Stakes look low in Washington’s Venezuela dilemma

  • Spanish Market: Crude oil
  • 15/04/24

The US administration's decision to temporarily lift oil sanctions against Venezuela in October last year relied on the premise that economic incentives would prompt Caracas to hold a competitive presidential election. But either the theory was wrong or the incentives were insufficient to encourage Venezuelan president Nicolas Maduro to consider exiting the scene.

The US wants Venezuela to allow credible opposition candidates to run in the latter's presidential elections on 28 July, and set this as a condition for extending sanctions relief beyond a looming 18 April deadline. But the Maduro government has prevented key opposition leader Maria Corina Machado from running. The main non-government affiliated candidate allowed to run in the election, governor of the oil-rich Zulia state Manuel Rosales, is viewed with scepticism in Washington. An election in which "only those opposition candidates with whom Maduro and his representatives feel comfortable" can participate will not be considered competitive enough for the US sanctions relief to continue, the US State Department says.

Colombian president Gustavo Petro appeared to be mounting a last-ditch effort this week to mediate between Maduro and the opposition. Petro also wants to make it easier for Colombian oil firm Ecopetrol to expand business with its neighbor, including putative plans for gas imports from Venezuela. But doing so requires a massive change of US policy. "The US government looks a little more interested in alleviating sanctions than the sanctioned party," Caracas-based economist Tamara Herrera says. "Barring a grand gesture" by the Maduro government, the US is likely to reimpose sanctions, but perhaps grant specific carve-outs more freely, she says.

Maduro's reneging on last year's accord with the opposition over the competitive election comes as no surprise to Washington-based critics of his government. "We've done everything we can to give economic inducement to the regime to behave differently," think-tank Center for Strategic and International Studies' Americas programme director Ryan Berg says, estimating the benefit to Caracas from sanctions relief at $6bn-10bn since October. "I just don't see that they've really given anything" in return. Leading US senators from both parties agree, calling on the White House this week to reimpose the sanctions after 18 April.

Do the sanctioned crude shuffle

But the six-month period during which Venezuela's state-run PdV was allowed to sell oil freely to any buyer and to invite foreign investment has hardly provided the economic benefits expected in October. India has emerged as a major new destination for Venezuelan crude, importing 152,000 b/d in March.

The sanctions relief has not significantly affected US-bound Venezuelan volumes, which averaged 133,000 b/d last year. Even before the October waiver, Washington had allowed Chevron to lift oil from its joint venture with PdV, solely into the US. That exception for Chevron will remain in place.

Undoing the US sanctions regime against Venezuela has provided unintended market incentives. Chinese imports of Venezuelan Merey, often labeled as Malaysian diluted bitumen, have been lower since October. Independent refiners in Shandong, which benefited from wide discounts on the sanctioned Venezuelan crude, cut back imports to just a fraction of pre-relief levels. By contrast, state-controlled PetroChina was able to resume imports. The possible reimposition of US sanctions is reflected in the widening Merey discount to Brent (see chart).

Venezuela's rekindling of a border dispute with Guyana is also irking many countries that might come to its defence, and US elections in November could make the prospects of a US deal with Maduro even less likely. Hopes for a renaissance in oil or democracy in Venezuela seem ever further away.

Chinese imports of Venezuelan crude

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Iran rebukes G7 after warning over nuclear escalation


