U.S. Considers Allowing Limited Oil Business To Continue In Venezuela

(MENAFN- The Peninsula) The Washington Post

Facing a mid-April deadline to decide whether to extend a temporary suspension of sanctions it granted Venezuela last fall, the Biden administration is considering ways to impose new limits on oil sales by the government of President Nicolás Maduro without increasing the number of Venezuelan migrants, raising U.S. gas prices or angering other Latin American governments.

Heavy sanctions barring oil sales, imposed by the trump administration, were lifted in October after Maduro promised that he would allow competitive presidential elections this summer.

Since then, the Venezuelan president has arrested members of the opposition and barred their main candidate from the race, leading the State Department to say in late January that, absent progress from Maduro, it would not renew a six-month sanctions suspension due to expire on April 18.

The U.S. Treasury "general license” issued last year allows buyers from around the world to purchase Venezuelan crude and pay for it in U.S. dollars for the first time since Trump's maximum pressure policy effectively removed it from the international market. China, which ignored the U.S. sanctions, became Venezuela's main buyer and Iran its main supplier of chemicals needed to dilute andproduce the country's heavy oil.

In the wake of Maduro's failure to live up to his side of the bargain, the administration wants to punish him, while avoiding losing what it gained from the agreement, negotiated at the urging of the Venezuelan opposition.

Under one proposal on the table, the Treasury Department would impose a new sanctions regime allowing Venezuela to continue to sell crude to international customers, but not for the U.S. dollars that are the market's dominant currency.

Instead, Venezuela would be paid in its own currency, the bolívar, deposited directly into its Central Bank through debt relief paymentsor barter arrangements that would swap oil for diluent, gasoline or diesel, according to an adviser to energy companies engaged in Venezuela's oil sector who spoke on the condition of anonymity to protect the confidentiality of clients.

This is the path "most likely” to be taken, according to a person familiar with internal administration deliberations, who was granted anonymity to discuss the sensitive issue. A spokesperson at the National Security Council declined to comment.

Biden officials, concerned about the political blowback for makingperceived concessions to an authoritarian leader, must make the case that the new policydoes not represent bending to the interests of a Maduro government that has repeatedly repressed the democratic opposition.

Biden began changing Trump's policy in 2022 by easing restrictions on Chevron,long a major producer in Venezuela, and allowing it to sell theoil it produces there to the United States. No additional restrictions are expected to be applied to the companyif the broader general license is rescinded, according to a U.S. government official, who spoke on the condition of anonymity under administration rules.

Administration officials began negotiations with the Maduro government at the urging of the Venezuelan opposition and companies operating there, incurring the displeasure of some powerful members of Congress, especially Florida's two Republican senators, Rick Scott and Marco Rubio, along with Sen. Ted Cruz (R-Tex.).

Critics expressed doubt that the sanctions relief would have the intended effect on Maduro.

"We gave up our leverage when we lifted the sanctions in the first place ... based on a promise that everybody knew he wasn't going to abide by,” said Eric Farnsworth, a Latin American expert with the Washington office of the Council of the Americas and the Americas Society and a former State Department official. "Now do you try to reimpose sanctions, and at what level?”

A return to the Trump-era sanctions policy could upset important left-leaning governments in the region, particularly Brazil and Colombia, which have struggled with their own migrant problems from neighboring Venezuela. India, a critical U.S. partner, has also becomea major importer of Venezuelan oil under the more liberal existing license.

"The worst thing that could happen is that we're seen as embracing this bad policy that we inherited from the Trump administration,” the person familiar with the issue said. "Maduro would go into the July elections with all the restrictions and put the blame on us. And countries we need to cooperate with us on migration” and other issues, "will rush to normalize relations” with Maduro, and "turn on us as the aggressors and the regime as the victim.”

The proposed new measure wouldstill allow "relief for the domestic economy” by providing swapped gas and other refined oil products for Venezuelan electricity, agriculture and gas, said David L. Goldwyn, who served as the State Department's special envoy and coordinator for international energy affairs during the Obama administration.

The existing license has had limited positive impact on cash flow to Venezuela and has not yet opened up wider access to the U.S. market, in part because of uncertainty over its six-month limit, said Francisco Monaldi, an expert on Venezuelan energy at Rice University in Houston.

Foreign companies, including somefrom the United States, had begun to explore possible new contracts in Venezuela in hopes that a relaxation in sanctions would last. But an end to the license would benefitChinese, Iranian and Russian interests, according to one oil sector business leader, who spoke on thecondition of anonymity about the now-uncertain situation to protect the confidentiality of his business.

With sanctions, the personsaid, "the American consumer is forced to pay for the country's bad foreign policy, while China is buying discounted oil.”

The Maduro government has barred, for corruption allegations validated by the Maduro-appointed Supreme Court, the main opposition coalition's chosen candidate, María Corina Machado, from running in the presidential election. After sweeping the opposition's primaries, Machado was unable to register as a candidate before the deadline last Monday. Her chosen alternative was also blocked from registering. At the last minute, the coalition managed to register a provisional candidate, former Venezuelan diplomat Edmundo González.

Now the country's historically squabbling opposition is trying to agree on a unity candidate all factions can support. If the government allows it, the opposition will haveuntil April 20 to suggest a substitute for González.

Maduro's electoral roadblocks prompted rare condemnation this week from leaders in Colombia and Brazil, governments usually seen as more friendly to Venezuela's leadershipthan some others in the hemisphere President Luiz Inácio Lula da Silva said on Thursday that there was no justifiable reason for Maduro to ban opposition candidates from running.

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