The US has announced a major easing of sanctions on Venezuela’s oil sector, following a historic agreement between the government and the opposition to hold free and fair elections in 2024. The move, which was welcomed by both sides of the political divide, will allow more oil to flow from the OPEC member nation, which has been suffering from a severe economic and humanitarian crisis for years.
The US Treasury Department issued a six-month license on Wednesday that authorizes transactions involving Venezuela’s state-owned oil company PDVSA and its subsidiaries, as well as other entities in the energy sector. The license also permits the export of diluents, which are needed to blend Venezuela’s heavy crude oil, and the import of refined products such as gasoline and diesel.
The license does not lift all sanctions on Venezuela, which were imposed by former President Donald Trump in 2019 to pressure President Nicolas Maduro to step down. The US still does not recognize Maduro as the legitimate leader of Venezuela and supports opposition leader Juan Guaido as the interim president. However, the license signals a shift in the US policy toward Venezuela under President Joe Biden, who has expressed a willingness to engage diplomatically with Maduro’s government and support a peaceful and democratic transition.
The license was issued after Maduro and Guaido reached a deal on Monday to hold presidential and parliamentary elections in November 2024, with guarantees of transparency, participation and international observation. The deal also includes the release of political prisoners, the return of exiled politicians, the restoration of constitutional powers to the National Assembly, and the delivery of humanitarian aid to the Venezuelan people.
The agreement was mediated by Norway and endorsed by several countries, including Canada, Mexico, Argentina, Brazil, Colombia, Chile, Panama, Costa Rica, Ecuador, Spain, France, Germany, Italy, the Netherlands, Portugal, Sweden and the UK. The easing of sanctions is expected to have a positive impact on Venezuela’s oil production, which has plummeted from over 3 million barrels per day (bpd) in 2014 to less than 500,000 bpd in 2021, according to OPEC data.
Venezuela has the largest proven oil reserves in the world, but its oil industry has been crippled by mismanagement, corruption, underinvestment and US sanctions. The license will allow Venezuela to resume some oil exports to cash-paying customers and attract foreign companies to its oilfields. It will also help alleviate fuel shortages that have caused long lines at gas stations and hampered transportation and agriculture.
However, experts say that Venezuela’s oil recovery will not be immediate or easy, as it will require significant investments, technical assistance and legal reforms. The license will also have implications for the global oil market, as it could increase the supply of crude oil at a time when demand is recovering from the pandemic-induced slump.
Oil prices fell about 2% on Thursday after the US announcement. Brent futures for December were down $1.52, or 1.7%, to $89.98 a barrel at 0913 GMT. U.S. West Texas Intermediate (WTI) futures for November stood at $87.07 per barrel, down $1.25, or 1.4%.
The license comes amid rising tensions in the Middle East over Israel’s military campaign in Gaza, which has sparked calls from Iran for an oil embargo on Israel. However, OPEC sources told Reuters that the cartel is not planning to take any action on Iran’s request.
The US decision to ease sanctions on Venezuela is seen as a gesture of goodwill and a recognition of the efforts of the Venezuelan people to achieve a peaceful and democratic solution to their crisis. The license is also an opportunity for Venezuela to rebuild its economy and improve its living conditions, as well as to rejoin the international community and play a constructive role in regional stability and energy security.
Source: [Reuters]