17/06/24
17/06/24

Iran rebukes G7 after warning over nuclear escalation

Dubai, 17 June (Argus) — Iran's foreign ministry has called on the G7 to distance itself from "destructive policies of the past" after the group issued a statement condemning Tehran's recent nuclear programme escalation. "Unfortunately, some countries, driven by political motives and by resorting to baseless and unproven claims, attempt to continue their failed and ineffective policy of imposing and maintaining sanctions against the Iranian nation," the foreign ministry's spokesperson Nasser Kanaani said on 16 June. Kanaani advised the G7 "to learn from past experiences and distance itself from destructive past policies". His comments were in response to a joint statement from G7 leaders on 14 June warning Iran against advancing its nuclear enrichment programme. The leaders said they would be ready to enforce new measures if Tehran were to transfer ballistic missiles to Russia. The G7's reference to Iran comes on the heels of a new resolution passed by the board of governors of the UN's nuclear watchdog the IAEA . The resolution calls on Iran to step up co-operation and reverse its decision to restrict the agency access to nuclear facilities by de-designating inspectors. Kanaani said "any attempt to link the war in Ukraine to the bilateral co-operation between Iran and Russia is an act with only biased political goals", adding that some countries are "resorting to false claims to continue sanctions" against Iran. Tehran will continue its "constructive interaction and technical co-operation" with the IAEA, Kanaani said. But the agency's resolution is "politically biased", he said. The IAEA's new resolution and the reference to Iran in the G7 statement could be the start of a more concerted effort to raise pressure on Tehran over its nuclear programme. "What is happening right now is the process of accumulation of resolutions, so that when the day comes and the IAEA makes a referral to the UN Security Council, there will be enough resolutions to make a case for action at the security council level," a diplomatic source told Argus . Iran is enriching uranium to as high as 60pc purity. Near 90pc is considered to be weapons grade, according to the IAEA. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

S Africa's ANC, DA agree to form government


14/06/24
14/06/24

S Africa's ANC, DA agree to form government

Cape Town, 14 June (Argus) — South Africa's African National Congress (ANC) and Democratic Alliance (DA) political parties today agreed to form a government while the first sitting of the new parliament was underway. The agreement, which includes the Inkatha Freedom Party (IFP), paves the way for ANC leader Cyril Ramaphosa to be re-elected president. The parties will assume various positions in government broadly in proportion to their share of seats. The government of national unity (GNU) agreement is the result of two weeks of intense negotiations after the ANC lost its long-held majority in the national election on 29 May. It secured 40.2pc of the vote, and the centre-right, pro-market DA retained its position as the official opposition with 21.8pc. The deal scuppers the possibility of an alliance between the ANC and the two largest left-wing parties, MK (uMkhonto weSizwe) and the Economic Freedom Fighters (EFF), which credit ratings agency Fitch warned could pose risks to macroeconomic stability . MK party unseated the EFF in the election to come third, winning 14.6pc of the vote. The EFF secured 9.5pc, and the IFP came a distant fifth with 3.85pc. The MK and EFF are populist parties that campaigned on agendas including wide-scale land expropriation without compensation, nationalisation of economic assets — including mines, the central bank and large banks and insurers — halting fiscal consolidation and aggressively increasing social grants. The GNU parties agreed the new administration should focus on rapid economic growth, job creation, infrastructure development and fiscal sustainability. Other priorities include building a professional, merit-based and non-partisan public service, as well as strengthening law enforcement agencies to address crime and corruption. Through a national dialogue that will include civil society, labour and business, parties will seek to develop a national social compact to enable South Africa to meet its developmental goals, they said. The GNU will take decisions in accordance with the established practice of consensus, but where no consensus is possible a principle of sufficient consensus will apply. By Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

