Venezuela's 'sham' election just made a very bad economy that much harder to fix

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The Venezuelan government made it much harder for the country to dig itself out of the giant economic, political and social hole it's in.

Venezuela held a highly contentious vote Sunday to create a new legislative body that supersedes others, including the opposition-led National Assembly. The National Constituent Assembly (ANC), will have the power to rewrite the constitution and is almost certain to solidify dictator Nicolas Maduro's power — at least for the moment.

"I think Maduro actually emerges weaker from this process," said Risa Grais-Targow, director, Latin America, at Eurasia Group. "It's going to escalate international isolationism and it could prolong protests on the streets."

The Venezuelan government claimed that voter turnout was 41.53 percent, or just over 8 million . But independent monitors and members of the opposition say only between 2 million and 3 million people voted in total, with most people boycotting what they viewed as a rigged election.

'The vote was a complete sham'

Maduro is widely unpopular for overseeing an economic collapse during his four years in office and for undermining democracy generally.

Protesters have taken to the streets and clashed with government forces in running street battles for months. More than 10 deaths were reported Sunday . More than 100 people have been reported dead since April.

"We were looking at the vote yesterday as a tipping point, and I think looking back at it, we will see it as such," said Jason Marczak, director of the Atlantic Council's Latin America Economic Growth Initiative. "The vote was a complete sham. There were no mechanisms in place to prevent people from voting multiple times, and a lot of people that voted were forced to vote."

The contest was condemned by the international community. Argentina, Colombia, Canada and the United States are among the countries that said they will not recognize the vote.

Another blow to Venezuela's oil industry?

The U.S. took things a step further Monday after the Treasury Department officially sanctioned Maduro himself. Those sanctions in turn increase the likelihood of the U.S. targeting Venezuela's oil sector, said Larry McDonald, head of the U.S. macro strategies at ACG Analytics.

"The option receiving the most attention at the moment would deprive [state-run oil company] PDVSA of U.S. exports of petroleum-blending products," McDonald said in a note Monday. "From [a] historical view, former Panamanian strongman Manuel Noriega's U.S. indictment on drug trafficking charges preceded a more assertive policy by the George H.W. Bush Administration in 1989."

The country's economy is almost entirely dependent on its oil industry, which accounts for 95 percent of Venezuela's exports. But a lack of investment in the sector has made it less and less profitable and productive.

A crash in oil prices that started in late 2014 made things worse. The International Monetary Fund currently expects Venezuela's inflation rate to rise by a crippling 720 percent this year.

However, sanctioning the country's most important economic component could have adverse consequences on regular Venezuelans, said Dany Bahar, a fellow at the Brookings Institution.

"The sanctions are a very delicate topic because they are a double-edged sword," Bahar said. If the U.S. places sanctions on Venezuela's oil business, "then a lot of people will suffer."

Bahar noted that such measures would further restrict the flow of capital into the country and could exacerbate an already dire humanitarian crisis. Venezuela has been dealing with a massive shortage of food, medicine and other basic goods.

"At the same time," Bahar said, imposing stronger sanctions "could make it harder for the Maduro regime to continue buying the loyalty of people."

—Reuters contributed to this report.