The Trump administration made a dramatic move Tuesday, ceasing an important operating license the American oil giant Chevron needed to operate in Venezuela.
The decision follows Washington’s condemnation of President Nicolás Maduro’s government for not making concrete advances on key electoral reforms.
Since 2022, Chevron has shipped approximately 200,000 barrels per day of Venezuelan crude oil, which accounted for at least a quarter of the country’s oil output, as per a Reuters report.
Effect on the Venezuelan economy and oil output
Chevron has until April 3 to wind down exports and other operations in Venezuela, according to an updated license from the U.S. Treasury Department.
The phaseout period raises questions about how quickly Venezuela’s oil market can adapt to the loss of one of its largest outlets.
Chevron’s joint ventures with state-owned Petróleos de Venezuela, S.A. (PDVSA) account for more than a quarter of the country’s total crude production.
Revocation of the license could cause a drastic drop in production, worsening an already urgent economic crisis with rising inflation and shortages of food and other staples.
The decision was met with a scalding response from Venezuelan Vice President Delcy Rodríguez.
Rodríguez emphasized that this measure will have consequences not just for the Venezuelan economy, but for global oil markets and US-Venezuela diplomatic relations.
He also said that the license termination would primarily impact the US by driving up gasoline prices and increasing risks for US companies investing abroad.
Political consequences and responses
This policy shift follows the contentious presidential elections held on July 28, 2024. The international community has sharply criticized these elections, accusing them of lacking openness and impartiality.
Despite Maduro’s control over the electoral and judicial institutions, the opposition led by Edmundo Gonzalez and María Corina Machado declared victory in the elections.
The Maduro government has repeatedly condemned US and other sanctions as illegal and as an “economic war” meant to destabilize the country.
The political crisis remains unresolved, and the opposition is consolidating its authority amid widespread estrangement, economic pain, and despair.
Trump and Venezuela
Since taking office in January, US President Donald Trump has stated that the country does not need Venezuelan oil, which accounted for about 3.5% of U.S. crude imports last year, or roughly 220,000 barrels per day.
However, these exports have been crucial for Chevron to recover billions in outstanding debt from Venezuela.
A similar wind-down order under Trump’s previous administration in 2020 allowed Chevron to continue producing crude and maintaining its joint ventures with PDVSA but prohibited exports and imports.
Over time, this led to a sharp decline in output and a buildup of unpaid revenue.
The question is, how effective are these sanctions? Critics argue that while these measures may cause short-term economic suffering, they ultimately strengthen the Maduro administration by instilling nationalistic sentiment against foreign enemies.
If Chevron’s license expires, it could have ramifications for the wider global oil market. This is likely to have an impact on oil prices, which analysts are following closely, particularly in the context of geopolitical instability in other oil-producing regions.
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