UK political parties repeat existing stances on energy


13/06/24
13/06/24

UK political parties repeat existing stances on energy

London, 13 June (Argus) — The two main UK political parties have set out their plans, including on energy and climate change, with just three weeks until the general election. Energy security and the cost to consumers is a recurring theme for both, but the manifestos present some marked differences in approach to the energy transition. Both the incumbent Conservative and opposition Labour parties doubled down on existing positions in their respective manifestos. The Conservative party said that it remains committed to the UK's 2050 net zero emissions target, but promises a "pragmatic and proportionate" route. The party's manifesto guarantees "no new green levies or charges while accelerating the rollout of renewables". The UK's net zero goal is legally-binding, and was passed with significant cross-party support under a Conservative government in 2019. The Conservatives have been in power since 2010, and fielded five prime ministers in that time. Recent polling data show a substantial lead for Labour, which performed well at local elections in May. Labour placed strong focus on the opportunity the transition offers, saying that it would place the UK at the "forefront of climate action by creating the green jobs of the future at home and driving forward the energy transition on the global stage". The party has committed to zero-carbon power by 2030, although it would "maintain a strategic reserve of gas power stations to guarantee security of supply", it said. The Conservative manifesto reiterates the party's plans to build new gas-fired power plants. The party had previously committed to a decarbonised power grid by 2035, in line with a G7 pledge, although that is not mentioned in its manifesto. The two main parties clearly diverge on their approaches to North Sea oil and gas production. The Conservatives aim to keep the windfall tax — which effectively results in a 75pc rate — on oil and gas producers in place "until 2028-29, unless prices fall back to normal sooner". Labour confirmed plans to lift the rate to 78pc and run the tax until the end of the next parliament, which is likely to be mid-2029. Labour is also clear that it "will not revoke existing licences" in the North Sea, but it will not issue any new licences — for oil, gas or coal. The Conservatives restated the party's aim to legislate for annual North Sea licensing rounds . Both parties back nuclear energy, including small modular reactors — though those are unlikely to be operational until after 2030. And both pledge to cut planning bureaucracy and tackle grid connections. Labour's plans to "double onshore wind, triple solar power, and quadruple offshore wind by 2030" would result in installed capacity of 31GW, 48GW and 59GW, respectively, from a baseline of end-2023. The Conservatives' target to triple offshore wind by the end of the next parliament would put installed capacity at 44GW in 2029 — below the 50GW target for 2030 set in 2022 — while it said it supports solar and onshore wind in some circumstances. Finance in focus Both parties are keen to pull in private-sector investment, while Labour took up an original Conservative pledge to "make the UK the green finance capital of the world". And both pledge to address the cost of energy for consumers — Labour through local power generation projects and home insulation upgrades, and the Conservatives by ruling out any further "green levies". The latter plans to reverse London's expansion of the ultra-low emissions zone — originally planned by Conservative then-mayor and later prime minister Boris Johnson. Labour said that it would restore a phase-out date of 2030 for new internal combustion engine cars — which prime minister Rishi Sunak in September pushed back to 2035 . On an international level, both parties mention climate leadership at summits such as UN Cops. The Conservatives pledged to "ring-fence" the UK's climate finance commitments, while Labour committed to restore development spending to 0.7pc of gross national income "as soon as fiscal circumstances allow". By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec reopens rift with IEA on peak demand


13/06/24
13/06/24

Opec reopens rift with IEA on peak demand

London, 13 June (Argus) — Opec today reopened a rift with the IEA about the future need for oil, calling the Paris-based agency's forecast for peak demand this decade a "continuation of [its] anti-oil narrative." Opec secretary-general Haitham Al Ghais said the IEA's projection , made earlier this week, is a "dangerous narrative" that "will only lead to energy volatility on a potentially unprecedented scale." He made his case in a commentary for consultancy Energy Aspects that Opec made publicly available. This is not the first time the two organisations have clashed over the future trajectory for oil demand growth. When IEA executive director Fatih Birol first floated the idea of a peak demand this decade in 2023, Al Ghais said this was "extremely risky and impractical". Birol and the IEA have been keen to stress that there will be no sharp demand fall beyond its predicted peak year of 2029, and have repeatedly said there will be a gradual decline perhaps over as long as 20 years. Al Ghais said Opec does not see peak oil demand by the end of the decade — he said in January that the scenario "is not showing up in any reliable and robust short- and medium-term forecasts" — and took issue with the IEA's forecasts for demand growth to 2030. The watchdog projects a sharp drop off in growth in 2026 to almost nothing in 2029 and a small contraction in 2030. Al Ghais called this unrealistic. The two bodies' demand estimates have been moving further apart in recent months, with Opec's forecast for growth this year now 1.3mn b/d more than that of the IEA. Birol this week acknowledged this is a "big gap", but was diplomatic when pressed for reasons. "We respect all institutions' forecasts," he said. "We will see at the end of the year what the numbers will be." Criticism of the IEA from the upstream industry has magnified since 2021, when the agency said that 2050 climate goals exclude the need for any new oil and gas fields. Saudi oil minister Prince Abdulaziz bin Salman described this as "la la land" analysis. This year the IEA has come under fire from Republicans in the US Congress who have said the agency is veering into climate advocacy. US industry body API chief executive Mike Sommers said earlier this year the IEA "has become, unfortunately, so politicized that it's just not a reliable source of data any more." By Ben Winkley Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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