The United States (US) Department of Treasury’s Office of Foreign Assets Control (OFAC) on Saturday granted energy company Chevron a license to “resume limited natural resource extraction operations in Venezuela” after Venezuelan President Nicolás Maduro lifted the suspension on peace talks with the opposition coalition last week.
“This action reflects longstanding US policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy,” the Treasury Department noted.
The US grants Chevron limited authorization to resume pumping oil from #Venezuela following announcement the 🇻🇪 govt &opposition group have reached an agreement on humanitarian relief & will continue to negotiate for a solution to the country’s chronic economic & political crisis
— Isa Soares (@IsaCNN) November 26, 2022
An anonymous US official remarked that these were “important steps in the right direction,” revealing that the license is only for six months, and can be revoked at any time if “the Maduro regime fails to negotiate in good faith or follow through on its commitments.”
The change in policy closely follows the Venezuelan government reaching a humanitarian agreement on education, health, food security, and continuing talks focused on the 2024 elections with the opposition coalition, called the Unitary Platform.
Though the license allows Chevron to expand operations in Venezuela in order to import it to the US, it forbids the American company from sharing any profits with its Venezuelan partner, the state-owned Petróleos de Venezuela (PDVSA), which was first sanctioned by the Trump administration back in 2017.
In fact, any profits must go toward the payment of debts to Chevron. In this respect, the Treasury Department said that the announcement “authorises activity related to Chevron’s joint ventures in Venezuela only, and does not authorize other activity with PDVSA.”
Venezuela owes Chevron hundreds of millions of dollars. Profit from the ops will go towards paying the debt. So while there won’t be a true economic gain from this (for #Venezuela), the incentive for Maduro is: employ some democratic measures and more concessions could follow. pic.twitter.com/Wd1JMk3ynF
— María Luisa Paúl (@marialuisapaulr) November 26, 2022
“Other Venezuela-related sanctions and restrictions imposed by the United States remain in place,” it added.
For instance, Chevron is barred from conducting any transactions with Iran or Russian-owned entities in the country.
Nevertheless, the Treasury pointed out that “any additional action will require additional concrete steps” for targeted sanctions relief to be possible in the future.
In a statement, Chevron noted that the “decision brings added transparency to the Venezuelan oil sector,” adding, “We are determined to remain a constructive presence in the country and to continue supporting social investment programs aimed at providing humanitarian relief.”
And a key note. As @GRamsey_LatAm points out: "The big thing" abt the new Chevron license in Vzla "is that it doesn't authorize payment of royalties or taxes to the government, or dividends to PDVSA." Geoff says: "US still holding on to plenty of leverage for future talks."
— julieturkewitz (@julieturkewitz) November 26, 2022
In May, the Biden administration hinted at relaxing some energy sanctions against Venezuela in order to incentivise the resumption of talks between Maduro and opposition leader Juan Guaidó, whom the US continues to recognise as the legitimate leader. Additionally, Carlos Erik Malpica-Flores, an official of the PDVSA and the nephew of the first lady, was also removed from the list of sanctioned individuals.
The measure was made at the request of the opposition, with the US continuing to stress on the need for democratic elections, maintaining that Maduro’s re-election in 2018 was illegitimate. The government suspended talks with the opposition back in October after Venezuelan businessman and close Maduro ally Alex Saab was extradited to the US on money-laundering charges.
The sanctions relief followed a visit by senior White House officials to Caracas in March, during which the two sides discussed a relaxation of sanctions in exchange for the release of two American prisoners who have been illegally held. In fact, one of those released was Gustavo Cárdenas, one of the CITGO 6, a group of oil executives who were arrested on corruption charges over three years ago after being lured to Caracas under the false pretence of doing business with PDVSA. All of the CITGO 6 have since been released.
In an interview with Bloomberg TV earlier this year, Chevron CEO Mike Wirth remarked that any sanctions relief “wouldn’t be an instantaneous” effect on oil production.
However, given the shift in global politics amid the Russian invasion of Ukraine, the US has been prompted to seek alternative oil suppliers.
According to the government, both parties will sign an agreement on Saturday that aims to address crucial social needs.
— Gurbaksh Singh Chahal (@gchahal) November 26, 2022
During Saturday’s talks, Norway’s chief facilitator, Dag Nylander, revealed that the “parties have identified a set of resources belonging to the Venezuelan state frozen in the international financial system to which it is possible to progressively access, understanding the need to obtain the authorizations and approvals” from foreign institutions and organisations.
According to the United Nations (UN), an estimated $795 million in humanitarian assistance is required to help about 5.2 million in order to avert the brewing crisis. Since 2018, about seven million Venezuelans have left the country. The UN is set to disburse $3 billion to the fund.
Senate Foreign Affairs Committee Chairman Bob Menendez (D/NJ) welcomed the news of rapprochement between the ruling and opposition parties of Venezuela.
Nevertheless, he cautioned, “If Maduro again tries to use these negotiations to buy time to further consolidate his criminal dictatorship, the United States and our international partners must snap back the full force of our sanctions that brought his regime to the negotiating table in the first place.”
Moreover, tensions between the US and the Maduro administration remain tense, given that Washington continues to recognise opposition leader Juan Guaidó as the legitimate president of Venezuela.
The big ? is whether the Maduro govt is willing to take steps towards free and fair elections. If not, the whole process may once more come to an abrupt halt.
— Phil Gunson (@philgunson) November 24, 2022
Up until 2019, Chevron continued to produce roughly 200,000 barrels per day. However, in 2020, the US government told the company it could only conduct ‘essential work’ on its oil wells and “preserve its assets and employment levels” in the country. Its operations in the country are estimated at around $2.6 billion.
Venezuela has an estimated 300 billion barrels of oil reserves, the highest such amount in the world. A lack of investment, poor maintenance, and the impact of US sanctions have left it unable to meet production targets over the last few years. Although it produced 679,000 barrels of oil per day (bpd) in October, this is well short of the 2.9 million bpd figure prior to US sanctions.