US reimposes oil sanctions on Venezuela as hopes for a fair presidential election fades

The Biden administration on Wednesday reimposed crushing oil sanctions on Venezuela, admonishing President Nicolás Maduro's attempts to consolidate his rule just six months after the U.S. eased restrictions in a bid to support now fading hopes for a democratic opening in the OPEC nation.

A senior U.S. official, discussing the decision with reporters, said any U.S. company investing in Venezuela would have 45 days to wind down operations to avoid adding uncertainty to global energy markets. The official spoke on the condition of anonymity to discuss U.S. policy deliberations.

In October, the U.S. granted Maduro’s government relief from sanctions on its state-run oil, gas and mining sectors after it agreed to work with members of the opposition to hold a free and competitive presidential election this year.

While Maduro went on to schedule an election for July and invite international observers to monitor voting, his inner circle has used the ruling party’s total control over Venezuela's institutions to undermine the agreement. Actions include blocking his main rival, ex lawmaker Maria Corina Machado, from registering her candidacy or that of a designated alternative. Numerous government critics have also been jailed over the past six months, including several of Machado's aides.

Wednesday's actions essentially return U.S. policy to what it was prior to the agreement hammered out in the Caribbean island of Barbados, making it illegal for U.S. companies to do business with state-run oil producer Petróleos de Venezuela S.A., better known as PDVSA, without a specific license from the U.S. Treasury Department.

It's unclear what impact the snapback would have on Venezuela’s long floundering oil and gas industry — or whether it will pressure Maduro to offer a more level electoral playing field.

The initial reprieve was issued for only six months. Experts say that's not nearly enough time to attract the major capital investments required to revive long stagnant production in Venezuela, which sits atop the world's largest proven oil reserves.

However, by allowing Venezuela to send oil directly, instead of going through shady middlemen who charge a hefty fee, Maduro's government was able to boost oil revenues and raise badly needed cash during the six months of U.S. sanctions relief.

Additionally, the stiffening of sanctions doesn’t directly impact Chevron, the last major U.S. oil driller in Venezuela, which was allowed to boost shipments thanks to a license it was issued in 2022 amid concerns that Russia’s invasion of Ukraine would disrupt global energy supplies.

“The true test of the administration’s seriousness about Venezuela is Chevron,” said Elliott Abrams, who served as the Trump administration's special envoy to the crisis in Venezuela. “Leaving that license in place suggests the administration cares more about keeping oil prices down until the election, and about Chevron’s profits, than about U.S. national security interests and freedom in Venezuela.”

While signaling its growing frustration with Maduro, the Biden administration is unlikely to return to the failed “maximum pressure” campaign tried during the Trump administration, which only strengthened the leftist leader's hand, experts said.

“It became impossible for the White House to pretend that the Maduro government in any way was complying — or even intended to comply — with the implicit deal in the partial lifting of sanctions,” said Christopher Sabatini, a research fellow at the Chatham House in London. “To have ignored that would have made the U.S. look weak and undermined the its credibility in leveraging sanctions not just on Venezuela but elsewhere.”

Opinion polls show most Venezuelans would eagerly boot Maduro from office if given half a chance. Numerous regional leaders, including the leftist presidents of Colombia and Brazil, have joined the U.S. in criticizing the Maduro government's failure to abide by its commitments and allow a competitive election.

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Garcia Cano reported from Mexico City.