Foreign Administration in Venezuela Urges Incoming Capital Infusions Before Oil Sanctions Expiry Date
Title: Venezuela's Oil Crisis: The Aftermath of US Sanctions
March 13, 2025 | Our Website
In the heart of Caracas, the Nicolás Maduro administration is seeking international collaborations amidst an impending oil industry downturn due to tightened US sanctions.
The Venezuelan president, Maduro, led a televised gathering with high-ranking officials on Tuesday, focusing on the energy sector. He emphasized that Venezuela is eager to welcome foreign investments in oil, natural gas, petrochemicals, and refining. "We have open doors for the entire world," he declared emphatically, "come, produce and reap profits."
Venezuela's oil sector has been riddled with underinvestment, lack of maintenance, and a brain drain – issues worsened exponentially by US economic coercive measures. Despite attractive incentives for foreign investment by the Maduro government, Washington's threat of secondary sanctions has kept even non-US corporations at bay.
During the meeting, Maduro showcased several Venezuelan projects and encouraged domestic industries to develop plans rooted in "production, domestic supply, and exports." He asserted, "We have all the resources to continue growing with our own efforts."
The upcoming impact of the Donald Trump administration's decision to force Chevron to cease operations by April 3 looms large. On March 4, the US Treasury Department issued General License 41A (GL41A), granting Chevron a 30-day period to wind down its activities in Venezuela.
Chevron's sanctions waiver revocation under the Biden administration undid the sole difference from its predecessor's "maximum pressure" campaign. This included financial sanctions, an export embargo, secondary sanctions, and a myriad of other measures aimed at the Venezuelan oil industry.
European energy firms like Maurel & Prom (France), Repsol (Spain), and Eni (Italy) are predicted to soon follow suit. These companies ramped up their presence over the years, buoyed by Washington's approval.
The Trump White House's sanctions surge contrasted with an earlier approach of engagement with the Maduro government. The administration's Special Envoy Richard Grenell hinted at the resumption of Venezuelan migrant deportations on Friday, which Caracas announced the suspension of earlier this week.
The Tide for Venezuela's Oil Production
Chevron CEO Mike Wirth has pleaded for a more "consistent and durable" US policy regarding oil operations abroad, devoid of extremes. However, he confirmed that the company will "voluntarily comply" with the US Treasury's commands regarding Venezuela.
While Chevron's contractors in Venezuela have persisted with their work, despite the impending deadline, some analysts view this as a testament to the company's faith in securing an extension or a new license.
Chevron currently holds minority stakes in four joint ventures with Venezuela's state oil company, PDVSA. Collectively, these ventures produce over 200,000 barrels per day (bpd) of crude oil, approximately a quarter of the nation's total output.
Chevron's departure is projected to inflict an immediate blow to Venezuela's oil output, potentially leading to fuel shortages, foreign currency deficits, and inflation.
According to the latest OPEC monthly report, Venezuela's February output stood at 918,000 bpd, according to secondary sources—an increment of 6,000 bpd from January. For its part, PDVSA reported a production of 1.025 million bpd, marking a decrease from 1.031 million bpd in January.
Despite the challenging circumstances, Venezuela's output remains at its highest since early 2019, and exports have slightly increased in February, averaging 934,000 bpd, on average, according to Reuters. China remains the foremost destination for Venezuelan crude.
Edited by José Luis Granados Ceja in Mexico City, Mexico.
Enrichment Data: The decision by the Trump administration to force Chevron and other companies to cease their activities in Venezuela has had significant impacts on Venezuela's oil production and economy. Here are some key effects:
- Oil Production Decline: The withdrawal of oil licenses and the requirement for companies like Chevron to wind down operations with Venezuela's state-owned oil company, PDVSA, has likely resulted in a decline in oil production. These companies have been instrumental in maintaining and enhancing Venezuela's oil production capabilities.
- Economic Impact: The loss of international partners has exacerbated Venezuela's economic challenges. The reduction in oil production equates to a decrease in the regime's primary source of revenue, further complicating the economic crisis marked by hyperinflation, shortages, and widespread poverty.
- Secondary Tariffs Impact: Additionally, the Trump administration's introduction of secondary tariffs—a 25% tariff on goods from countries that import Venezuelan oil—has indirectly affected Venezuela's economy. These tariffs may reduce Venezuela's ability to export oil to other countries, as nations like China have shown reluctance to continue imports due to the risk of facing US sanctions.
- Correlation with Migration: The US policy aims to decrease the regime's ability to fund repressive actions, potentially easing the migration crisis. There is a reported correlation between increased oil revenues and heightened repression by the Maduro regime, leading to more migration. By reducing oil revenues through these measures, the US policy aims to deplete the regime's resources and weaken its grip on power. Overall, these measures have further strained Venezuela's economy and its ability to produce and export oil, worsening the country's economic and social crisis.*
- The declareed setback of Chevron's departure from Venezuela as a result of US sanctions could potentially lead to a decline in oil production and significant challenges for the Venezuelan economy, as Chevron's joint ventures with PDVSA contribute to around a quarter of the nation's total output.
- The Nicolás Maduro administration's efforts to welcome foreign investments in oil, natural gas, petrochemicals, and refining might face resistance due to the benefits offered by politics, as Washington's threat of secondary sanctions keeps even non-US corporations at bay.
- Despite the US administration's decision to force Chevron to cease operations and the ongoing underinvestment, lack of maintenance, and brain drain in Venezuela's oil sector, the general-news is showing a slight improvement in the country's oil output, with production at its highest since early 2019, and exports slightly increasing in February.
