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U.S. grants Chevron license to pump oil in Venezuela
The move came as the government of Nicolás Maduro held its first formal talks with Venezuela’s opposition coalition in more than a year. Meeting in Mexico City on Saturday, the two sides agreed to ask the United Nations to manage several billion dollars in government funds held in foreign banks that will be unfrozen to help assuage a humanitarian crisis in Venezuela.
The negotiators also agreed to continue talks next month to discuss a timetable for “free” elections in 2024 and human rights issues.
“We have long made clear we believe the best solution in Venezuela is a negotiated one between Venezuelans,” said a senior Biden administration official who spoke on the condition of anonymity under rules set by the White House. “To encourage this, we have also said we were willing to provide targeted sanctions relief.”
The policy “remains open to further calibrating sanctions,” the official said. “But any additional action will require additional concrete steps,” including the release of political prisoners and recognition of opposition legitimacy, as well as unfettered access for U.N. humanitarian missions.
The official dismissed reports that the administration was acting to ease an oil shortage and high energy prices exacerbated by Russia’s invasion of Ukraine. “Allowing Chevron to begin to lift oil from Venezuela is not something that is going to impact international oil prices. This is really about Venezuela and the Venezuelan process,” the official said, where the United States is “supporting a peaceful, negotiated outcome to the political, humanitarian and economic crisis.”
Venezuela has the world’s largest oil reserves, slightly more than Saudi Arabia, although its thick crude is more difficult to extract. But its production faltered due to poor government management even before Maduro took over in 2013 after he death of Hugo Chávez, a former military officer who was elected in 1998.
U.S. sanctions against Venezuela that began 15 years ago on grounds of drug trafficking, corruption and human rights abuses gradually expanded, culminating under Donald Trump’s administration. Trump sharply tightened measures against the state oil company, Petróleos de Venezuela S.A. or PDVSA; the central bank; and individuals and companies. U.S. oil company activities there were almost completely banned.
The sanctions were an attempt to block global revenue from oil sales, and production fell sharply as black market exports have been sold primarily to China and India. When the Venezuelan opposition declared December 2018 elections illegitimate, it recognized Juan Guaidó, the opposition leader in the parliament, as interim president. The United States quickly followed suit, recruiting dozens of other Latin American countries to do the same.
But economic and political pressure on Maduro had little effect, and the Venezuelan people bore the brunt of a failing economy and repression, leading millions to flee to neighboring countries as well as to the United States, where the number of Venezuelan refugees has swelled.
President Biden came to office convinced that Trump’s Venezuela policy had failed, but he took few steps to reverse it, as powerful lawmakers vowed to block any action and the administration retained hopes of winning the midterm votes of anti-Maduro Venezuelans and other Latin Americans in Florida. As recently as the summer, Biden called Guaidó to assure him of continued American recognition and support, even as other governments and members of Guaido’s own opposition coalition were turning away from him and calling for negotiations with Maduro.
The Republican electoral rout in Florida appeared to convince the administration it was time to move. Chevron officials have said it will take some time to get their operations up and running again in Venezuela.
The sanctions change appears to be an agile circumvention of a main complaint of U.S. critics — the possibility that the Maduro government would benefit directly. Under the terms of the license, PDVSA is cut off from any profits its joint venture may make with Chevron.
But Maduro would not be any worse off than he is now, and one crack in the sanctions may lead to others. For the administration, assuming negotiations with the opposition continues toward democratic elections and human rights improvements, any loosening of global energy supply is seen as positive.
In a statement Saturday on the resumption of talks in Mexico, Sen. Robert Menendez (D-N.J.), the chairman of the Senate Foreign Relations Committee and a longtime hard-liner on Venezuela, said that “if Maduro again tries to use these negotiations to buy time to further consolidate his criminal dictatorship, the United States and our international partners must snap back the full force of our sanctions that brought his regime to the negotiating table in the first place.”
Chevron Gets U.S. License to Pump Oil in Venezuela Again
WASHINGTON—The U.S. said it would allow
Chevron Corp.
CVX -0.29%
to resume pumping oil from its Venezuelan oil fields after President Nicolás Maduro’s government and an opposition coalition agreed to implement an estimated $3 billion humanitarian relief program and continue dialogue in Mexico City on efforts to hold free and fair elections.
Following the Norwegian-brokered agreement signed in Mexico City, the Biden administration granted a license to Chevron that allows the California-based oil company to return to its oil fields in joint ventures with the Venezuela national oil company, Petróleos de Venezuela SA. The new license, granted by the Treasury Department, permits Chevron to pump Venezuelan oil for the first time in years.
