Caracas, October 6, 2022 (venezuelanalysis.com) – The Biden administration is reportedly considering handing a broader sanctions waiver to US oil corporation Chevron.
According to the Wall Street Journal (WSJ), Washington could allow the energy giant to resume drilling and selling crude from its joint ventures with Venezuelan state oil company PDVSA.
If confirmed, the license would represent the first major step taken by the Democrat White House to revert its predecessor’s “maximum pressure” campaign against Venezuela.
Since 2017, the Trump administration levied financial sanctions, an oil embargo, secondary sanctions and a raft of other measures against Venezuela’s most important industry. The US Treasury Department likewise threatened foreign companies against dealing with the Caribbean nation and clamped down on swap agreements.
As a result, state oil company PDVSA’s output fell dramatically from around 1.9 million barrels per day (bpd) before the first measures to historic lows below 350,000 bpd in the second half of 2020. Production doubled in the following 12 months but with the US blockade firmly in place, operational disruptions have seen output plateau around 700,000 bpd.
Chevron has led the lobbying efforts to get expanded sanctions exemptions from the Treasury Department. Past rumors of a license that would grant the company the operational possibilities it had until late 2020 have led to furious backlash from foreign policy hardliners. The Biden administration recently extended Chevron’s current license, which authorizes only maintenance of existing wells, until November.
The California-based corporation has reportedly reached an agreement with PDVSA to revamp operations following months of talks, with Venezuelan Oil Minister Tareck El Aissami claiming “the ball is in the US’ court” concerning a new license.
Chevron holds 25 to 40 percent stakes in four Venezuela-based ventures that have a total capacity of 200,000 bpd. The most important one is crude upgrader Petropiar. Kickstarting its Venezuelan projects would additionally allow the firm to use crude sales to offset some $3 billion owed by PDVSA.
The US-led economic blockade has also seen the freezing and seizure of Venezuelan assets abroad, including oil subsidiary CITGO, 31 tonnes of gold deposited at the Bank of England, and a number of bank accounts. Unnamed WSJ sources likewise talked of an agreement between the Maduro administration and the US-backed hardline opposition that would “free up” hundreds of millions of dollars in blocked US bank accounts to be used for imports and infrastructure repair work.
However, US officials were quick to downplay any prospects, with White House National Security Council Spokesperson Adrienne Watson demanding unspecified “constructive steps” from the Venezuelan government before any change to unilateral coercive measures can take place.
“Our sanctions policy on Venezuela remains unchanged. We will continue to implement and enforce our Venezuela sanctions,” she told media outlets.
The Biden administration has demanded that the Maduro administration reengage in talks with the Juan Guaidó-led right-wing opposition, which were suspended in October 2021 after Venezuelan government envoy Alex Saab was flown to the US to face money-laundering charges in what Caracas deemed a kidnapping.
Previous announcements of a possible resumption of dialogue did not materialize. Renewed Republican majorities in Congress following the November midterm elections could also see a hardening of Washington’s stance.
Following the WSJ article, Reuters reported that Guaidó was seeking “consultations” with the US concerning the purported Chevron license. The opposition frontman has consistently opposed any easing of the measures that have been classified as “collective punishment” against Venezuela’s civilian population.
In a letter to Assistant Secretary of State Brian Nichols, Guaidó argued that increased Chevron activities would hamper “successful negotiations” while also raising questions about the “legality” of a possible new arrangement.
Prior reporting stated that the oil corporation’s deal with PDVSA did not involve any changes to existing stakeholding structures, while the WSJ claimed Chevron would take full operational control over its Venezuela projects. Venezuela’s hydrocarbon legislation stipulates that PDVSA must run all oilfields, but sanctions have seen other companies take over operations to avoid further trade obstacles.
The Wednesday report came on the heels of OPEC+ countries announcing an up to 2 million bpd cut beginning in November to shore up prices. Washington had been lobbying its Middle Eastern allies against slashing production in order to ease fears of a widespread recession, especially in Europe.
Venezuela and the US have not had diplomatic relations since the Trump administration recognized self-proclaimed “Interim President” Guaidó in January 2019 and ramped up its unilateral sanctions program in an attempt to oust the Maduro government.
However, the Biden White House has promoted a limited rapprochement in recent months, with official delegations traveling to Caracas in March and June and meeting with Maduro and other high-ranking Venezuelan officials. The back-channel communication yielded a prisoner exchange last week for “humanitarian” reasons, according to the Venezuelan government.
Previous talks led to oil-for-debt licenses allowing Spain’s Repsol and Italy’s Eni to receive crude cargoes to settle debts as the Biden administration looked to help European partners tackle the energy crisis brought by the Ukraine conflict. Both Repsol and Eni have stakes in a number of joint projects in Venezuela but were pressured into winding down operations by the Trump administration.
After a number of Europe-bound shipments in June and July, PDVSA reportedly halted the agreements to negotiate better terms, allegedly looking to receive fuel as well as continuing to repay debt.