US reinstates embargo on Venezuelan oil. How will they affect the economy of the South American country?

(CNN Spanish) — The United States government decided this Wednesday to reinstate some sanctions on Venezuela’s oil and gas sector, senior officials in Joe Biden’s government told CNN. This announcement represents the automatic expiration of License 44, which suspended part of the sanctions on the Venezuelan oil sector, and which expired this Thursday the 18th.

Within the framework of the progress at the time in negotiations between the government of Nicolás Maduro and the unitary represented majority opposition, a waiver with a validity of six months, subject to review, was published on 18 October by the US Treasury Department Platform in Barbados (PU ).

The Office of Foreign Assets Control (OFAC) grants licenses to international companies to produce and sell oil and gas from Venezuela, as well as to make payments for related goods and services, to invest in, and to repay the oil and gas to that country’s government creditors. Allowed to distribute. , through the financial system of the United States.

This way, foreign companies can operate without the pressure that any wrong move could violate sanctions previously imposed by Washington.

Additionally, on the same day, through amended licenses 3I and 9H, restrictions on Americans purchasing certain sovereign bonds and bonds or shares of Petroleos de Venezuela in the secondary market were temporarily lifted.

With this relief, Caracas hoped to recover crude oil production, which fell to historic lows in 2019, even below 500,000 barrels of oil per day, due to state controls and restrictions imposed on the economy. Due to the economic crisis arising out of the deployment of. Issued to put pressure on Maduro, who was sworn in for his second term as president in January that year, following majority opposition, the United States, the European Union, and the region’s countries gathered in the Lima Group sought to legitimize the issue. Not recognized. Presidential elections of December 2018.

However, slow progress in output over the past six months, without moving away from 800,000 barrels per day, according to OPEC data, raises questions about whether the reimposition of sanctions could lead to a steep decline.

“The expectation was that with this license Venezuela could increase its oil production by about 200,000 barrels (daily) this year. As well as the possibility of reducing the discount at which oil exports were sold, the country could receive US$6,000 to 7,000 million annually this year, Alejandro Arreza, Latin America economist at Barclays, told CNN Dinero in an interview. .

But the outlook has been far from that optimistic scenario. “Venezuela today has become a marginal producer in international oil markets, its production is about 800,000, 850,000 barrels (daily), somewhat similar to Colombia’s production,” Arreaza said.

The economist noted that Russia’s war in Ukraine caused some attention to Venezuela due to oil market shocks, but last semester observed that the country “does not have the capacity to play that role,” at least in the short term. In , the absence of other markets did not become an option to replace or mitigate.

Thus, Arreaza pointed out that reimposing sanctions on Venezuelan oil would not have a significant impact on both the country and the international market.

He concluded, “The reality is that no matter what decision is taken, the impact on both the world oil market and the Venezuelan economy may be quite limited.”

For its part, despite the expiration of License 44, the American company Chevron, the main oil company operating in the country, will be able to continue operating for some time, as it does so under another authorization, License 41.

Arreza said Chevron has projects in Venezuela with a capacity of 250,000 barrels per day, with current production close to 50% of that target. “Given the political uncertainty that still exists in the country and the lack of credibility of the government, the chances of thinking about new developments, new projects seem unlikely,” he said.

The Treasury Department has not made a specific statement about the future of License 41, due in November 2022. But it is clear about License 44, which had been under the Maduro government since its inception, allowing the registration of presidential candidates following the Unitary Platform. Venezuelan legal and constitutional framework.

Following the signing of agreements in October, detentions continued into December in exchange for the release of ten detained Americans, when the US handed over Alex Saab, a Colombian businessman with ties to Venezuela, whom the Maduro government described as a “diplomat”. Describes as. Venezuela.

But in January, the State Department warned that the immunity would not be extended after the Supreme Court, which answers to Maduro, decided to confirm the administrative disqualification from holding public office that rests on Maria Corina Machado, the winner of the primaries. Opponents.

“The actions of Nicolás Maduro and his representatives in Venezuela, including the arrest of members of the opposition and the banning of candidates from competing in this year’s presidential elections, are not consistent with the agreements signed in Barbados,” the State Department said. A statement then obtained by CNN.

It also moved in that direction by revoking General License 43A, which authorized transactions related to Minerven, the Venezuelan state company dedicated to gold mining, since October, and to cease all operations with the company or its affiliates. Gave a period of two weeks.

Although there have been meetings between US and Venezuelan representatives in recent days, Maduro on Monday played down the impact the reimposition of sanctions would have on the Venezuelan economy. “I ask negotiators to convey the following message to President Biden: ‘If you want, I want, I do, you don’t want, I don’t want.’ In Caracas: ‘If you want I can want, if you don’t want I can’t.’ The final point,” he commented on his program Con Maduro+.