US rejects Venezuelan President Maduro’s reelection, but keeps financial lifeline for his government
CARACAS, Venezuela (AP) — 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 U.S. 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 U.S.
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 U.S. 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 U.S. 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, U.S. 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 U.S. 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 U.S., 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 did not answer questions from The Associated Press regarding the joint ventures, including payments made to Venezuela’s treasury.
“Chevron conducts its business in Venezuela in compliance with all applicable laws and regulations,” Chevron spokesman Bill Turenne said in a statement.
Economist José Guerra, a former economic research manager at Venezuela’s Central Bank, said the license’s impact is partly reflected in the nation’s foreign cash reserves, which increased by roughly $1 billion between February 2022 and November 2024, according to the institution’s data. The government uses its dollar reserves in part to maintain an artificially low exchange rate between the U.S. dollar and the Venezuelan bolivar.
“The only explanation is that Chevron exports without discounts, it exports everything — the 200,000 barrels go abroad — and that is what is feeding the reserves,” Guerra said. “I call it Saint Chevron.”
Critics say the permit has not encouraged democracy
The outcome of Venezuela’s presidential election, and a subsequent campaign of repression, have prompted new calls to rescind the licenses.
“In the end, one wonders, and quite rightly so, why the Biden administration continues to maintain a license whose objective was not achieved,” said Rafael de la Cruz, who is an adviser to the opposition campaign of Edmundo González and María Corina Machado. He said the opposition has estimated that Maduro’s government has received about $4 billion through the operation of the joint ventures.
Venezuela’s National Electoral Council, stacked with government loyalists, declared Maduro the winner of the July 28 election hours after polls closed. But unlike in previous contests, electoral authorities did not provide detailed vote counts, while the opposition collected tally sheets from 85% of electronic voting machines showing its candidate, González, won by a more than a two-to-one margin. U.N. experts and the U.S.-based Carter Center, both invited by Maduro’s government to observe the election, said the tally sheets published by the opposition are legitimate.
“The election was stolen. Therefore, the basis for any lifting of sanctions doesn’t exist,” said Elliot Abrams, who was special representative for Venezuela during Trump’s first term. “So, why isn’t the administration then reimposing the full sanctions?”
Maduro continues to boast of his resistance to U.S. influence. “Venezuela will not be colonized or dominated, neither by carrot diplomacy nor by stick diplomacy,” he said after taking the oath of office on Jan. 10. “Venezuela must be respected.”
Renewed sanctions could fuel migration
The disputed results have deepened Venezuela’s protracted social, economic and political crisis, which has has pushed millions into poverty, stunted hungry children’s growth and driven entire families to migrate. More than 7.7 million Venezuelans have already left their homeland since Maduro became president in 2013.
Rodriguez said in a December analysis that a U.S. government decision to revoke Chevron’s license or further tighten sanctions “would have discernible effects on migration.” He estimated that more than 800,000 Venezuelans could emigrate between 2025 and 2029 if Chevron’s license is canceled.
After Maduro’s inauguration, Biden defended his decision not to toughen sanctions on Venezuela’s oil sector, explaining that the idea is “still being investigated in terms of what impact it would have and whether or not it would just be replaced by Iran or any other” country’s oil market.
“It matters what would happen afterwards,” he told reporters.