In October, the White House eased sanctions that it had been imposing on the Venezuelan energy sector since 2018 in a bid to stabilise oil prices and support the South American country in improving its economy. The agreement to ease sanctions was made on the assurance that President Nicolas Maduro would allow his political opposition to run in the upcoming elections. But five months later, the Biden administration is threatening the reintroduction of sanctions as the main opposition candidate has been blocked from running for office.
The Easing of Sanctions
The U.S. government eased sanctions on Venezuela's oil sector following a deal with Venezuelan opposition parties for the 2024 election. The U.S. Treasury Department authorized a new license, allowing Venezuela to produce and export oil to its chosen markets for the next six months without limitation. This agreement was made with the stipulation that President Maduro would lift bans on opposition presidential candidates, as well as begin releasing political prisoners and “wrongfully detained” U.S. citizens.
The U.S. originally introduced sanctions on Venezuelan energy following Maduro’s re-election in 2018 in what was deemed by many Western governments to be a sham election. The state-owned company PDVSA has not been permitted to export crude since 2019. The U.S. Treasury Department made it clear that it would revoke the easing of sanctions if Maduro failed to comply with its commitment to the deal.
Rising Exports
Despite the sanctions in place, Venezuela steadily increased its crude production and export in 2023, supported by the deepening of ties with Iran and China. The easing of sanctions helped the South American country to increase its output further, producing an average of 700,000 bpd last year. This marks a 12% rise on 2022. China is the biggest importer of Venezuelan crude, purchasing around 65% of its exports last year. The U.S. received around 19% of Venezuela’s oil exports, while Europe purchased 4% and Cuba imported 8% of its crude. Smaller amounts went to Brazil, Colombia and Panama.
Venezuela imported around 58,595 bpd of condensate and fuel from Iran and the U.S. in 2023, mainly exchanging it for its heavy crude. The steadily rising export demand and easing of sanctions have led to more stable oil production in recent months. Venezuela hopes to be producing over 1 million bpd within the next few months, which will depend heavily on whether the U.S. continues its sanctions pause.
Non-Compliance
At the end of January, the U.S. government threatened to reinstate sanctions on Venezuelan oil after the country’s Supreme Court upheld a 15-year ban on the running of opposition candidate María Corina Machado. Following the move, the U.S. said it would not renew the easing of sanctions unless "political progress" was made between the Maduro government and the opposition “particularly on allowing all presidential candidates to compete in this year's election.” Machado won over 90% of votes in the opposition’s primary in October and is widely liked among Venezuelans.
The U.S. State Department’s Spokesperson, Matthew Miller, stated “The Venezuelan Supreme Court's January 26 decision to disqualify democratic opposition primary winner Maria Corina Machado is inconsistent with the commitment by Nicolás Maduro's representatives to hold a competitive Venezuelan presidential election in 2024. The reinstatement process lacked basic elements, as Machado neither received a copy of the allegations against her nor was afforded the opportunity to respond to those allegations.” He added, “This deeply concerning decision runs contrary to the commitments made by Maduro and his representatives under the Barbados electoral roadmap agreement to allow all parties to select their candidates for the presidential election.”
The rulings of Venezuela’s Supreme Court are final and unappealable. This has led many to believe that this marks the effective end of the Barbados Agreement. However, three other political leaders had their disqualifications lifted, meaning that less popular opponents of Maduro may still be eligible to run in the elections.
In response, Venezuela's Vice President Delcy Rodríguez wrote on the X social media platform that she rejected the “ultimatum” from the US government as “blackmail”. She said the Venezuelan government would halt the deportation of Venezuelans illegally residing in the U.S. if the “economic aggression” continued.
The Outlook
It is uncertain whether the U.S. will continue to ease sanctions on Venezuelan oil given that the stipulations of the agreement are not being met at present. The reintroduction of sanctions would harm the Venezuelan economy, which relies heavily on oil exports. Further, it could put the final nail in the coffin for an oil industry that is barely hanging on, with little investment in the sector and widely outdated infrastructure. However, the 2018 sanctions were put in place to encourage greater political competition and punish Maduro for acting as a dictator, a situation that remains largely unchanged.
About the Author:
Felicity Bradstock is a freelance writer specializing in Energy and Industry. She has a Master’s in International Development from the University of Birmingham, UK, and is now based in Mexico City.
