The Biden administration eased oil sanctions on Venezuela Saturday after the government of Nicolás Maduro resumed long-stalled talks with the country’s democratic opposition.
Hours after the two sides met in Mexico, the Treasury Department said it would grant Chevron a six-month license to resume oil production in Venezuela. The license could be amended at any time by the U.S. government, a White House official said, and profits from new production will go toward paying off the debt the Caracas socialist regime owes Chevron — not to Venezuela’s state-run oil company, PDVSA.
The Venezuelan government currently owes Chevron around $4.2 billion derived from its interests in three different joint ventures held in partnership with PDVSA, industry sources said.
“We have long made clear that we believe the best solution in Venezuela is a negotiated one between the two parties,” a senior administration official said. “And in order to encourage that, we have said we are willing to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and bring them closer to a restoration of democracy.”
Biden administration officials said the move was in response to “concrete steps” by the Maduro regime toward a democratic transition in Venezuela, and that additional steps could be taken if Maduro demonstrates his commitment to free and fair elections.
The Biden administration has been cautiously engaging the Maduro government, signaling it would be willing to lift the sanctions if the socialist regime would restart the negotiations with the opposition and commits to holding fair elections by 2024.
The talks in Mexico between Maduro’s government and the opposition were the first since Maduro cut them off more than a year ago. Previous U.S. diplomatic efforts held this year led to the exchange of a number of U.S. citizens deemed to have been detained illegitimately in Venezuela for two of Maduro’s nephews facing an 18 year sentences for drug trafficking.
“To be clear, other Venezuela-related sanctions and restrictions imposed by the United States remain in place,” the official added.
Industry sources monitoring the South American country’s oil trade said that the new license signals the reopening of the U.S. market to Venezuelan crude, which had remained closed since the Trump administration sanctioned PDVSA in January 2019. But they warned the measure will have scant impact on the international oil market.
Since the sanctions, PDVSA had been running Chevron’s operations in Venezuela maintaining a production level of 130,000 barrels per day which could in theory be increased by nearly by the end of next year, one of the sources said, speaking under condition of anonymity.
Right before the sanctions were introduced, Venezuela exported most of its oil to the U.S., between 400,000 and 500,000 barrels per day. If the sanctions were to be completely removed, industry sources say the country can produce up to 1.5 million barrels per day in about a year and to go beyond that it would take several years.
Those levels are a considerable shortfall from the levels Venezuela produced when the Hugo Chavez Revolution took power 1998, which surpassed the 3 million barrel per day mark.
The senior administration official also rejected the notion that the move would alter global gas prices.
“This action was not taken in response to energy prices, this is a limited license,” the official said. “This is about the regime taking the steps needed to support the restoration of democracy in Venezuela.”
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