What US sanctions relief means for Venezuela

At face value, the US government's decision to lift some sanctions on Venezuela is a major boon for the South American country's authoritarian government.

The White House rolled back a series of restrictions – mostly related to the oil and gas industry – late on Wednesday after Nicolás Maduro's regime reached an agreement with opposition parties to allow a competitive, internationally monitored election next year.

The most significant concession was a general license issued by the US Treasury Department allowing Venezuela to produce and export oil without restrictions for the next six months. 

"This is a carrot that Maduro couldn't resist," Francisco Monaldi, a Latin American energy policy expert at Rice University in Houston, told BNamericas on Thursday.

"The biggest short-term benefit, in an election year, is to sell oil at a full price to its most profitable market [the US] instead of with heavy discounts in the Chinese black market, and without the need to pay down debts."

Venezuela, which sits on the world's largest proven oil reserves, has seen crude production plummet over the past two decades as state-owned company PDVSA has been wracked by mismanagement, corruption and crippling sanctions.

Analysts say the Biden administration's decision could pave the way for up to 300,000b/d of additional production from Venezuelan oilfields over the next two years.

"Not subject to OPEC quotas, PDVSA is now on a highway free of traffic," Venezuelan journalist Marianna Párraga said on X, the platform formerly known as Twitter. "But diminished after decades of insufficient investment and mismanagement, the big question today is what is the most it can do to take advantage of this?" 

PDVSA is reportedly scrambling to resume crude supply contracts to quickly boost depleted state coffers, knowing that sanctions lifted on Wednesday could be reinstated. 

One foreign company likely to benefit is Chevron, which received a US license in November to revive oil operations in Venezuela. 

Other producers that stand to gain from the decision include Eni, Maurel & Prom, Repsol and China's CNPC, all of which have stakes in local oil and gas blocks. 

But the ripple effects of the US announcement are set to be most evident in Venezuela's political sphere. 

"Maduro doesn't have money and needs [oil revenue] to spend in an electoral year," Monaldi said, adding that Washington will be watching closely to see if political prisoners are released and banned political opponents are allowed to participate in a late 2024 election. 

Even if those demands are not met, Maduro could buy enough time to ensure a potentially decisive election campaign windfall.

Maduro is widely expected to use new oil revenue to bolster his propaganda machine while attempting to divide the opposition. And he will be in no rush to fully comply with White House demands for a free and transparent election. 

"Let's assume that six months from now, Maduro feels that he cannot win the election in any fair form – he might face sanctions again," Monaldi said. "I believe he thinks he will continue to have the [oil production and export] license after six months because the final decision that he has to take is later on, given the elections are likely to be in November or December of 2024."