The United States has once again resorted to economic sanctions as a measure of pressure against the Government of Nicolás Maduro. This Thursday, Washington reactivated the restrictions on the energy sector suspended six months ago due to the elimination from the electoral competition of opposition candidates such as María Corina Machado, disqualified by Chavismo. In practice, the so-called General License 44, which allowed Venezuela to market its gas and crude oil in international markets, has not been renewed. But this pressure, now exerted in the middle of the race towards the presidential elections on July 28, is not new. It spans three administrations in the White House and has become progressively more complicated. These are the keys to the diplomatic struggle with Caracas:
In 2015, under the mandate of Barack Obama, the first measures were imposed within the framework of the Law for the Defense of Human Rights and Civil Society in Venezuela, which was intended to punish those identified as responsible for violations of fundamental rights. . These were individual sanctions, among which were senior officials of security forces, such as the Bolivarian Intelligence Service (Sebin), the Bolivarian Police and the National Guard, involved in the violent repression of anti-government protests in 2014.
The first economic sanctions date back to 2017. The Treasury Department, under the orders of Donald Trump, imposed restrictions on operations, transactions and negotiations between US entities and persons and the Venezuelan Government. This led to a policy of overcompliance in the legal departments of US banks regarding transactions involving Venezuelan citizens.
This year
Venezuela defaulted
on
its debt payments.
Siege of PDVSA
In the following years, specific sectors and organizations were added. In 2019, in the midst of a fight between Juan Guaidó and Maduro, Washington hit PDVSA, greatly weakened by the economic crisis and the rampant corruption of the state oil company, and its subsidiary companies. On that occasion, for the first time, the oil exchange between Venezuela and the United States, a traditional client and payer of the South American oil company that then shipped about 500,000 barrels a day, was suspended.
Along with these sanctions, known as “primary”, the so-called “secondary sanctions” were applied that threaten a veto in the US financial system, not only to the citizens of that country but also to foreign citizens and entities that “materially assist, sponsor or provide financial, material or technological support, or goods or services to the sanctioned Government of Venezuela.” This ban complicated the marketing of PDVSA crude oil in international markets and led the Caribbean country to resort to the black oil market, trading it at great discounts, and to tricks such as the use of ghost ships to ensure the sale or barter for goods. or hydrocarbon derivatives from the barrels that were left at PDVSA docks.
In those waters full of intermediaries they navigated these opaque negotiations that have ended in an extensive network of corruption, which Chavismo has called PDVSA Cripto. This new embezzlement in the country's main industry involved the loss of 21,000 million dollars and a purge in the Government that led to several arrests of officials and which a few days ago reached an alleged outcome with the recent imprisonment of Tareck El Aissami, former Minister of Oil and close man of Maduro, after disappearing from public life without explanation for a year.
Six month relief
The path to easing these blockades on the sale of Venezuelan oil began on February 25, 2022, when Russia invaded Ukraine. The imbalance in the global energy market with a new war on the horizon ended up bringing the United States closer to the Maduro Government. Long conversations and at least six meetings in Doha, sponsored by Qatar in parallel to the negotiations with the opposition that had begun a year earlier in Mexico, led to the Barbados Agreements, with a series of political commitments, and the implementation of the License 44.
This General License opened the door to the production, extraction, sale and export of oil or gas from Venezuela. This Thursday's change in Venezuela's sanctioning regime had a previous movement at the end of January, when the Supreme Court ratified the disqualification of the opposition candidate María Corina Machado. Then, the Treasury Department ordered to close all operations with Minerven before February 13, 2024 that had been permitted with the issuance of the 43A license last October.
Little impact for people
The impact of sanctions relief, both on the global energy market and on the street economy in Venezuela, is limited. Boosting production, after years of disinvestment and mismanagement, has been difficult for PDVSA, which has not managed to significantly increase the number of barrels produced. Venezuela, a country that once reached more than three million barrels a day, has not exceeded one million again since it recorded its minimum at the time of greatest crisis in the operations of the state company that worsened with the veto of United States to Venezuelan oil.
Today between 800,000 and 850,000 barrels are produced daily. The cash flow that has entered the coffers of the Maduro Government has allowed it to make injections of dollars into the exchange market to keep inflation at bay. But social spending remains contracted. The minimum wage has not been increased in Venezuela for two years, which today is equivalent to just over three dollars a month.
The Specific Licenses Slot
The relief of sanctions sparked interest among European, Indian and Chinese oil companies. This same Wednesday, on the eve of the expiration of the license granted last year, PDVSA and the Spanish company Repsol signed an agreement to extend the geographical area of the Petroquiriquire Mixed Company. License 44 that the United States has decided not to renew in response to the little progress made by the Maduro Government in complying with the agreements has been replaced by License 44A, which gives the companies involved a month and a half to close operations and opens the possibility for OFAC to consider specific license applications to those interested in continuing operations authorized by the license that ends today. With this fine print, the United States has managed not to completely return to the totally closed regime prior to the Barbados negotiations.
“Venezuela, with and without a license, will continue to grow,” said Pedro Tellechea, president of PDVSA, during the signing of the agreement with Repsol. “The license opens the door for Indian, Asian and European companies to come and request their license and continue working with Venezuela,” he added. PDVSA's reaction is opposite to that of the Chavismo high command, which has interpreted the non-renewal of License 44 as a failure by the United States to comply with what was agreed in Doha.
Extra time for Chevron
In 2022, the United States issued a first license aimed at easing sanctions with Venezuela. It was one of the first signs from Washington to move the sanctioning lever in exchange for progress in the democratization of the country. This license was issued after the opposition and the Government returned to the negotiating table in Mexico, after months of stagnation in the talks.
The beneficiary then was the American oil company Chevron, which received authorization to resume oil production in the country and new field projects. Regarding this license, which has been renewed every six months, the United States has not yet commented, so it could continue in force. The 8M general license, which allows limited transactions through May 16, 2024 with Halliburton, Schlumberger Limited, Baker Hughes Holdings LLC and Weatherford International, also remains in effect.