US to not renew licence to ease Venezuela oil, gas sanctions unless President Maduro progresses on free, fair elections

Three days before the temporary licence was set to expire, on Monday, a State Department spokesperson stated that the US would not renew it unless President Nicolas Maduro made good on his promises to hold free and fair elections this year. The licence had significantly eased sanctions on Venezuela’s oil and gas industry.

Regarding the July 28 presidential elections, the US has expressed worry about the electoral process in Venezuela and what it perceives as Maduro’s inability to fulfil his key campaign pledges.

“Absent progress by Maduro and his representatives in terms of implementing the road map’s provisions, the United States will not renew the license when it expires on April 18, 2024,” the spokesperson said.

The Biden administration is not optimistic that Maduro would yield enough by Thursday’s deadline to appease the US. Last Tuesday, US and Venezuelan officials met in secret in Mexico; but, according to a source with knowledge of the discussions, they did not make any headway in resolving their disagreements.

The US responded to an electoral agreement made in Barbados between Maduro’s administration and the opposition by lifting some of the sanctions in October. The deal gave the opposition the freedom to select its own nominee for president.

If the present licence is not renewed, there is still a chance that the US will grant a new, more restrictive licence in its stead.

Venezuela’s oil exports in March rose to their highest level since early 2020 as customers rushed to complete purchases ahead of the predicted expiration of the US license, Reuters reported this month.

Venezuela’s state-run oil firm, PDVSA, has said it is prepared for any scenario, including the return of full oil sanctions.

President Joe Biden’s aides are still discussing a range of options ahead of the expiration on Thursday of the US license that has allowed Venezuela to freely sell its crude, according to people familiar with the matter.

The Biden administration is determined to punish Maduro’s government in some way and is deliberating on how far to go in withdrawing sanctions relief, though it is expected to stop short of a full return to the Trump-era “maximum pressure” policy.

Possible steps under serious consideration would be to allow Venezuela to continue selling its crude on world markets but to reimpose a ban on use of US dollars in such transactions, requiring Venezuela to switch to other currencies and expand barter arrangements and swaps, according to people briefed on the discussions.

That option could expand the Venezuelan banking sector’s role in oil sales if transactions in domestic currency are the only ones authorized.

“We are going ahead with a license or without a license, we aren’t a gringo colony,” Maduro said on his weekly television program on Monday evening, adding that lawmaker and government negotiator Jorge Rodriguez had attended a video call about the decision.

A bipartisan group of US senators urged Biden last week to consider individual sanctions for those directly responsible for “repressive actions.” Successive US administrations have already sanctioned scores of Venezuelan officials.

US officials are not planning to roll back the authorization given to Chevron (CVX.N), opens new tab in 2022 to sell oil in the US from its Venezuela joint ventures, which renews automatically each month. Authorizations to European oil companies to take Venezuelan oil also are expected to remain, the sources said.

Chevron did not immediately reply to a request for comment.

Weighing on current US deliberations are concerns about whether reimposing sanctions on Venezuela’s energy sector could spur higher global oil prices and increase the number of Venezuelan migrants heading for the US-Mexico border as Biden campaigns for reelection in November.

The US Treasury Department separately on Monday extended through Aug. 13 a license that protects Venezuela-owned refiner Citgo Petroleum from creditors.

Venezuela’s opposition is conducting internal negotiations about how to run a candidate in the July 28 election and who that candidate could be.

Maria Corina Machado, who resoundingly won the opposition primaries last October, cannot run because she is barred from holding public office, a decision she says is unfair. Machado named Corina Yoris as her successor, but the 80-year-old academic was also unable to register her candidacy.

Two opposition candidates were able to register, and possible substitutes can be named until April 20.