US rejects President Maduro’s reelection; keeps financial lifeline for his government

Caracas (Venezuela): Things seemed to be looking up for Venezuela in 2022. Following years of authoritarian rule and withering economic sanctions, President Nicolás Maduro had agreed to work toward a democratic presidential election. The White House, in return, granted him a financial lifeline: a permit for US energy giant Chevron to pump and export Venezuelan oil.

Oil wells roared back to life and massive tanker ships returned to Venezuela’s coast to be filled with heavy, hard-to-refine crude destined for the US.

Maduro’s promised election was neither fair nor free, and the longtime president was sworn in this month for a third six-year term despite credible evidence that his opponent got more votes. Yet, the sanctions reprieve the US offered “to support the restoration of democracy” is still helping fill state coffers.

Venezuela’s opposition says Maduro’s government has earned billions of dollars from exports allowed by the permit.

The White House has ignored calls from the main opposition coalition, as well as Republicans and Democrats in the US Congress, to cancel a permit that now accounts for around a quarter of the South American country’s oil production.

Senior administration officials have struggled to explain why the permit has been left in place under questioning by reporters, saying only that sanctions policy toward Venezuela is frequently reviewed. President Joe Biden told reporters last week he “didn’t have enough data” to adjust oil-related sanctions before he leaves office Monday.

A lifeline for Venezuela’s economy

Venezuela sits atop the world’s largest proven oil reserves and once used them to power Latin America’s strongest economy. But corruption, mismanagement and eventual U.S. economic sanctions saw production steadily decline from the 3.5 million barrels per day pumped in 1999, when the fiery Hugo Chávez took power and began his self-described socialist revolution, to less than 400,000 barrels per day in 2020.

California-based Chevron Corp., which first invested in Venezuela in the 1920s, does business in the country through joint ventures with the state-owned company Petroleos de Venezuela S.A., commonly known as PDVSA.

The joint ventures produced about 200,000 barrels a day in 2019, but the following year, US sanctions imposed by then-President Donald Trump forced Chevron to wind down production.

In 2020, when the COVID-19 pandemic contributed to a 30% decline in the country’s economic activity, Venezuela’s Central Bank reported year-over-year inflation of over 1,800%. For many, rummaging through garbage in search of food scraps or valuable items became a common activity.

Locked out of world oil markets by US sanctions, Venezuela sold its remaining oil output at a discount — about 40% below market prices — to buyers like China and other Asian markets. It even started accepting payments in Russian rubles, bartered goods or cryptocurrency.

Saint Chevron’

Once Chevron got a license to export oil to the US, its joint ventures quickly began producing 80,000 barrels a day, and by 2024, they topped their daily output from 2019. That oil is sold at world market prices.

The terms of the license bar Chevron from directly paying taxes or royalties to Venezuela’s government. But the company sends money to the joint ventures, which are majority-owned by PDVSA.

“What Chevron is doing is buying oil from joint ventures,” Venezuelan economist Francisco Rodriguez said. “This purchase of oil is what generates the revenue of the joint ventures,” and that revenue pays taxes and royalties to Venezuela’s government.

It is not clear exactly how Venezuela’s government, which stopped publishing almost all financial data several years ago, uses this revenue. Neither the government nor Chevron have made public the terms of the agreement allowing the company’s return to Venezuela.

Chevron’s operations in Venezuela, including joint ventures, have boosted the country’s reserves, though critics argue the licenses haven’t promoted democracy. Following Maduro’s controversial election win, opposition calls for sanctions to be reimposed grow, with concerns that tightening them could worsen migration, already affecting millions

of Venezuelans.