The United States reimposes oil sanctions on Venezuela after fulfilling its election promises

The United States is reimposing sanctions on oil from Venezuela, saying President Nicolas Maduro's revolutionary socialist government “has not adhered” to its commitments to hold free and fair presidential elections this year.

The action amounts to an admission by the Biden administration that sanctions relief, granted six months ago, has so far failed to persuade Maduro to engage in a truly competitive contest.

Aware of the risk that new sanctions on Venezuela could lead to higher oil prices in a US election year, Washington will allow US major Chevron to continue a joint venture with Venezuela's national oil company PDVSA, which has been steadily increasing production.

In October, Maduro and the US-backed opposition coalition signed an electoral agreement in Barbados, but the ink had hardly dried before his government launched a widespread crackdown.

The main opposition candidate, Maria Corina Machado, was banned from running in the elections, her chosen alternative candidate was not allowed to register, and some members of her campaign team were arrested. Opinion polls indicated that Machado would defeat Maduro by an overwhelming majority.

“We have determined that although Venezuelan authorities have fulfilled some basic commitments, they have also bombed in several areas,” a senior administration official said, describing a “continuing pattern of harassment and repression against opposition figures and civil society.”

The US administration official added that Maduro supported “certain aspects” of the Barbados Agreement, including setting an election date, updating the electoral registry and “starting a process to allow international monitoring of the elections.”

In another gesture of cooperation, Washington and Caracas in December completed a prisoner exchange, in which 10 Americans — including six whom the United States designated as wrongfully detained — were released from a Venezuelan prison in exchange for the release of Alex Saab, a Colombian businessman and businessman. Colombian. An ally of Maduro, who US prosecutors accused of transferring $350 million from Venezuela to US accounts.

Despite hostile government statements in recent weeks, Maduro said on Monday that he would “never close the door to dialogue” with the United States, adding that his negotiators met with Washington's envoys in Mexico last week. “I tell the negotiators to give the president [Joe] Biden's next message: 'If you want, I want. Maduro said: If you don't want to, I don't want to.

In response to the re-imposition of sanctions, the President of the Venezuelan Congress, Jorge Rodriguez, accused Washington of violating the trade agreement reached with Caracas. “We honor our word, and we will never tolerate any ultimatum,” Rodriguez said. “We will see who complied and who did not abide by their word and commitments.”

The Biden administration is trying to reconcile its desire to punish Maduro for reneging on his promises to hold free and fair elections with other concerns. It is concerned about pushing Venezuela further into the arms of its allies Russia and China, and is concerned that new sanctions may stimulate more Venezuelan migration toward the United States.

Once a major oil producer in the world, Venezuela's production collapsed from about 2.9 million barrels per day in 2014 to less than 400,000 barrels per day in 2020, the result of years of mismanagement combined with “maximum pressure” sanctions in The Trump era, which aims to overthrow Maduro.

Helped by the temporary lifting of sanctions in October and increases in Chevron's oil joint venture, Venezuela boosted crude oil production to an average of just over 800,000 barrels per day in the first quarter of this year, according to OPEC figures. The easing of sanctions also allowed Venezuela to sell its oil directly, without having to use black market intermediaries to charge large fees.

Venezuela has the largest oil reserves in the world, as well as an abundance of natural gas. Energy companies have taken advantage of the easing of sanctions to flock to Caracas over the past six months in search of potential deals with Maduro.

Shell and Trinidad's National Gas Company signed an agreement to export Venezuelan offshore gas via the Caribbean island, while Spain's Repsol and France's Morel & Prom also signed deals, according to news reports. These were covered by separate US sanctions authorizations. US officials declined to say whether these permits would continue, citing commercial confidentiality.

US companies investing in Venezuelan oil and gas that are not covered by current licenses will have until May 31 to wind down their operations. The US Department of the Treasury's Office of Foreign Assets Control “will consider applications for specific licenses to continue activities after the end of the liquidation period on a case-by-case basis,” a US State Department statement said on Wednesday.

Venezuelan Oil Minister Pedro Telechea told reporters that the sanctions would not harm the country's economy, and that foreign companies could apply to the US Treasury Department for individual licenses.

Analysts said that the decision to tighten sanctions on the oil sector will have a limited impact in the short term on Venezuela's current production and exports, but will harm its recovery in the long term.

“There will not be a major impact on Venezuelan production because the general license that was canceled on Wednesday was not generating investment,” said Francisco Monaldi, a Venezuelan oil expert at the Baker Institute at Rice University. He added that Chevron, with its continued license to operate in Venezuela, is an important investor in the country's oil sector. “The re-imposition of sanctions will slightly impact the availability of diluents at non-Chevron projects.”

Asdrubal Oliveros, director of Caracas-based consultancy Econalitica, estimated that renewed sanctions could cause Venezuela to lose foreign income worth about $3 billion and a 3.6 percent drop in GDP growth — a price Maduro is willing to pay.

“In Maduro’s cost-benefit analysis, it was important not to give up too much political space,” Oliveros said. “This may give the government an excuse to tighten political dynamics with more repression, giving less room for the opposition in the elections.”