Venezuela: Washington Reimposes Oil Sanctions, Maduro Gov’t Pledges Continued Growth

Caracas, April 18, 2024 (venezuelanalysis.com) – The Biden administration has reintroduced wide-reaching economic coercive measures against Venezuela’s oil industry.

The US Treasury Department allowed General License 44 (GL44), which eased sanctions against Venezuela’s oil and gas sectors, to expire on April 18. It was replaced by General License 44a (GL44a) which establishes a 45-day grace period for companies to wind down their Venezuela activities.

In a press statement, the US Treasury claimed that it was reimposing restrictions because the Nicolás Maduro government had not “fully met the commitments” from the October 2023 Barbados Agreement signed with the US-backed opposition. US officials reportedly met Venezuelan counterparts recently but could not force concessions from Caracas.

For months, Washington has threatened to harshen sanctions over María Corina Machado’s political ban. The far-right candidate saw her existing disqualification upheld as the Venezuelan Supreme Court pointed to corrupt dealings and support for US-led coercive measures.

Caracas has rejected US efforts to interfere in the upcoming July 28 presidential elections while adding that the Barbados Agreement specified that political forces were free to choose candidates so long as they were legally allowed to run.

The Treasury statement added that firms that wish to deal with Venezuela’s energy sector beyond May 31st will have to apply for licenses that will be “considered on a case-by-case basis.” 

Throughout his first years in office, the Biden administration kept its predecessor’s “maximum pressure” sanctions on Venezuela largely in place. Under Donald Trump, the US levied financial sanctions, an oil embargo, secondary sanctions and a bevy of other measures destined to strangle the Caribbean nation’s main source of foreign income.

Oil output fell precipitously before undergoing a slow recovery. It recently hit a five-year high.

Apart from a license allowing Chevron to ramp activities in its Venezuela joint ventures, and greenlit deals for European corporations, GL44 was the first reversal of a blanket measure targeting the oil industry. 

The six-month waiver allowed PDVSA to export crude to international customers without offering big discounts and resorting to unreliable intermediaries. Buyers have rushed to complete purchases ahead of GL44’s expiry. At the same time, there was no significant boost in long-term prospects after Washington warned corporations against investing in Venezuela.

Though sanctions only directly bar US actors from engaging with Venezuelan state oil company PDVSA, the US has either threatened or targeted multinational enterprises with secondary sanctions in order to deprive Caracas of foreign partners. The impacts of the renewed restrictions will depend on US officials’ willingness to enforce them as well as its policy towards license requests. Inside sources had floated the possibility of allowing companies to receive Venezuelan crude by swapping fuel and diluents or offering debt relief.

For its part, the Maduro government has struck a defiant tone, vowing that oil production and the economy at large would continue to grow regardless of GL44’s non-renewal.

“We are going ahead with a license or without a license,” the Venezuelan president said in his Monday broadcast. “We aren’t a gringo colony.”

Under sanctions, Venezuela has increasingly turned toward allies such as Russia and Iran, while China has become the main destination for Venezuelan crude. Indian companies have imported Venezuelan oil in recent months, but officials have stated that they will not continue without US Treasury permission.

On Tuesday, Oil Minister Rafael Tellechea reiterated that the country is “open to national and foreign investors” and that the industry would continue to progress “with or without illegal sanctions.”

Tellechea offered his remarks before the Venezuelan National Assembly following the legislative approval of a new joint venture. Petrolera Roraima will have 51 percent of its shares owned by the Venezuelan state, with the remaining 49 percent belonging to an undisclosed private sector partner.

According to reports, Roraima will operate oilfields in a 1,825 square-kilometer area and will require an initial US $13 billion investment. The company is targeting a 45,000 barrel per day (output) bpd by the end of 2024 and growing to 120,000 over the next three years.

Tellechea’s recent work to boost foreign investment in the oil industry included the expansion of the area explored by Petroquiriquire, a joint project with Spain’s Repsol, by 377 square kilometers. PDVSA and Repsol have pledged to boost production to 50,000 bpd by 2028 from the present 24,000 bpd.