How Wall Street Won a Battle Over Venezuelan Sanctions
After the U.S. dropped a broad array of sanctions against Venezuela in October, it warned that it could reimpose all of them, except one. The White House admitted that its ban on buying Venezuelan bonds was a failure that had potentially benefited enemies of the U.S.
Behind the scenes, a group of powerful Wall Street investors had been feeding Washington a stream of evidence that showed Venezuelan bonds were being traded by investors with ties to Russia. They said Moscow was hoping to gain influence in the U.S.’s backyard. The Biden administration said dropping the debt-trading ban “would have the positive effect of displacing nefarious players in this market." It was the first time the U.S.
publicly acknowledged that banning U.S. investors from buying debt of a sanctioned country could backfire. The investors stood to benefit from the end of the ban, because prices of Venezuela’s bonds were expected to rise.
They did, giving the investors a windfall of hundreds of millions of dollars. The U.S. has ramped up its use of sanctions in the past two decades.
In response, countries such as Russia, Iran and North Korea have become increasingly adept at moving cash and goods across their borders. Debt-buying bans, which have also been imposed on Russia and Belarus, are now seen as giving foreign buyers a chance to profit and potentially influence debt restructurings while making it harder to track the trades. The Trump-era sanctions on the government of Venezuela’s authoritarian leader, Nicolás Maduro, were meant to hammer the regime.
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