US eases sanctions: Chevron to resume oil production in Venezuela

After the resumption of negotiations between the government of Nicolás Maduro and the Venezuelan opposition in Mexico, the United States authorized the oil company Chevron to continue oil production in Venezuela.

Under the deal, Venezuela’s national oil company PDVSA will not benefit from oil sales and the proceeds will be used to pay off debts owed to Chevron.

The relaxation of oil sanctions meant that Washington made a major change in its attitude towards the Venezuelan government, with the consequences of restrictions on Russian energy products.

Opposition and government at the table

Yesterday, representatives of the Venezuelan government and the opposition returned to political negotiations in Mexico, which were suspended a year ago. The parties signed a $3 billion humanitarian agreement aimed at releasing Venezuelan funds frozen abroad for infrastructure and education.

At the same time, the US Treasury Department announced that it was easing oil sanctions against Venezuela. “This action reflects the longstanding policy of the United States to ease sanctions based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy,” Treasury said in a statement.

THE SITUATION MAY CHANGE

Briefing reporters yesterday, a senior US administration official said the six-month furlough could change if “the Maduro regime does not negotiate in good faith or honor its commitments.”

The official said that with this measure, Venezuelan oil will go from the black market to “transparent and legitimate channels.” The official denied claims that this decision was made due to problems in world oil markets and said that this move will not affect prices.

LOW PRODUCTION DUE TO SANCTIONS

Venezuela has the largest proven oil reserves in the world. The country once produced more than 3 million barrels of oil per day. However, after years of problems in the country and US sanctions, today production is well below 1 million barrels per day.

Francisco Monaldi, a Venezuelan energy policy expert at the Houston-based Baker Institute, said Chevron’s production could increase from 50,000 to 100,000 barrels a day in a matter of months.

WHAT HAPPENED?

The United States had previously tried to remove Nicolás Maduro from the presidency and recognized opposition leader Juan Guaidó as the country’s leader, claiming the 2019 election was rigged.

Under the Donald Trump administration’s sanctions against Venezuela, Chevron is not allowed to export crude oil or expand its operations, but only to maintain its Venezuelan assets.

Talks between the Caracas government and the opposition began in September 2021. However, the Maduro government withdrew from the talks just a month after Alex Saab was extradited to the United States on money laundering charges.

On the other hand, the surge in the crude oil market after the Russia-Ukraine war pushed US oil prices to a record high earlier this year and led to the highest inflation in 40 years. .

The Joe Biden administration, on the other hand, began looking at alternatives to Russian energy to combat rising oil prices after the Russia-Ukraine war this year. Thus, the need for Venezuelan oil led the US to lift the sanctions.