A recent approval by the US government for Chevron Corp. to resume oil operations in Venezuela spells a new direction for US-Venezuela relations.
On November 26, 2022, the Biden administration provided Chevron, an American oil company, a license to start oil operations with Venezuela. According to the US Treasury Department, Chevron has been granted expanded approval for importing petroleum alongside its joint venture with the Venezuelan state-owned firm PDVSA. The move has followed recent talks resumed with Venezuelan President Nicolás Maduro. According to the deal, the goal of this move is to reduce the debt Venezuela owes Chevron.
The US Treasury Department, “This action reflects longstanding U.S. 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 move also aims to bring “added transparency to the Venezuelan oil sector,” says the Treasury Department. In addition, "The United States welcomes and supports the reopening of negotiations between the Unitary Platform and the Maduro regime as part of our longstanding policy to support the peaceful restoration of democracy, free and fair elections, and respect for the rights and freedoms of Venezuelans."
Chevron received an exemption from the oil sanctions placed on Venezuela in 2019 to regain incurred debts but removed the exemption a year later. Before the sanctions were imposed, Chevron and its PDVSA joint ventures in Venezuela produced around 200 000 barrels of crude oil daily. The current deal prevents Chevron from helping the country build new oil fields. Venezuelan oil production is also limited by the renewal, not expansion, of other oil firms such as Baker Hughes and Halliburton. The United States reserves the right to rescind the deal at any time.
According to a Biden administration official, there is still a long way to go for a more permanent resolution to the crisis. However, since the license agreement is very limited in scope, it is not expected to impact international oil prices. In a statement released by the Treasury Department’s Office of Foreign Assets Control, the release, “GL 41 authorizes activity related to Chevron’s joint ventures in Venezuela only and does not authorize other activity with PdVSA. Other Venezuela-related sanctions and restrictions imposed by the United States remain in place; the United States will vigorously enforce these sanctions and will continue to hold accountable any actor that engages in corruption, violates U.S. laws, or abuses human rights in Venezuela.”
This move comes right after the US is hit hard by sanctions on Russian crude oil supplies following the Ukrainian crisis. Venezuela possesses the world’s largest oil reserves at around 300 billion barrels of oil but has been unable to tap into the potential due to US sanctions and low investments.
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