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U.S. steps up pressure on Maduro as Russia backs Venezuelan ally

[January 26, 2019] By Lesley Wroughton, Mayela Armas and Angus Berwick

WASHINGTON/CARACAS (Reuters) - The United States on Friday signaled it was ready to step up economic measures to try to drive Venezuelan President Nicolas Maduro from power as some U.S. diplomats left the embassy in Caracas and Russia vowed to back its socialist South American ally.

The U.S. Treasury Department stopped short of announcing a freeze on Venezuela's U.S. assets and accounts, but said it would take steps to ensure commercial transactions were "consistent" with its recognition this week of opposition leader Juan Guaido as Venezuela's legitimate head of state.

U.S. Secretary of State Mike Pompeo on Saturday will urge members of the United Nations Security Council to recognize Guaido. Washington requested the meeting of the 15-member council after a string of countries threw their weight behind Guaido, who heads Venezuela's congress, and urged Maduro to step down.

Pompeo will be accompanied by former U.S. diplomat Elliott Abrams, who he named on Friday to lead U.S. efforts on Venezuela. Abrams is a neoconservative who has long advocated an activist U.S. role in the world.

Russia opposes the U.S. efforts and has accused Washington of backing a coup attempt, placing Venezuela at the heart of a growing geopolitical duel.

Private military contractors who carry out secret missions for Russia have flown into Venezuela in the past few days to beef up security for Maduro, sources said.

Maduro said he welcomed the U.N. debate. "Thanks, Mike," he said, tongue in cheek, during a Friday news conference. "We're going to tell the truth about the articles of the constitution, about the coup."

Maduro on Wednesday ordered U.S. diplomats out of the country within 72 hours. On Friday, some American diplomats left the U.S. embassy in Caracas in a convoy of vehicles with a police escort en route to the airport, according to a Reuters witness.

U.N. human rights boss Michelle Bachelet called on Friday for an investigation into alleged excessive use of force by Venezuelan security forces against anti-Maduro protesters in recent days, adding that she was "extremely concerned" that the situation could rapidly spiral out of control.

"NO FAKE DIALOGUE"

Guaido, who has galvanized Venezuela's opposition, proclaimed himself interim president on Wednesday during a march of hundreds of thousands in Caracas. He is considering making a request for funds from international institutions including the International Monetary Fund, sources said on Friday.

However, he still has no control over the Venezuelan state and the military, which has so far remained loyal to Maduro despite a deep economic and political crisis that has sparked mass emigration, with inflation forecast to rise to 10 million percent this year.

Guaido has promised future amnesties to military members if they disavow Maduro, asking soldiers on Friday to "put themselves on the side of the constitution."

Most Latin American nations have joined the United States in supporting Guaido's claim on the presidency, although Mexico's new leftist government has said it would not take sides. Mexican President Andres Manuel Lopez Obrador said on Friday his administration would be willing to mediate.

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Supporters listen to Venezuela's opposition leader Juan Guaido during a news conference at a square in Caracas, Venezuela January 25, 2019. REUTERS/Carlos Barria

Guaido said he would reject any negotiations that did not include Maduro's exit, the setting up of a transition government, and free elections to pick a new president.

"No one wants fake dialogue ... the only thing we want to negotiate is the end of the usurpation," he told a crowd clustered in a plaza in Caracas' Chacao district, an opposition stronghold.

To ratchet up pressure on Maduro, who began a second term on Jan. 10 following an election last year widely considered to be a fraud, the United States is seeking to cut off funds for his government and is considering introducing fresh sanctions, including on its vital oil sector.

Maduro warned off any attempt to take control of U.S. refiner Citgo, the country's primary offshore asset. "It is the property of the Venezuelan people, and we will defend it," he said.

The Maduro-appointed board of Citgo is preparing a legal strategy to defend itself against any attempts to divert its funds or change its board, sources said.

Oil prices edged higher on Friday as the political turmoil in the OPEC member threatened to tighten the global supply of crude. The U.S. has until now resisted significant oil sanctions because of the impact it would have on Venezuelan citizens already struggling with shortages.

"The oil situation has been an ethical moral dilemma for us," said U.S. Senator Richard Durbin, the no.2 Democrat in the Senate, in an interview. "Cutting off all trade in oil would be the last step. It would make it even worse for the average person."

The Trump administration is trying to make sure that any measures to restrict oil revenues to Maduro do not cause spikes in prices that would be felt by U.S. consumers, said Scott Modell, managing director of Rapidan Energy Group, who advises energy clients on geopolitical risks.

"How do they allow Venezuelan oil to continue to flow, while cutting off the flow of money back to Maduro and the government? That's the general playbook they have been using for Iran, and the one they are trying to adapt to Venezuela now," Modell said.

(Reporting by Vivian Sequera, Shaylim Valderrama, Ana Isabel Martinez, Brian Ellsworth, Deisy Buitrago, Angus Berwick, and Mayela Armas in Caracas and Lesley Wroughton in Washington; additional reporting by Patricia Zengerle, Roberta Rampton and Matt Spetalnick in Washington; Writing by Angus Berwick and Roberta Rampton; Editing by Brian Ellsworth, Paul Simao and Rosalba O'Brien)

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