Biden administration officials said the license prohibits PdVSA from receiving profits from Chevron’s oil sales. The officials said the U.S. is prepared to revoke or amend the license, which will be in effect for six months, at any time if Venezuela doesn’t negotiate in good faith.
Venezuela produces some 700,000 barrels of oil a day, compared with more than 3 million in the 1990s.
Photo:
Isaac Urrutia/Reuters
“If Maduro again tries to use these negotiations to buy time to further consolidate his criminal dictatorship, the United States and our international partners must snap back the full force of our sanctions,” said Sen.
Robert Menendez
(D., N.J.), the chairman of the Senate Foreign Relations Committee.
The U.S. policy shift could signal an opening for other oil companies to resume their business in Venezuela two years after the Trump administration clamped down on Chevron and other companies’ activities there as part of a maximum-pressure campaign meant to oust the government led by Mr. Maduro. The Treasury Department action didn’t say how non-U.S. oil companies might re-engage with Venezuela.
Venezuela produces some 700,000 barrels of oil a day, compared with more than 3 million barrels a day in the 1990s. Some analysts said Venezuela could hit 1 million barrels a day in the medium term, a modest increment reflecting the dilapidated state of the country’s state-led oil industry.
Some Republican lawmakers criticized the Biden administration’s decision to clear the way for Chevron to pump more oil in Venezuela. “The Biden administration should allow American energy producers to unleash DOMESTIC production instead of begging dictators for oil,” Rep. Claudia Tenney (R., N.Y.) wrote on Twitter.
Biden administration officials said the decision to issue the license wasn’t a response to oil prices, which have been a major concern for President Biden and his top advisers in recent months as they seek to tackle inflation. “This is about the regime taking the steps needed to support the restoration of democracy in Venezuela,” one of the officials said.
The Wall Street Journal reported in October that the Biden administration was preparing to scale down sanctions on Venezuela’s regime to allow Chevron to resume pumping oil there.
Jorge Rodriguez led the Venezuelan delegation to the talks in Mexico City, where an agreement was signed.
Photo:
Henry Romero/Reuters
Under the new license, profits from the sale of oil will go toward repaying hundreds of millions of dollars in debt owed to Chevron by PdVSA, administration officials said. The U.S. will require that Chevron report details of its financial operations to ensure transparency, they said.
Chevron spokesman Ray Fohr said the new license allows the company to commercialize the oil currently being produced at its joint-venture assets. He said the company will conduct its business in compliance within the current framework.
The license prohibits Chevron from paying taxes and royalties to the Venezuelan government, which surprised some experts. They had been expecting that direct revenue would encourage PdVSA to reroute oil cargoes away from obscure export channels, mostly to Chinese buyers at a steep discount, which Venezuela has relied on for years to skirt sanctions.
“If this is the case, Maduro doesn’t have significant incentives to allow that many cargoes of Chevron to go out,” said
Francisco Monaldi,
director of the Latin America Energy Program at Rice University’s Baker Institute for Public Policy. Sending oil to China, even at a heavy discount, would be better for Caracas than only paying debt to Chevron, he said.
The limited scope of the Chevron license is seen as a way to ensure that Mr. Maduro stays the course on negotiations. “Rather than fully opening the door for Venezuelan oil to flow to the U.S. market immediately, what the license proposes is a normalization path that is likely contingent on concessions from the Maduro regime on the political and human-rights front,” said
Luisa Palacios,
senior research scholar at the Columbia University Center on Global Energy Policy.
The license allows Venezuelan oil back into the U.S., historically its largest market, but only if the oil from the PdVSA-Chevron joint ventures is first sold to Chevron and doesn’t authorize exports from the ventures “to any jurisdiction other than the United States,” which appears to restrict PdVSA’s own share of the sales to the U.S. market, said Mr. Monaldi.
The license prohibits transactions involving goods and services from Iran, a U.S.-sanctioned oil producer that has helped Venezuela overcome sanctions in recent years. It blocks dealings with Venezuelan entities owned or controlled by Western-sanctioned Russia, which has played a role in Venezuela’s oil industry.
Jorge Rodriguez,
the head of Venezuela’s Congress as well as the government’s delegation to the Mexico City talks, declined to comment on the issuance of the Chevron license.
Freddy Guevara,
a member of the opposition coalition’s delegation, said the estimated $3 billion in frozen funds intended for humanitarian relief and infrastructure projects in Venezuela would be administered by the United Nations. He cautioned that it would take time to implement the program fully. “It begins now, but the time period is up to three years,” he said.
