US eases some sanctions on Venezuelan oil industry
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The Trump administration has eased some sanctions on Venezuela's oil industry to encourage US investment.
PHOTO: REUTERS
WASHINGTON – The Trump administration on Jan 29 eased some sanctions on Venezuela’s oil industry to encourage US investment, after its forces ousted the South American country’s president Nicolas Maduro earlier in January.
The US Treasury authorised transactions involving the government of Venezuela and state oil company PDVSA related to “the lifting, exportation, re-exportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil, including the refining of such oil, by an established US entity”.
The authorisation, known as a general licence, did not include language lifting sanctions on the production of Venezuelan oil. A White House official confirmed the measure kept sanctions on the production of Venezuelan crude, adding that it “would help flow existing product”, and there will soon be more announcements on the easing of sanctions.
The move could unlock billions of dollars in new US investment in Venezuela’s crippled energy sector, but it excludes companies from rivals such as China and Russia, signalling an “America First” approach to the nation’s reconstruction.
The easing of some sanctions marks a pronounced shift from the previous strategy of granting individual exemptions.
During US President Donald Trump’s first administration, the Treasury’s Office of Foreign Assets Control (OFAC) designated Venezuela’s entire energy industry as subject to US sanctions in 2019 after Maduro’s first re-election, which Washington did not recognise.
The licence does not authorise any payment terms that are not commercially reasonable, involve debt swaps or payments in gold, or are denominated in digital currency.
The licence excludes any transactions involving persons or entities located in or controlled by Russia, Iran, North Korea and Cuba. It also excludes transactions involving blocked vessels and entities “organised under the laws of Venezuela or the United States that are owned or controlled, directly or indirectly, by or in a joint venture with a person located in or organised under the laws of the People’s Republic of China”.
America First
Oil producers Chevron, Repsol and ENI, refiner Reliance Industries and some US oil service providers had sought licences in recent weeks to expand output or exports from the Organisation of Petroleum Exporting Countries member. The companies are partners and customers of PDVSA.
Mr Jeremy Paner, a lawyer at Hughes Hubbard & Reed and a former OFAC sanctions investigator, said the authorisation is broad in the sense that it opens up many operations, including refining, transportation and “lifting” of Venezuelan oil.
But he said the scope is narrow in that it applies only to US companies.
Mr Kevin Book, an analyst at ClearView Energy Partners, said the authorisation could provide clarity for US companies considering new investments while maintaining the previous standard of case-by-case review for non-US entities.
“In short, it appears to offer ‘America First, Others Ask’ sanctions relief.”
The large number of individual requests to the US government had delayed progress on plans to expand exports and get investment moving quickly into Venezuela, two sources said this week.
The new OFAC licence, meanwhile, came as lawmakers in Venezuela on Jan 29 approved a sweetened reform of the country’s main oil law, which is expected to grant autonomy to private producers in joint ventures or under new contracts to operate their projects and commercialise the output. It also formalises an oil production-sharing model first introduced by Maduro and negotiated with little-known energy companies in recent years.
Following the US capture of Maduro
Mr Francisco Monaldi, director of the Latin American Energy Program at Rice University’s Baker Institute in Houston, said he wondered if the exclusion of Russian and Chinese production would make it hard for PDVSA to operate or market oil from those ventures.
Ventures with those countries produce about 22 per cent of the oil, he added. “If they cannot export the oil coming from these ventures, that’s a big problem.” AFP
