US bides time with latest Venezuela actions

Washington's latest move to tighten sanctions pressure on Caracas — stopping Chevron's ability to lift Venezuelan crude — is a tacit acknowledgment that regime change is going to take longer than Washington expected.

At first glance, the Treasury Department's detailed sanctions license issued yesterday fits the White House narrative of maximizing pressure on Venezuelan president Nicolas Maduro, whom most Western countries no longer recognize as the country's legitimate leader. The renewed exemption from US oil sanctions for Chevron and US oil services giants Halliburton, Schlumberger, Baker Hughes and Weatherford comes with more caveats, including a prohibition on drilling, lifting, purchasing or processing Venezuelan-origin crude or oil products, as well as further limits on what the US companies can spend to maintain essential operations and contracts.

US secretary of state Mike Pompeo said today that the latest waivers "will allow companies operating there to begin their wind down process" before a deadline of 1 December, even though the new exemption mandates no such withdrawal.

The date and duration of the new exemption point to Washington's loss of confidence in the odds of swift political transition in Caracas. Treasury until recently extended the waivers every three months, in part with the expectation that Maduro's fall was imminent. Eliminating a quarterly interagency discussion on the fate of the closely watched sanctions waivers gives more prominence to Washington's new plan, which offers Venezuela a phased dismantling of the sanctions in exchange for Maduro's departure and early presidential elections. The US is hoping the crises descending on Caracas from the oil price crash and the global pandemic will persuade military and civilian officials surrounding Maduro to abandon him and sign on to the transitional power-sharing plan.

The 1 December expiry date ties in to political calendars in both the US and Venezuela. The administration will make its next decision on the waiver after US presidential elections in November, but just before elections for Venezuela's National Assembly are supposed to take place around early December. The US and the EU hold that the National Assembly is the only legitimate institution in the country, and the end of its term threatens to undermine speaker Juan Guaido's constitutional claim to be the country's interim president.

The export ban tagged on to the new sanctions waiver gives the White House a way to talk tough on Caracas, but the move is largely symbolic in current oil market conditions. The provision blocks Chevron from lifting its share of crude from its PetroPiar heavy crude upgrading joint venture with controlling shareholder PdV. Following a January 2020 loading of synthetic crude from PetroPiar, no further cargoes were on the horizon for Chevron anyway. And in the case of PetroPiar and Chevron's PetroBoscan joint venture with PdV in western Venezuela, the PdV-led joint venture companies face no such direct obstacles to exports.

In practice, the oil price crash is curbing Washington's broader ability to pressure Maduro through oil sanctions. Venezuela's oil industry already is hanging by a thread, but the Maduro government now relies less on oil and more on opaque revenue streams — Washington accuses Caracas of profiting from illegal gold sales and drug trafficking.

Washington imposed sanctions on PdV in January 2019 but carved out exemptions for Chevron and other foreign companies, allowing them to lift Venezuelan crude and sell it outside of US markets. European firms Repsol and Eni continue to lift cargoes and deliver some sorely needed refined products to Venezuela in quiet, debt and swap arrangements. Sanctions hawks, including some prominent members of the political opposition, have pushed to cancel those exemptions as a way to turn the screws on Maduro. But so far such action has only focused on Russia, Maduro's most outspoken international patron.

US sanctions imposed in February and March, as well as chronic financial losses, forced Russian state-controlled Rosneft to transfer its Venezuelan oil assets to an unnamed entity owned by the Russian government.

Chevron said it will "continue to comply with applicable laws and regulations in relation to the activities that it is authorized to undertake in Venezuela," adding that it remains committed to "the integrity of our joint venture assets, the safety and wellbeing of our employees and their families, and the company's social and humanitarian programs during these challenging times." Schlumberger said it is reviewing the terms of the license renewal.

By Haik Gugarats and Patricia Garip