The United States is considering financial sanctions on Venezuela that would halt dollar payments for the country's oil, according to a senior White House official and an adviser with direct knowledge of the discussions.
The move could severely restrict the OPEC nation's crude exports and starve its socialist government of hard currency.
Sanctions prohibiting any transaction in US currency by Venezuela's state-run oil firm, PDVSA, are among the toughest of various oil-related measures under discussion at the White House, the two sources said.
The administration aims to pressure socialist President Nicolas Maduro into aborting plans for a controversial new congress that critics say would cement him as a dictator.
Venezuela's oil-based economy is in the grip of a brutal recession and a local currency crash, and Maduro has faced months of anti-government unrest that has claimed the lives of about 100 people.
The White House declined to comment on the sanctions under consideration. PDVSA and Venezuela's Oil Ministry did not immediately respond to requests for comment.
The US measures under discussion are similar to those that were imposed against Iran over its nuclear program - which halved Iran's oil exports and prevented top crude buyers from paying for Iranian oil.
The measures were seen as among the most effective economic sanctions ever imposed and paved the way for a deal that curbed Tehran's nuclear activity.
Ban on oil imports?
Measures on financial transactions would give President Donald Trump's administration the power to escalate pressure on Venezuela by threatening punishment of any US firm doing business with PDVSA or US banks processing any of its transactions in dollars.
The financial restrictions have been "raised repeatedly" in recent discussions about options for actions against Maduro's government, said the senior White House official, who spoke on condition of anonymity.
The administration is also discussing a ban on US oil imports from Venezuela, but no final decisions have been reached, the official said.
Sanctions on dollar transactions could be more punitive than an import ban because they would make it much more difficult for any refiner or trader to buy Venezuelan oil — not just customers in the United States.
The impact of sanctions on PDVSA would ripple across oil markets, forcing refiners to buy alternative supplies. The US could use crude from its Strategic Petroleum Reserve (SPR) to blunt the impact of any short-term supply shortage, the policy adviser.
The United States bought 780,000 barrels per day (bpd) of Venezuelan crude and refined products in the first four months of 2017, according to the Energy Information Administration, nearly 8 percent of total imports. PDVSA is a major supplier to Valero Energy, Phillips 66, Chevron Corp and PBF Energy.
PDVSA's refining unit in the United States, Citgo Petroleum, last month was the second largest recipient of Venezuelan crude.
It is unclear how Citgo, being wholly owned by Venezuela, would be impacted by US sanctions. Citgo operates three refineries, pipelines and a fuel distribution network in the United States.
The threat of sanctions against Venezuela was a key reason for talks this week between PDVSA and Rosneft, Russia's leading state-owned oil firm, which is already under US sanctions. The negotiations in Moscow, earlier this week, focused on a proposed swap of Rosneft's collateral stake in Citgo for a host of other Venezuelan oil assets - a move to avoid legal complications.
Barter deals create cash crunch
The White House said earlier this week that Trump's administration could take what it called "strong and swift economic actions" against Venezuela as soon as July 30.
Other options under consideration by Washington include putting more Venezuelan officials and PDVSA executives on its sanctions list, the two sources said.
Maduro intends to create a superbody called the constituent assembly this year that would have the power to rewrite the country's constitution. It would supersede other institutions and replace the democratically elected National Assembly.
Maduro has decried what he calls "imperialist meddling" by US officials.
Several governments in Latin America also have called on Maduro to abandon the assembly plan.
But officials in neighbouring countries also expressed concern that US economic sanctions would trigger famine in Venezuela, which is already reeling from shortages of food and medicine.