February 2, 2023

Money News PH

The Premier Blog Where Money Talks

As the Venezuelan antagonists speak, the US softens its stance

BOGOTÁ, Colombia — A rare meeting between leaders of Venezuela’s bitterly divided government and the opposition is expected to result in two important agreements aimed at alleviating the country’s complex political and humanitarian crisis.

The meeting reflects in part the economic fallout from Russia’s invasion of Ukraine, which has reduced world oil supplies and pushed the United States to reconsider its restrictions on energy companies operating in Venezuela.

If all goes as planned, talks scheduled for Saturday will result in an agreement to transfer up to $3 billion in Venezuelan government funds frozen abroad to a United Nations-administered humanitarian program – a concession by Venezuelan President Nicolás Maduro has long denied the extent of the suffering that has unfolded under his tenure.

At the same time, the United States is expected to comply with a license application from Chevron Corp. agree to expand operations in Venezuela, according to three people familiar with the deal. The deal could represent an important step in allowing Venezuela to re-enter the international oil market, something Mr Maduro badly needs to improve the economy.

US State Department officials publicly applauded the return to negotiations between the two parties after an earlier effort was scrapped by the Maduro government last year.

However, a Biden administration official familiar with the talks said that any Chevron-related action in Venezuela “is conditional on the parties actually announcing tangible commitments to support the people of Venezuela.”

The officer asked for anonymity so he could speak freely about the matter.

For years, US sanctions aimed at starving Mr. Maduro’s government have prevented Chevron and other oil firms from large-scale operations in Venezuela.

After the expected deal, other companies are likely to put pressure on the United States to further lift Venezuela-related restrictions, including sanctions banning companies in India and elsewhere from importing Venezuelan oil, said Francisco Monaldi, director of Rice’s Latin American energy program University.

The United States is likely to tie such measures to further concessions from Mr. Maduro. But if it lifts sanctions, it would be an economic “game changer” for Venezuela’s authoritarian leader, Mr Monaldi added.

“My concern,” he said of the anticipated Chevron license, “is that the US appears to be giving a lot for very little.”

A Chevron spokesman declined to comment on the expected agreement.

The meeting between the Venezuelan government and opposition leaders, held in Mexico, is the culmination of more than a year of talks between the two sides on how to address the country’s economic, political and humanitarian crisis, which dates back to at least 2014.

But the talks are also part of a broader softening of US policy towards Venezuela, which many analysts say is linked to a growing global need for non-Russian oil wells. Venezuela is believed to have the largest oil reserves of any country.

The United States is a supporter of the Venezuelan dialogue, not a participant.

The Biden administration official said that any Chevron-related action in Venezuela was not in response to energy prices.

“This is about the regime taking the necessary steps to help restore democracy in Venezuela,” the person said.

Any new license would be time-limited and would prevent Venezuela from making profits on Chevron’s oil sales, the official added, explaining that the Biden administration “would retain the power to modify or revoke permits if the Maduro regime should not negotiate well, Faith.”

For years, the Trump administration sought to weaken Mr. Maduro through sanctions and isolation, recognized opposition leader Juan Guaidó as president, and pulled Washington’s top diplomats from Caracas.

The Biden administration has opted for more engagement.

In June, the US Ambassador to Venezuela, James Story, who is now based in neighboring Colombia, flew to Caracas to meet with government and opposition leaders. In October, the United States granted clemency to two nephews of Mr Maduro’s wife in exchange for seven Americans held captive in Venezuela. The nephews were sentenced to 18 years in prison for conspiracy to smuggle cocaine.

It would be years before Venezuela’s neglected oil infrastructure had any impact on the world market. But with no sign of tensions between Russia and the West easing anytime soon, some leaders believe the wait may be worth it.

“I think energy was one of the things that allowed Biden, perhaps politically, to take the rather bold step of communicating directly with Mr. Maduro’s government,” said Phil Gunson, an analyst with the International Crisis Group who lived there has Venezuela for more than two decades.

But he warned that American indulgence in Venezuela preceded the war in Ukraine.

“Energy is a factor” in strategy change, he said, but “it’s not the only factor.”

Venezuela was once one of the wealthiest countries in Latin America, its economy lived on oil. But mismanagement and corruption by leaders who invoked socialist ideals threw the economy into chaos, while Mr Maduro and his predecessor Hugo Chávez destroyed their democratic institutions.

The situation has resulted in the largest cross-border migration crisis in the western hemisphere, according to the United Nations, with more than 7 million Venezuelans – a quarter of the population – fleeing their homes. A record number of Venezuelans have recently arrived at the US border, most of whom hike through a harrowing jungle called the Darién Gap to get there.

The talks in Mexico are said to be part of a series of meetings between the Venezuelan government and the opposition. Much of the opposition is hoping that political concessions will be next on the agenda.

Mr Maduro is focused on lifting American sanctions, which would help him improve the economy – and perhaps win a presidential election already scheduled for 2024.

The Venezuelan opposition has long said their goal is to press Mr Maduro to create free and fair conditions that would give them the opportunity to oust him in these elections.

Mr. Guaido recently invoked this vote “the door to democracy, freedom and family reunification.”

In the past, Mr Maduro has controlled voting, barring many opposition figures from political participation, jailing others and co-opting many political parties. He holds elections to project a semblance of legitimacy.

Mr. Maduro is speaking on state television this week about the Mexico talks said he wanted to clarify: “Nobody will force anything on us, not today, not tomorrow, never.”

The United States still recognizes Mr. Guaidó as the country’s president, although his global influence has declined significantly after an offer to support him failed to oust Mr. Maduro.

Mr Monaldi, the energy expert, said the Chevron deal isn’t just token – within two years the company could be pumping more than 200,000 barrels a day in Venezuela, adding to the approximately 765,000 barrels pumped daily today, according to Argus , to Industry Monitor.

For the US and the opposition, the talks are a gamble.

On the one hand, simply getting Mr. Maduro into negotiations is a victory, and the $3 billion humanitarian deal could be a big step in easing the suffering.

On the other hand, Mr Gunson said the aid and Chevron deal could improve economic conditions and boost Mr Maduro’s popularity.

Still, he hasn’t budged an inch on the political front.

“That’s why there’s so much anger for the people in the administration who are pushing this policy,” Mr. Gunson said. “Because if Maduro essentially says ‘thank you’ and doesn’t make any concessions, then they’re going to look pretty stupid.”

Isayen Herrera contributed reports from Caracas, Venezuela, and Clifford Krauss from Houston.