The Venezuelan government’s extension of the state of economic emergency for another 60 days on August 11, 2025, reflects both the country’s efforts to maintain domestic economic stability and its response to the deteriorating foreign policy climate. This decision is directly linked to Washington’s recent imposition of a 15% additional tariff on Venezuelan products and a 25% additional obligation imposed on buyers of oil and gas imports from Venezuela. Official estimates from the United States (US) suggest that this new tax regulation could potentially generate $50 billion in additional revenue per month. The Caracas government, however, describes this move as “economic warfare.”[i]
This decree, signed by President Nicolas Maduro in April and renewed in mid-August, grants extraordinary powers to the executive branch. According to the text published in the Resmi Gazete, these powers include making temporary adjustments to maintain economic balance, controlling prices, reorganizing imports and exports, and allocating resources to strategic sectors. Furthermore, the authority to expedite the approval process for urgent contracts aims to prevent time loss in public procurement.[ii]
In addition, it is possible to temporarily suspend or grant exemptions from tax collections at the national, state, and municipal levels. These powers also include centralizing and directing special fees and contributions to the National Treasury and facilitating the transfer of resources from existing public funds. With these regulations, the government aims to increase the economy’s maneuverability in the face of external pressures, which it describes as “imperial sanctions.”
US-Venezuela relations have been shaped by sanctions, trade restrictions, and diplomatic crises, particularly since 2015. In 2019, Washington declared that it did not recognize the Maduro government and began imposing heavy sanctions on the oil sector.[iii] Although a relative softening was observed in 2024, a period of re-escalation began in early 2025 due to geopolitical reasons.
Recent tax hikes risk further squeezing Venezuela’s already limited foreign revenue streams, prompting the government to accelerate its efforts to diversify its oil and gas sales markets. Focusing on China, India, and some African countries is central to this strategy.
Such decisions can have both positive and negative consequences in the short and medium term. On the positive side, increased government support for strategic sectors will facilitate the rapid mobilization of resources, while tax deferrals could provide domestic producers with the opportunity to improve their cash flow. Furthermore, flexibility in import and export regulations could alleviate supply constraints in markets by expediting the procurement of needed products and services.
Conversely, negative effects can also be observed. Delaying tax collections could widen the budget deficit and weaken fiscal discipline. Concentrating all financial flows in a single entity could lead to increased bureaucratic bottlenecks and inefficiencies. Furthermore, the continued use of emergency powers could erode investor confidence by reducing predictability for the private sector and foreign investors.
Examining the examples of three countries is crucial to understanding the global context of Venezuela’s strategy. In Iran, after 2018, centralizing foreign exchange transactions, restricting imports, and prioritizing strategic sectors were the primary methods used to counter US sanctions. While this model provided market stability in the short term, it proved limited in solving the problems of foreign exchange bottlenecks and high inflation in the long term.
Russia, on the other hand, implemented capital controls, subsidized domestic production, and shifted its trade toward Asian markets following waves of sanctions between 2014 and 2022. While similar to Venezuela’s diversification strategy in oil exports, Russia’s energy reserves, infrastructure capacity, and international trade network far exceed Caracas’ capabilities.
The Cuban example emerged during the “Special Period” of the 1990s. In response to the US embargo, the country’s economy was reorganized, the use of foreign currency increased, and new forms of property ownership were recognized. However, while this model is closer to Venezuela in sociopolitical terms, it also brought about long-term economic contraction. These comparisons demonstrate that the consequences of emergency economic powers are directly related to each country’s production capacity, foreign market connections, and domestic political stability.
The economic emergency stands out as a powerful political tool in the hands of the ruling party. For the Maduro government, this step offers the opportunity to consolidate the base by calling for national unity through the rhetoric of an “external enemy,” facilitate intervention in the financial resources of opposition municipal and state governments through emergency powers, and exert tighter control over the flow of media and information. However, this situation can lead to serious criticism of democratic mechanisms and the separation of powers, and prolonged states of emergency carry the risk of weakening institutional stability.
The US tax hike is not only an economic but also a diplomatic message. With this move, Washington is sending a clear signal to Caracas that it will both reduce oil revenues and increase political pressure. Venezuela, in response to this pressure, is implementing strategies such as establishing stronger trade ties with the BRICS countries, African, and Southeast Asian markets, using oil and gas as political negotiating tools, and trading in local currencies by turning to non-SWIFT payment networks.
These strategies may provide some relief to Venezuela in the short term; diversifying export markets and creating alternative payment systems may offer some success in limiting the impact of sanctions. However, in the long term, it should be noted that these steps may not be sufficient to completely bypass the sanctions environment and could risk shifting the country’s economic dependencies in other directions.
When considering possible scenarios, in the optimistic scenario, emergency measures are expected to boost production and exports, stimulate the domestic market through tax deferrals, and diversify revenue streams through new trade partnerships. In the pessimistic scenario, the halt in tax collections widens the budget deficit, while inflation accelerates, centralized fiscal resources are used inefficiently, political pressure increases, and corruption allegations increase. In the middle-of-the-road scenario, the government may gain some room to maneuver in the short term, but unless structural reforms are implemented, persistent economic problems are inevitable in the long run.
Venezuela’s 60-day extension of its economic emergency is a time-buying move in the deepening trade war with the US. However, such measures often provide temporary relief rather than addressing structural economic problems. The country’s future will depend not only on its ability to manage external pressures but also on its willingness to implement domestic economic reforms.
In this context, Venezuela can inherit short-term resistance methods from the experiences of Iran and Russia, and social resilience models from Cuba. But as in all these examples, long-term success requires a balanced pursuit of economic diversification, transparent governance, and international legitimacy.
[i] Ruiz, Luis Alejandro, “Venezuela Extends State of Economic Emergency”, Guacamaya, guacamayave.com/en/venezuela-extends-state-of-economic-emergency, (Date Accessed: 17.08.2025).
[ii] Ibid.
[iii] Ibid.