The Venezuelan state funds frozen in overseas banks by sanctions are expected to be used to alleviate the country’s health, food and electric-power crises in part by building infrastructure for electricity and water-treatment needs. “Not one dollar will go to the vaults of the regime,” Mr. Guevara said.
Chevron plans to restore lost output as it performs maintenance and other essential work, but it won’t attempt major work that would require new investments in the country’s oil fields until debts of $4.2 billion are repaid. That could take about two to three years depending on oil-market conditions, according to people familiar with the matter.
PdVSA owes Chevron and other joint-venture partners their shares of more than two years of revenue from oil sales, after the 2020 U.S. sanctions barred the Venezuelan company from paying its partners, one of the people said. The license would allow Chevron to collect its share of dividends from its joint ventures such as Petropiar, in which Chevron is a 30% partner.
Analysts said the new agreement raises expectations that will take time and work to fulfill. “Ensuring the success of talks won’t be easy, but it’s clear that offering gradual sanctions relief like this in order to incentivize agreements is the only way forward. It’s a Champagne-popping moment for the negotiators, but much more work remains to be done,” said Geoff Ramsey, Venezuela director at the Washington Office on Latin America.
—José de Córdoba and Ginette Gonzalez contributed to this article.
Write to Collin Eaton at collin.eaton@wsj.com and Andrew Restuccia at andrew.restuccia@wsj.com
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US provides Chevron limited authorization to pump oil in Venezuela after reaching humanitarian agreement
Washington
CNN
—
The US has granted Chevron limited authorization to resume pumping oil from Venezuela following the announcement Saturday that the Venezuelan government and the opposition group have reached an agreement on humanitarian relief and will continue to negotiate for a solution to the country’s chronic economic and political crisis, including a focus on the 2024 elections.
A senior Biden administration official described Saturday’s announcements as “important steps in the right direction,” but noted that there is still much to be done as both parties work toward a more permanent solution to the ongoing crisis. The official also highlighted the license’s limited nature saying that they do not expect this to have a tangible impact on international oil prices and that the move is intended as an inducement for the negotiations – not a reaction to high global oil prices.
The Treasury Department’s Office of Foreign Assets Control on Saturday issued Venezuela General License 41, which authorizes Chevron to “resume limited natural resource extraction operations in Venezuela,” according to a news release from the Treasury Department. This is a 6-month license, and the US can revoke it at any time. Additionally, any profits earned will go to repaying debt to Chevron and not to the Maduro regime, according to the senior official, and states that the US government will continue to require significant reporting by Chevron on its financial operations.
“GL 41 authorizes activity related to Chevron’s joint ventures in Venezuela only, and does not authorize other activity with PdVSA. Other Venezuela-related sanctions and restrictions imposed by the United States remain in place; the United States will vigorously enforce these sanctions and will continue to hold accountable any actor that engages in corruption, violates U.S. laws, or abuses human rights in Venezuela,” the release said. PdVSA is the state-owned Venezuelan oil and gas company.
Chevron CEO Mike Wirth told Bloomberg TV earlier this year that if there was a thaw that it would take months and years to refurbish their oil fields in the country and that there “wouldn’t be an instantaneous” effect on oil production.
If the Venezuelan regime continues to take concrete steps toward reaching a negotiated solution, then future targeted sanctions relief is possible, according to the official.
Putin courts Erdogan with plan to pump more Russian gas via Turkey
ASTANA, Oct 13 (Reuters) – Russian President Vladimir Putin proposed to his Turkish counterpart Tayyip Erdogan on Thursday that Moscow could export more gas via Turkey and turn it into a new supply “hub”, bidding to preserve Russia’s energy leverage over Europe.
At a meeting in Kazakhstan, Putin said Turkey offered the most reliable route to deliver gas to the European Union, and the proposed platform would allow prices to be set without politics.
Russia is looking to redirect supplies away from the Nord Stream Baltic gas pipelines, damaged in explosions last month that are still under investigation. Russia blamed the West, without providing evidence, and rejected what it called “stupid” assertions that it had sabotaged the pipelines itself.
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Putin told Erdogan the hub would be “a platform not only for supplies, but also for determining the price, because this is a very important issue”.
“Today, these prices are sky-high,” he said. “We could easily regulate [them] at a normal market level, without any political overtones.”
Erdogan did not respond in the televised portion of their meeting, but Kremlin spokesman Dmitry Peskov was quoted by the Russian news agency RIA as saying both men had ordered a rapid and detailed examination of the idea.
Russia supplied about 40% of Europe’s gas before its Feb. 24 invasion of Ukraine but had cut flows sharply even before the explosions, blaming technical problems that it said were the result of Western sanctions.
