Topline
The Biden Administration granted a license to Chevron to resume oil production in Venezuela—easing sanctions imposed on the country in 2019 over corruption and human rights concerns—though a senior U.S. official is claiming it’s not related to the energy crunch caused by the war in Ukraine.
The U.S. Treasury Department issued a license for Chevron to resume oil production in Venezuela, … [+]
Key Facts
The six-month license from the federal Treasury Department’s Office of Foreign Assets Control allows the California-based oil giant to resume “limited natural resource extraction operations.”
Recent talks between the U.S. and Venezuela began in March, one month after Russia’s invasion of Ukraine, as President Joe Biden began searching for alternatives to Russian oil and the U.S. looks to weaken Russia’s economy as the war drags on.
Still, a senior U.S. official, speaking anonymously, told the Associated Press the deal was unrelated to efforts to increase the U.S. energy supply, and was not expected to impact oil prices.
The announcement also comes after the Biden Administration released more than 200 million barrels from the federal emergency oil reserve in an effort to curb prices, amid record gas prices and after OPEC+ oil-producing countries (including Venezuela) decided last month to cut oil production.
Federal officials granted the license after Venezuelan President Nicolas Maduro—who has been harshly criticized for human rights abuses—agreed with opposition party members to a humanitarian spending plan focused on education, public health, food security and electricity programs, and to continue negotiating around efforts to hold free and fair elections in 2024.
The Biden Administration called the announcement an “important step in the right direction,” CNN reported—as the Latin American country remains in a political stalemate over who its leader is, with several countries, including the U.S., recognizing opposition party member Juan Guaido as its president after an allegedly fraudulent 2020 election.
The license comes with several limitations, however, including a provision prohibiting Chevron from conducting any transactions with Iran or Russian owned-entities in Venezuela, Bloomberg reported.
It also prohibits the country’s oil company, Petroleos de Venezuela, S.A.—which the U.S. sanctioned in 2019—from receiving profits from Chevron’s oil sales, which are intended to go instead to repaying debt owed to Chevron, according to the White House official.
Crucial Quote
In a statement, federal officials said the measure is aimed at “targeted sanctions relief” for “concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy,” adding the Treasury Department will “continue to hold accountable any actor that engages in corruption, violates U.S. laws or abuses human rights” in Venezuela, which is home to the largest oil reserves in the world. The Treasury Department maintains the right to revoke the agreement at any time if Venezuela does not follow through on its end of the negotiations.
Contra
Speculation of negotiations started circulating when a U.S. delegation visited the Venezuelan capital of Caracas in March, prompting GOP lawmakers to theorize the trip was a sign the Biden Administration’s goal was to replace the loss of Russian energy, following the Kremlin’s invasion of Ukraine in February. Following reports last month that the White House was looking to ease sanctions on Venezuela, Sen. Dan Sullivan (R-Alaska) called the move “national security suicide,” complaining that while Biden has shut down U.S. energy production, primarily in Alaska, he would then go “on bended knee to dictators in countries like Iran, Saudi Arabia & Venezuela.”
Key Background
U.S. companies have been prohibited from conducting business with Venezuela’s state-owned oil company since 2019, as the result of economic sanctions aimed at forcing Maduro out of power. In addition to allegations of rigging the 2020 election, Maduro’s government has been accused of crimes against humanity, including by authorizing gruesome torture and extrajudicial killings, according to a 2020 report from the United Nations human rights body. Previous rounds of negotiations between Maduro and his opposition have fallen through, including most recent attempts in Oct. 2021. Venezuela was able to continue producing oil largely through the help of Russian energy companies and banks, the New York Times reported.
Big Number
679,000. That’s how many barrels of oil Venezuela produced each day, on average, in October, according to data sourced from an OPEC report. It’s a slight increase from September, but well below the 2.9 million barrels it had been producing before the sanctions, Bloomberg reported.
Sfurther Reading
Chevron Gets New U.S. License to Pump Oil in Venezuela Again (Wall Street Journal)
The Last Oil Drilling Rig Leaves Venezuela (Forbes)
America Needs More Oil But It’s Only Coming From Other Countries (Forbes)
Source: https://www.forbes.com/sites/brianbushard/2022/11/26/biden-administration-allows-chevron-to-pump-oil-in-venezuela-heres-why-its-so-controversial/