The Trump administration on Thursday eased some sanctions on Venezuela's oil industry to encourage US investment, after US forces ousted the South American country's illegitimate president Nicolas Maduro earlier this month.
The US Treasury authorised transactions involving the government of Venezuela and state oil company PDVSA related to, "the lifting, exportation, reexportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil, including the refining of such oil, by an established US entity."
The authorisation, known as a general licence, did not include language lifting sanctions on production of Venezuelan oil. A White House official confirmed the measure kept sanctions on production of Venezuelan crude, adding it, "would help flow existing product," and that there will soon be more announcements on easing of sanctions.
The move could unlock billions of dollars in new US investment into Venezuela's crippled energy sector, but it excludes firms from rivals like China and Russia, signalling an "America first" approach to the nation's reconstruction.
The easing of some sanctions marks a pronounced shift from the previous strategy of granting individual exemptions.
During President Donald Trump's first administration, the Treasury's Office of Foreign Assets Control designated Venezuela's entire energy industry as subject to US sanctions in 2019 after Maduro's first re-election, which Washington did not recognise.
The licence does not authorise any payment terms that are not commercially reasonable, involve debt swaps or payments in gold, or are denominated in digital currency.
The licence excludes any transactions involving persons or entities located in or controlled by Russia, Iran, North Korea and Cuba. It also excludes transactions involving blocked vessels and entities, "organised under the laws of Venezuela or the US that is owned or controlled, directly or indirectly, by or in a joint venture with a person located in or organised under the laws of the People’s Republic of China."
Oil producers Chevron, Repsol and Eni, refiner Reliance Industries, and some US oil service providers had sought licences in recent weeks to expand output or exports from the OPEC member. The companies are partners and customers of PDVSA.
Jeremy Paner, a lawyer at Hughes Hubbard Reed and a former OFAC sanctions investigator, said the authorisation is broad in the sense that it opens up many operations including refining, transportation and "lifting" of Venezuelan oil.
But he said the scope is narrow in that it only applies to US companies.
Kevin Book, an analyst at ClearView Energy Partners, said the authorisation could provide clarity for US companies considering new investments while maintaining the previous standard of case-by-case review for non-US entities.
“In short, it appears to offer ‘America First, Others Ask’ sanctions relief.”
The large number of individual requests to the US Government had delayed progress on plans to expand exports and get investment moving quickly into Venezuela, two sources said this week.
The new OFAC licence, meanwhile, came as lawmakers in Venezuela on Thursday approved a sweetened reform of the country's main oil law that is expected to grant autonomy to private producers in joint ventures or under new contracts to operate their projects and commercialise the output.
It also formalises an oil production-sharing model first introduced by Maduro and negotiated with little-known energy firms in recent years.
Following the US capture of Maduro, the Trump administration is pursuing a $100 billion reconstruction plan for the country's oil industry, and intends to manage the oil sales "indefinitely." The effort builds on an initial $2 billion deal that Washington and Caracas reached in January to export Venezuelan crude oil, including to US refiners.
Francisco Monaldi, director of the Latin American Energy Programme at Rice University's Baker Institute in Houston, said he wondered if the exclusion of Russian and Chinese production would make it hard for PDVSA to operate or market oil from those ventures. Ventures with those countries produce about 22 per cent of the oil, he said.
“If they cannot export the oil coming from these ventures, that's a big problem.”
(Reporting by Timothy Gardner, Marianna Parraga, Christian Martinez and Daphne Psaledakis; Editing by Rod Nickel, Nathan Crooks, Richard Valdmanis and Lisa Shumaker)
