Easing Oil Sanctions on Venezuela: Chevron’s Limited License to Resume Oil Extraction Operations

By Daphna Jimenez

December 16, 2022

Venezuela’s economy has struggled for many years due to its overreliance on its oil industry, which has contributed to astronomically high inflation, mass food shortages and the weakening of Venezuela’s private sector as oil prices declined. In January 2019, the United States imposed sanctions on Venezuela’s most important global business – producing and selling crude oil, which accounts for more than 95 percent of the country’s export revenue. These sanctions arose from President Nicolas Maduro’s refusal to relinquish power and cease government-sponsored violence against civilians and protesters.

On November 26, 2022, the Unitary Platform and the Maduro regime announced the resumption of talks in Mexico City; a humanitarian agreement focused on education, health, food security, flood response, and electricity programs that will benefit the Venezuelan people; and agreement on the continuation of talks focused on the 2024 elections. Following this announcement and consistent with U.S. government policy, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela General License (GL) 41, authorizing Chevron Corporation to resume limited natural resource extraction operations in Venezuela.

The Treasury Department noted that “this action reflects longstanding U.S. policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy.”

While the Treasury emphasized humanitarian rationale for the decision, many speculate that the federal government is considering easing Venezuelan sanctions for alternative sources of energy amid the energy crisis which in turn produce additional cash revenue for the Maduro Regime.

GL 41 authorizes transactions ordinarily incident and necessary to certain activities related to the operation and management by Chevron Corporation or its subsidiaries of its joint ventures in Venezuela (“Chevron JVs”) involving Petróleos de Venezuela, S.A. (PdVSA) or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest. Such activities include, among others:

  1. Production and lifting of petroleum or petroleum products produced by Chevron JVs and related maintenance, repair, or servicing of the Chevron JVs;
  2. Sales, exports from, or imports into the United States of petroleum or petroleum products produced by the Chevron JVs provided such products are first sold to Chevron;
  3. Ensuring the health or safety of personnel or the integrity of operations or assets of the Chevron JVs in Venezuela; and
  4. Purchases and imports into Venezuela of goods or inputs related to the above activities, including diluents, condensates, petroleum, or natural gas products provided such goods or services are not of Iranian origin.

It is important to note Venezuela-related sanctions and restrictions imposed by the United States remain in place and GL 41 does not authorize:

  • Payments of taxes or royalties to the Government of Venezuela.
  • Payment of any dividends, including a dividend in kind, to PdVSA, or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest.
  • The sale of petroleum or petroleum products produced by or through the Chevron JVs for the exportation to any jurisdiction other than the United States.
  • Any transaction involving an entity located in Venezuela that is owned or controlled by an entity located in the Russian Federation.
  • Any expansion of the Chevron JVs into new fields in Venezuela beyond what was in place on January 28, 2019.
  • Any transactions involving any person blocked pursuant to the Venezuela Sanctions Regulations other than the blocked persons authorized under GL 41 or other OFAC authorizations.

While the Biden administration has dismissed reports that the limited license was part of a larger effort to lower energy prices, many have questioned why the limited license restricts any profits to the Government of Venezuela which are the only ones who can realistically make change in the Venezuelan economy. Although the treasury department claims to have issued this license to Chevron under humanitarian concerns of the Venezuelan people, its hard to ignore that this license comes after the White House has spent months trying to find new sources of oil to help drive down fuel prices that soared after Russia’s invasion of Ukraine. “Biden is willing to overlook human rights abuses in countries like Venezuela or Saudi Arabia, in order to safeguard oil supplies for Americans and their European allies,” says Venezuela journalist Alonso Moleiro. 

Additionally Francisco Rodriguez, a Venezuelan economist, claims that the statement that the GL 41 does not authorize “payment of taxes or royalties to the Government of Venezuela” might be misleading. Rodriguez states that Chevron does not pay taxes to the Venezuelan government because it does not produce oil in Venezuela. Instead, Chevron JV’s in which Chevron is a minority partner are the ones that produce the oil and pay taxes to the government of Venezuela. Essentially, the United States has neither the authority nor the power to stop the boards of the JVs from making the tax and royalty payments that they are obligated to make according to Venezuelan law. Rodriguez worries that the Chevron license generates additional cash revenues that the Maduro regime will be able to use at will, and that could easily end up siphoned off to corruption or used to fund the state’s repressive apparatus.

Moving forward, the United States should probably condition the easing of sanctions by implementing institutional mechanisms designed to ensure that the proceeds from these sales be used to purchase goods and inputs needed to address Venezuela’s humanitarian crisis as intended by the issuance of Chevron’s General License (GL) 41.

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