U.S. lifts some Venezuela sanctions to ease oil sales
- Broad U.S. license eases some sanctions on Venezuelan oil
- Does not ease measures on production of Venezuelan crude
- Represents shift from issuing individual licenses
- Transactions with entities in Cuba not allowed
- Recasts with detail on intention of license and additional measures coming
The administration of President Donald Trump lifted some sanctions on Venezuela’s oil industry on Thursday to make it easier for U.S. companies to sell its crude oil, and said more restrictions on the country would be lifted soon.
The move by the Treasury’s Office of Foreign Assets Control authorizes U.S. companies to buy, sell, transport, store and refine Venezuelan crude oil, but does not lift existing U.S. sanctions on production.
A White House official said the measure "would help flow existing product" from Venezuela and that there will soon be more announcements on the easing of sanctions.
Trump has said the United States intends to control Venezuela’s oil sales and revenues indefinitely since U.S. forces seized the country’s leader Nicolas Maduro in a raid on the capital Caracas on January 3.
He has said he also wants U.S. oil companies to eventually invest $100 B to restore the OPEC-member nation’s production to its historic peaks following years of underinvestment and mismanagement.
In the meantime, Washington and Caracas have already agreed an initial deal to sell 50 MMbbl of Venezuelan crude oil, with European trading houses Vitol and Trafigura marketing the supply.
Treasury's new authorization, known as a general license, opens up Venezuela oil trade to additional companies, provided they are from the United States.
It allows 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 U.S. entity."
It specifically excludes firms and individuals from rivals like China, Iran, North Korea, Cuba and Russia.
During President Donald Trump's first administration, Treasury designated Venezuela's entire energy industry as subject to U.S. sanctions in 2019 after Maduro's first re-election, which Washington did not recognize.
The new license does not authorize any payment terms that are not commercially reasonable, involve debt swaps or payments in gold, or are denominated in digital currency.
America first. Oil producers Chevron, Repsol and ENI, refiner Reliance Industries, and some U.S. oil service providers had sought licenses in recent weeks to expand output or exports from the OPEC member.
Expanding production in the country would require additional U.S. authorizations.
Jeremy Paner, a lawyer at Hughes Hubbard & Reed and a former OFAC sanctions investigator, said the authorization 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 U.S. companies.
Kevin Book, an analyst at ClearView Energy Partners, said the authorization could provide clarity for U.S. companies while maintaining the previous standard of case-by-case review for non-U.S. entities.
“In short, it appears to offer ‘America First, Others Ask’ sanctions relief.”
The large number of individual requests to the U.S. government had delayed progress on plans to expand exports and get investment moving quickly into Venezuela, two sources said this week.
The new OFAC license, 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 commercialize the output.
It also formalizes an oil production-sharing model first introduced by Maduro and negotiated with little-known energy firms in recent years.
Francisco Monaldi, director of the Latin American Energy Program at Rice University's Baker Institute in Houston, said he wondered if the exclusion of Russian and Chinese entities would make it hard for PDVSA to operate or market oil from those ventures. Ventures with those countries produce about 22% of the oil, he said.
"If they cannot export the oil coming from these ventures, that's a big problem."
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