European governments rejected that explanation, accusing Moscow of using energy as a geopolitical weapon.
Russia’s President Vladimir Putin and Turkey’s President Tayyip Erdogan meet on the sidelines of the 6th summit of the Conference on Interaction and Confidence-building Measures in Asia (CICA), in Astana, Kazakhstan October 13, 2022. Sputnik/Vyacheslav Prokofyev/Pool via REUTERS
TURKISH MEDIATION
Relations with NATO member Turkey are vital to Russia at a time when the West has hit it with waves of economic sanctions, which Ankara has refrained from joining. Turkey has, however, rejected Russia’s move to annex four Ukrainian regions as a “grave violation” of international law.
Erdogan has sought to mediate between Moscow and Kyiv, and achieved a rare breakthrough in July when, together with the United Nations, he brokered an agreement allowing for the resumption of commercial Ukrainian grain exports from Black Sea ports that Russia had blockaded.
Russia has complained, however, that its own grain and fertiliser exports, while not directly targeted by Western sanctions, continue to be hampered by problems with access to foreign ports and obtaining insurance.
Erdogan told Putin: “We are determined to strengthen and continue the grain exports … and the transfer of Russian grain and fertiliser to less developed countries via Turkey.”
Russian officials had said before the meeting that they were open to hearing proposals from Turkey about hosting peace talks involving Russia and the West.
However, Peskov was quoted by RIA as saying “the topic of a Russian-Ukrainian settlement was not discussed” by the leaders.
Russian Foreign Minister Sergei Lavrov this week signalled increasing receptiveness to talks after Moscow suffered a series of military defeats. Washington dismissed his comments as “posturing”.
Ukrainian President Volodymyr Zelenskiy has ruled out talking to Putin after he proclaimed the annexation of the four Ukrainian regions and after Russia rained missiles on Ukrainian cities this week in the wake of an attack on a vital bridge between Russia and Crimea, the peninsula it seized in 2014.
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Reporting by Reuters; writing by Mark Trevelyan, Editing by Kevin Liffey
Our Standards: The Thomson Reuters Trust Principles.
JP Morgan’s Dimon Urges US to Pump More Oil Amid Global Energy Crisis
- JPMorgan CEO Jamie Dimon says the US should pump more oil, amid the global energy crisis.
- Energy prices have gained sharply after major exporter Russia invaded Ukraine in February.
- The US has huge energy reserves but exports are hitting their upper limits.
JPMorgan CEO Jamie Dimon said the US should pump more oil amid the world’s energy crisis, just days after the Organization of the Petroleum Exporting Countries, or OPEC, agreed to an production cut that is equivalent to 2% of the global supply.
“Obviously, America needs to play a real leadership role — America is the swing producer, not Saudi Arabia,” Dimon told CNBC in an interview on Monday. “And we should have gotten that right starting in March. It’s almost too late to get it right because obviously, this is a longer-term investment.”
Energy prices have gained sharply after Russia invaded Ukraine in February as Russia is a major exporter of oil and gas. Fears of a worsening energy crunch heightened in recent months after Russia started cutting natural-gas supplies to Europe — a development Dimon called “pretty predictable.”
“In my view, America should have been pumping more oil and gas,” he told CNBC.
The US is the world’s largest producer of oil, producing 18.9 million barrels of the fuel a day, per the Energy Information Administration, or EIA. However, the US is also the world’s largest consumer of oil, so exports are limited.
By comparison, the de facto OPEC leader, and major exporter Saudi Arabia produces 10.8 million barrels of oil a day but consumes just 3.2 million barrels daily, exporting the rest, the EIA said.
And while the US has huge energy reserves, the industry’s exports are hitting maximum levels and can’t be boosted overnight, US shale producers told the Financial Times in the last few months.
Dimon’s comments came days after OPEC and its allies agreed to slash oil output, in response to a weaker global economy. The White House said US President Joe Biden was “disappointed by the shortsighted decision.”
Janet Yellen, the US Treasury Secretary, echoed the sentiment and told the FT in a Sunday interview that OPEC’s decision is “unhelpful and unwise.” She was speaking ahead of the ongoing International Monetary Fund and World Bank annual meetings in Washington this week, where soaring inflation will be a key discussion topic.
Dimon told CNBC there’s now a longer-term problem of the world not producing enough oil and gas, in order to reduce the use of coal and transition to renewable energy. Describing the issue as a “critical” one, he said “this should be treated almost as a matter of war at this point, nothing short of that,” he added.
In the same interview, Dimon gave a gloomy forecast of the economy, predicting a recession for the US in the next six to nine months.