Venezuela’s loss of a key U.S. license that allowed it to export oil to markets around the world and secure investment is expected to affect the volume and quality of its crude and fuel sales, while causing a avalanche of individual authorization requests for American markets.
US officials had warned that in the absence of progress by President Nicolas Maduro’s administration in implementing an electoral road map agreed to last year, the United States would not renew the license 44 which, since October, has eased the oil sanctions in place for five years.
On Wednesday, Treasury gave companies 45 days to complete pending transactions, particularly crude oil and fuel sales, through a more restrictive license.
It also said it would process specific authorization requests for transactions with Venezuela, a commitment Venezuelan officials expect to be honored by the United States. Many companies have been waiting for years for energy deals involving Venezuela to be approved by Washington.
But the Treasury also explained that “the conclusion of new business, including new investments previously authorized by License 44, will not be considered as a winding down activity”, which leaves doubts about the type of transactions that will be authorized.
Authorizations previously granted to oil companies such as Chevron, Repsol and Eni have not been withdrawn, guaranteeing oil flows from Venezuela to the United States and Europe.
POLITICAL MOVEMENTS
The withdrawal of the most important element of US sanctions relief marks a significant step back from President Joe Biden’s policy of reengagement with Mr Maduro.
However, this is not a return to the “maximum pressure” campaign under former President Donald Trump, and the situation could change depending on progress toward the election in the coming months. .
The Venezuelan opposition is negotiating to choose its candidate for the July 28 presidential election, after the winner of the primaries and her substitute were prevented from registering.
The license had allowed Venezuelan state-owned PDVSA to increase its exports to pre-pandemic levels, improve its cash flow and guarantee imports of diluents and fuel for the domestic market.
Under a separate authorization, about a fifth of Venezuelan exports are now sent by Chevron to the United States. PDVSA and the company have started talks to expand the areas of one of their joint ventures.
Other expansion projects should receive the green light from Venezuelan authorities before the end of the 45-day period, Oil Minister Pedro Tellechea said on Wednesday.
THE RACE FOR CARGO
In March, PDVSA’s oil exports reached some 900,000 barrels per day (bpd), their highest level in four years, as customers rushed to make their purchases before the contract expired. But the number of tankers waiting to load at Venezuelan ports has not decreased significantly, shipping data shows.
The six weeks given by the United States to complete transactions may not be enough to fully resolve the bottleneck, forcing some oil importers to apply for specific licenses, traders say.
Thanks to the previous license and separate permits, Venezuela’s crude production increased to 874,000 bpd in March, and the country added two operational drilling rigs.
Without the license, PDVSA would again have to rely on little-known middlemen to sell its oil at discounted prices, mainly in Asia, unless enough individual U.S. permits are issued, experts say.
PDVSA’s finances, eroded by five years of sanctions, will also take another hit, limiting access to hard currency needed to pay for everything from labor to purchases.
