Chevron in the crosshairs: US sanctions and Venezuela's oil future

Donald Trump's return to the White House has cast fresh doubt on the future of US policy toward Venezuela. Key questions revolve around whether his administration will intensify sanctions against Nicolás Maduro's regime or pivot to a more pragmatic approach. 

The stakes are particularly high for Venezuela's oil sector, with companies such as Chevron at risk of losing their operating licenses in the South American country, according to Control Risks director Theodore Kahn. 

This is the second instalment of a two-part interview. The first part can be seen here.

BNamericas: Do you believe Donald Trump will resume the hardline stance against Venezuela that he adopted during his first term in office in 2017-21? In other words, do you think he will pressure the regime of President Maduro to cede power through tougher sanctions? What would that mean for the oil sector? 

Kahn: I think that in the first year we'll likely see a continuation of the trends. We've even seen moves by the Biden administration in the past few months to ramp up pressure. With [Marco] Rubio coming in [as secretary of state], if we assume there's a six-month to one-year window where Rubio is going to have a significant influence, at least on Latin America policy, I think we should expect intensification of the pressure on the Maduro government. Rubio will no doubt try to promote a harsher stance against Maduro. 

Beyond that one-year horizon, for the rest of Trump's period, and assuming that Rubio will not be there much beyond a year, I think there's a much wider range of possible outcomes. That's where it does seem plausible to imagine that at some point in the Trump administration, he might say, "Hey, this isn't working" and that it might be better to talk to him. That would be kind of like the Kim Jong Un scenario in which the US would take a pragmatic approach and have some sort of negotiation with Maduro. There are issues involving Venezuela that are important to Trump, such as migration. I think Maduro thinks he can use that to gain some sort of leverage. 

BNamericas: And the oil sector too…

Kahn: Yes. Obviously Venezuela is not pumping a massive amount of oil anymore, but it still matters for companies such as Chevron. And it matters for other companies that have restarted operations in Venezuela. We know there is going to be a significant lobby from US oil companies for Trump to take a more moderate approach. So there will be countervailing factors. It's going to be particularly interesting to see what OFAC [Office of Foreign Assets Control] does with the Chevron license in April [when the current agreement expires].

BNamericas: What do you think will happen?

Kahn: It's a tough one. My instinct says that there is a significant risk that they [OFAC] shut down that license in April. I don't think it's a foregone conclusion, but if you just think about Rubio's posture… We know he's going to come in and take a hardline approach in an effort to ramp up pressure on Maduro. He will push for the US to try everything possible to create conditions for a transition, especially after the election results last July.

It seems hard to imagine Rubio reconciling that position with a continuation of the Chevron license, knowing that Chevron is contributing a significant amount to the Venezuelan government's income and that it's directly helping Maduro. I think there will be serious pressure from Rubio and the State Department to revoke that license and then it will be a question of the internal administration dynamics. At the end of the day, it's not going to be Rubio's call necessarily, because Rubio will not be running the Treasury department. And it is OFAC [a branch of the US Treasury Department] that issued that license. 

Maybe Trump will come in and litigate that dispute in some way. It's also unclear how much pushback there might be from the Treasury to Rubio's position. So there's still some uncertainty, but I definitely think there's going to be a push, at least from Rubio, to shut down the Chevron license in April. 

BNamericas: If Washington does revoke the Chevron license, what would it mean for European companies operating in Venezuela, such Repsol, Eni and Maurel & Prom?

Kahn: I'd say those licenses will also be under a lot of scrutiny. Chevron has a general license which is a little broader, whereas those other companies have specific ones. So it's a little different, but the Trump administration could ask itself, "If we are stopping Chevron, why are we still allowing European companies to operate under our licenses?"

I think those licenses are also going to be at risk. And the other interesting one will be the licenses that have recently been granted for offshore gas developments in waters straddling Venezuela and Trinidad. Shell and BP are major parts of those and they are licenses that could potentially be shut down in the next few months. 

BNamericas: Will the new US administration place pressure on Colombia's President Gustavo Petro to end his support for the Maduro regime and declare it illegitimate?

Kahn: I think there will be pressure on Petro to take a somewhat more critical stance against Maduro, especially after January 10 when there is the expectation that he will be sworn in as President again.

There are obviously limits to what Petro can be expected to do in terms of speaking out against Maduro. It's hard to imagine him being overly critical and I don't think he'll start calling Edmundo González the president-elect. But there might be a subtle shift in the way he talks about Maduro and in his general stance toward Venezuela. 

I don't think we'll hear much more about, for example, this idea of importing gas from Venezuela. I think these kinds of grandiose visions of reestablishing a bilateral relationship with Venezuela will be put on the backburner. Petro is entering his last year and a half in office and his political capital is starting to erode. I doubt these sorts of initiatives that have been discussed with Venezuela are going to gain any traction, especially now with the reelection of Trump.