The US Treasury authorised transactions involving the government of Venezuela and state oil company PDVSA that are “ordinarily incident and necessary to the lifting, exportation, reexportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil, including the refining of such oil, by an established US entity.”
The decision to issue a broad, general license marks a pronounced shift from a previous strategy of granting individual exemptions to sanctions for companies seeking to do business in the country. During President Donald Trump’s first administration The Treasury’s Office of Foreign Assets Control designated Venezuela’s entire energy industry as subject to US sanctions in 2019 after Maduro’s first re-election, which Washington did not recognise.
The license does not authorise any payment terms that are not commercially reasonable, involve debt swaps or payments in gold, or are denominated in digital currency. The license also excludes any transactions involving persons or entities located in or controlled by Russia, Iran, North Korea and Cuba.
It also excludes transactions involving blocked vessels and entities “organized under the laws of Venezuela or the United States that is owned or controlled, directly or indirectly, by or in a joint venture with a person located in or organized under the laws of the People’s Republic of China.”
Oil producers seeking licenses
Oil producers Chevron, Repsol and ENI, refiner Reliance Industries, and some US oil service providers had sought licenses in recent weeks to expand output or exports from the Opec member. The companies are partners and customers of PDVSA.
The large number of individual requests to the US government had delayed progress on plans to expand exports and get investment moving quickly into Venezuela, two sources said this week.
The new OFAC license, meanwhile, came as lawmakers in Venezuela on Thursday approved a sweetened reform of the country’s main oil law that is expected to grant autonomy to private producers in joint ventures or under new contracts to operate their projects and commercialise the output. It also formalises an oil production-sharing model first introduced by Maduro and negotiated with little-known energy firms in recent years.
Following the US capture of Maduro, the administration of President Donald Trump is pursuing a US$100 billion reconstruction plan for the country’s oil industry, and intends to manage the oil sales “indefinitely”.
As part of that effort, the US and Caracas reached an initial US$2 billion deal in January to export Venezuelan crude oil, including to US refiners.