Negotiations for oil sanctions relief that began last year were always underpinned by the thought that the 2024 elections in Venezuela would take place on a more level playing field. The West, particularly the US, wanted a different approach to effect change in a country that has seen the United Socialist Party of Venezuela, or its predecessor, in power since 2002. The 'maximum pressure' mantra that Trump had begun in 2019 was swapped in exchange for reasonable concessions as to the participation of the opposition in the upcoming election, amongst other things. The US was prepared to gamble by initially showing some goodwill in repealing the sanctions, hoping that it could be the catalyst for change that has long been sought after. Unfortunately, that goodwill wasn't reciprocated. Although the opposition was allowed to elect a unified candidate, Maria Corina Machado, in a primary, she was subsequently barred by the Chavista-controlled Supreme Tribunal from participating in the election. Her named replacement, Corina Yoris, could not register for the ballot. Those actions, and many others, have convinced the international community that Maduro is turning a blind eye to the pressures of holding competitive elections, forcing the hand of the US government when it comes to its support for oil sanctions relief.

Due to the inability of the Maduro regime to comply with the sanctions relief agreement, the U.S.-issued General License 44 was allowed to expire on 18 April. Executed by the Office of Foreign Asset Control, which sits within the Department of the Treasury, this license permitted activity in the Venezuelan oil and gas space, which had previously been under sanctions. Expressly, GL 44 granted permission to engage in four distinct activities: the production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services; payment of invoices for goods or services related to oil or gas sector operations in Venezuela; new investment in oil or gas sector operations in Venezuela; and delivery of oil and gas from Venezuela to creditors of the Government of Venezuela, including creditors of PdVSA entities, for debt repayment. The expiry of this license would seem to be a death knell to the Venezuelan oil industry. Yet, the Biden administration has been somewhat ambiguous here and may be trying to have its cake and eat it, too.

Chevron, the last US driller with assets in Venezuela, has been allowed to retain its General License 41, which specifies activities that are and aren't allowed. The San Ramon-based supermajor is permitted to engage in the production and lifting of petroleum or petroleum products produced by the Chevron JVs and any related maintenance, repair, or servicing of the Chevron JVs; the sale to, exportation to, or importation into the US of petroleum or petroleum products produced by the Chevron JVs, provided that the petroleum and petroleum products produced by the Chevron JVs are first sold to Chevron; and the purchase and importation into Venezuela of goods or inputs related to the activities including diluents, condensates, petroleum, or natural gas products. GL 41 does not authorize the payment of any taxes or royalties to the Government of Venezuela; the payment of any dividends, including a dividend in kind, to PdVSA or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest. It does not allow the sale of petroleum or petroleum products produced by or through the Chevron JVs for exportation to any jurisdiction other than the US or any expansion of the Chevron JVs into new fields in Venezuela beyond what was in place on 28 January 2019. This license is still active, so Chevron could import up to 200,000 barrels per day (bpd) to the US by the fourth quarter as production ramps up. This is a significant inflow to the US in an election year, especially considering that Venezuela's heavy crude is a favorite of US Gulf Coast refiners and could help keep gas prices from rising further, which is always a bellwether for voters.

The Biden Administration has even encouraged others to apply for specific licenses if they're 'in the national interest.' This has attracted a lot of potential players, including Texas billionaire wildcatter Rod Lewis and many others. Although the prospects are slim, there is still the thought within some cadres of US policymakers that Maduro can be brought around to right-headed thinking when it comes to the upcoming election and that if 'maximum pressure' is not brought to bear, there may be some room to negotiate. There are both explicit and implicit advantages to this strategy. Explicitly, continuing the push for free and fair elections by leaving some levers in hand resonates with the international community. Implicitly, securing foreign supply of sought-after heavy crude to control gasoline prices will resonate with the US electorate. It won't be easy to walk this line, however; at some point, the rubber will meet the road. But for now, it seems all are content to proceed with this bifurcated strategy.