MONTEGO BAY, January 28, 2018- When U.S. Secretary of State Rex Tillerson visits Jamaica next month to outline U.S. concerns about Venezuela, Jamaica may be placing on the agenda for discussion the financial difficulties the country is experiencing as a result of the Trump Executive Order imposing economic sanctions on Venezuela.
During his trip to Kingston on February 7, Tillerson will meet with Prime Minister Andrew Holness and Foreign Minister Kamina Johnson-Smith to discuss bilateral and regional security issues as well as Jamaica's economic reform efforts.
Jamaica's discussion with Tillerson could centre around President Trump's August 25, 2017 Executive Order
13808, which imposed significant “Russia-style” sanctions against Venezuela, intended to restrict access to the US financial system, by that country's government and which in turn is having a destablizing effect of the Jamaican economy as a result of our oil arrangments with Venezuela, the world's fifth largest producer of oil.
The sanctions, which took effect on August 25 last year, prohibit a range of transactions relating to the Government of Venezuela, including Petróleos de Venezuela, S.A. (PdVSA) and other entities owned or controlled by the Government of Venezuela, by US persons or within the United States.
The prohibitions apply to transactions relating to new debt and equity of the Government of Venezuela, bonds issued by the Government of Venezuela, dividend payments or other distributions to the Government of Venezuela, as well as the purchase of securities from the Government of Venezuela.
The US sanctions affect the Jamaican economy, as Venezuela owns 49% of Jamaica's oil refinery, Petrojam. With PdVSA and PetroCaribe being owned or operated by the Venezuelan Government, the imposition of EO 13808 affects payments to and from Petrojam as they are subject to increased due diligence by its primary financiers/suppliers of lines of credit, as well as from intermediary banks, pending clarification on whether the EO 13808 was applicable to Petrojam.
Energy Minister Andrew Wheatley, told Parliament that government was now considering buying back Venezuela's 49 per cent share in local oil refinery Petrojam following Trump's recent executive order imposing new sanctions on the South American oil exporter.
Wheatley said Jamaica had been receiving “minimal or no crude products” for the refinery from Venezuela and has been dependent on products from Trinidad and Tobago, and the “spot market”, which he described as the “normal course of operation.”
He suggested that the proverbial 'straw that broke the camel's back' was Trump's August 25 executive order (EO 13808), which restricted US citizens and entities from transactions involving the Government of Venezuela, including “any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela and PdVSA, and any person owned or controlled by, or acting for, or on behalf of the Government of Venezuela.”
In addition to the disruption/delay of transactions for Petrojam, sovereign debt payments due by the Government of Jamaica under the Caracas Agreement 2001 and various other loan agreements which were due and payable to the Government of Venezuela are being withheld by the US Federal Reserve Bank, and others, in order to facilitate their own due diligence process.
Although those funds would ultimately be released, explanations and proof of business transactions have now become a standard requirement for all transactions by the banks, occasioning significant processing delays, Wheatley told Parliament.
Jamaica as well as a number of countries in the Caribbean have a special relationship with Venezuela under the PetroCaribe arrangement, where oil is purchased from Venezuela on preferential payment conditions.
The agreement, which began in 2005, allows beneficiary nations to buy oil at market value but only pay a percentage of the cost up front. The balance can be paid over 25 years at 1% interest.
Countries under PetroCaribe are required to pay 40% of their oil bill within 90 days. The remainder can be paid over the next 25 years at a fixed interest rate of 1% as long as oil prices exceed US$100 per barrel.
Seventy per cent of payments may be deferred if oil reaches US$150 a barrel.
Beneficiary nations are allowed to purchase 185,000 barrels of oil per day on these terms. Additionally, these nations could settle their debt to Venezuela using goods and services.
The countries that are signatories to this agreement are: Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Nicaragua, Suriname, St Lucia, St Kitts and Nevis, and Saint Vincent and the Grenadines. Cuba, the Dominican Republic, Haiti, Honduras.
Tillerson's six day tour across the Region will begin Thursday at the University of Texas at Austin, where he is expected to set the tone for his whirl-wind trip with a speech outlining the Trump administration's policy priorities in the Western Hemisphere.
From there he will travel to Mexico City to meet with Mexican President Enrique Peña Nieto, Foreign Secretary Luis Videgaray and other Mexican officials.
The Mexico visit comes as US President Trump prepares to unveil a sweeping immigration framework, in which he has given a commitment to offer a path to citizenship for nearly 2 million young "Dreamers" who were taken to the US by their parents at a tender age and now call the United States their home.
In exchange for a path to the "Dreamers" Trump is demanding tens of billions of dollars for the construction of his long-promised wall between the U.S. and Mexico.
Kingston will be the final stop for Tillerson who is also scheduled to visit Bariloche and Buenos Aires, Argentina; Lima, Perú as well as Bogotá, Colombia between February 1 to 7
The secretary of State's focus on Venezuela comes on the heels of new U.S. sanctions against four Venezuelan military officials that the Trump administration has deemed corrupt and responsible for political oppression.
Tensions between Washington and Caracas have soared in recent months amid concerns in the West over Venezuelan President Nicolas Maduro's efforts to consolidate power in the crisis-stricken country.
The administration also imposed new sanctions on Venezuela in July after Maduro called for a vote to rewrite the country's constitution, a move widely seen as an attempt to consolidate power.