US restates conditions for Venezuela sanctions relief

The US will not substantially alter its sanctions targeting Venezuela's oil sector until Caracas holds free and fair elections, a US official said one day after Washington issued a limited waiver allowing LPG sales.

The US Treasury Department yesterday authorized Venezuela to import LPG from the US and other sources, the first crack in the wall of sanctions Washington has imposed against Caracas in recent years. But to the consternation of US authorities, Venezuelan president Nicolas Maduro's government on the same day detained a close associate of opposition leader Juan Guaido, whom the US recognizes as the country's interim leader.

"Yesterday's disruption of political opposition to Mr. Maduro certainly makes it harder to demonstrate that Maduro and his supporters are going to allow this to be a level playing field," US deputy assistant secretary of state Kevin O'Reilly said today in a virtual event hosted by Washington-based think tank the Atlantic Council. "That kind of action against those political leaders is utterly unacceptable."

The US sanctions regime has made it all but impossible for Venezuela to export crude to any destination other than China, while also effectively prohibiting imports of diesel in exchange for shipments of Venezuelan crude. President Joe Biden's administration issued a joint declaration with the EU and Canada last month that promised to consider sanctions relief if the Venezuelan government and opposition forces negotiate successfully to resolve the Opec producer's protracted political and economic crisis.

Norway and the wider EU have been working behind the scenes to lay the groundwork for negotiations between the government and various factions of the political opposition, with the goal of establishing credible conditions for state and local elections in November. The US would need to see that the November ballot is truly competitive to begin considering sanctions relief, O'Reilly said.

"Certainly, based on yesterday's events, I am somewhat skeptical that there is goodwill to allow that to happen," O'Reilly said.

The US administration's relatively modest step of allowing LPG sales prompted fierce criticism from US politicians who want to maintain pressure until Maduro steps down, even though the "maximum pressure" sanctions regime imposed by former president Donald Trump achieved little over the past two years. "At the very moment the Maduro regime was abducting one prominent member of the opposition and surrounding the home of Juan Guaido trying to abduct him, the Biden administration was announcing it was removing a sanction on the regime," senator Marco Rubio (R-Florida) said yesterday via Twitter. Venezuelan ally Cuba's crackdown on rare protests on the island this week amplified calls to maintain a tough stance on Caracas.

Allowing Venezuela to import LPG — a fuel that nearly 90pc of Venezuela's population relies on for cooking — was a humanitarian gesture, O'Reilly said. "Our Treasury Department has loosened certain restrictions on cooking gas because we see that it is fundamental to the well-being of Venezuelans, their day to day lives, so that they can then focus on these more enduring political questions and help resolve their challenges."

Venezuela used to be self-sufficient in LPG, but as production dwindled it turned to US suppliers until sanctions effectively blocked access in January 2019. Removing a ban on LPG sales is unlikely to have a significant impact on trade flows from the US, at least in the near term. Venezuela would still be unable to swap LPG imports for crude. Forced to pay cash, the Venezuelan government may have little immediate incentive to direct scarce resources to LPG, despite an acute shortage.

By Haik Gugarats