Washington Lifted Key Sanctions on the Maduro Regime. Now What?

On Wednesday, October 18th, the Biden administration lifted a critical bundle of economic measures against state-owned companies. Here’s what we know and what they mean

Beyond technicalities, which sanctions were lifted?

First of all, we must understand that the sanctions lifted are directly related to the economy and were issued against Venezuelan State-owned companies and businesses, so the relief package doesn’t cover sanctions against individuals. According to general license 44, the Department of the Treasury’s Office of Foreign Access Control (OFAC) partially lifted sanctions on oil & gas operations involving PDVSA for a six month period. This is intended to be a test for the Maduro government: if it fails to comply with the electoral agreement signed in Barbados this week, these sanctions will be reinstated. This is the message that the US is sending.

“The license will be renewed only if Venezuela meets its commitments under the electoral roadmap as well as other commitments with respect to those who are wrongfully detained”, an OFAC press release said.

Moreover, after the relief package was revealed some U.S. officials said that they expect all political bans to be lifted by November OR ELSE. We’ll see what happens, we know that the Maduro regime has no intention in lifting the political ban on Maria Corina Machado, and we know the U.S. knows it. 

The new licenses authorize the production, extraction, sale and export of oil or gas from Venezuela as well as the supply of related goods and services. It also authorizes transactions with some blocked banks like the Central Bank of Venezuela and the Bank of Venezuela. OFAC also authorized invoices for goods or services related to these sectors, new investments in sector operations in the country and the delivery of Venezuelan oil and gas to creditors of Venezuela and PDVSA (like those of the Citgo auction). Another license authorizes operations with public gold company Minerven CVG that the United States hopes will reduce Venezuelan gold trafficking. The licenses have restrictions on operations and transactions that benefit Russian companies while sanctions related to Iran remain in place.

That said, the sanctions lifted are critical for the Venezuelan state’s capacity to earn money by exporting resources and getting investment, which means that the major constraints to the main source of income for the Maduro government are being removed. Naturally, the State’s ability to reactivate the energy industry on time, and the way the government disposes of the income it will get, is beyond control of the OFAC. But we can say that the Chavista-controlled State-owned industries can operate and export again without losing time and profits evading sanctions. 

Now, the oil, gas and gold public industries can perform financial transactions with the banking sector and foreign companies can take part in exploration, extraction, processing and export of oil, gas and gold. Similarly, creditors can accept payments from Venezuelan public companies. Foreign companies with interests in the country, besides Chevron, can resume operations, collect due payments and make new investments without getting in trouble with the U.S. 

More or less: companies and individuals—from the U.S. or elsewhere—can now make business with Venezuelan state-owned companies, except for joint ventures or projects where Russia and Iran are involved or in the primary bond market. 

What should the Maduro government give in exchange for the lifting of those sanctions?

The government is supposed to follow the Barbados agreement and promote conditions for competitive presidential election in 2024: including a precise date, the actualization of the Electoral Registry, invitations for international observation missions, access to the media for all candidates, etc. The U.S. Department of State “expects” and “understands” that the government will release political prisoners and define a process to allow banned candidates to participate before the end of November. As it seems, Maria Corina Machado is off limits for Chavismo, so the most dangerous candidate for Maduro will continue to be unable to compete in 2024, even if she wins the opposition primaries next Sunday. Maduro could lift the bans on more moderate candidates like Henrique Capriles, who quitted the primaries race.

The government must also release political prisoners, “according to the law.” This will surely be used discretionary. Last night, five political prisoners were released, among them Primero Justicia lawmaker Juan Requesens and journalist and Voluntad Popular militant Roland Carreño. More than 200 hundred prisoners remain in jail or house arrest so far, including U. S. citizens. 

How does this benefit Chavismo?

The government is announcing this as a huge political victory against imperialism, relaunching the “Venezuela se arregló” trope that the revolution is leading an economic recovery and preparing for the reelection of Maduro in 2024 with a money influx in the form of oil exports. How much money? That will depend on how much they can do in six months to extract and export resources, get investment, manage it well, etc. So you figure.

Of course it’s great news for Maduro. This increases his maneuvering range to distribute wealth and reinforce loyalties, and to recover legitimacy by winning an election in 2024 using the oil exports. Also, of course, he will be under pressure from the political tribes around him for access to fresh resources as well as from sectors of the population who are demanding better wages and living conditions, like the public employees who have been protesting for months to hear that they cannot aspire to better wages “because of the economic blockade”. Now that the government is announcing the sanctions are lifted, that excuse is gone. 

How does this benefit the opposition?

Parties like Voluntad Popular—the most belligerent against Chavismo—are getting people out of jail. This is supposed to engage the government back in the electoral path: to allow the opposition parties to compete in a legitimate presidential election in 2024. But this is also more ammo for the intestine wars. If frontrunner Maria Corina Machado remains banned, and Chavismo favors other opposition candidates as more easily defeatable competitors in 2024 (think Manuel Rosales, Henrique Capriles or Carlos Prosperi), the opposition and the electorate will shatter while the Maduro government argues that is complying with the Barbados agreement. The opposition will only have a clear shot in these cuasi-competitive elections if it manages to coordinate its wildly diverse forces. 

How does this benefit people in Venezuela?

If the lifting of economic sanctions translates into an influx of petrodollars, the economy will experience an important reactivation, which could even reduce the migratory pressure that worries the U. S. and the international community so much. Actually, as part of the Caracas-Washington negotiation that led to this sanction lifting, the U. S. is organizing direct repatriation flights to send refused migrants back to Venezuela. The first one arrived this week with 135 Venezuelans. Washington wants to reduce stimuli for Venezuelan irregular migration. 

Why is the Biden Administration doing this?

Like many other countries, even those who recognized Juan Guaidó as interim president in 2019, and perhaps the U.S. accepted some time ago that regime change was not happening in Venezuela and that the best thing to do was to use the carrot instead of the stick. But the U.S. currently has two significant problems that a better relationship with Venezuela could help tackle. First, helping to revamp Venezuela’s oil industry could help increase PDVSA’s output to alleviate the market and give relief to a couple U.S. companies that have interests in Venezuela. The immediate effect over the global oil market will be minimal, of course. But in the long run it is a smart strategic move: to recover an important regional oil partner. The other problem is related to the border crisis. This month, the U.S. started direct repatriations to deport Venezuelans who had unlawfully crossed the U.S. border (ojo, right after expanding TPS for almost 500,000 Venezuelans). This took an important diplomatic effort between the U.S. and Venezuela, and in the view of the Biden administration it seems that the best solution they found to implement a stronger border policy regarding Venezuela goes through the path of diplomacy.

Sanction-lifting is expected to restore competitive conditions to the degree they can lead to an acceptable presidential election, after which Maduro—given he doesn’t miscalculate and is reelected—is considered legitimate again. The question still remains whether the restoration of diplomatic and consular relationships and the reopening of embassies and commercial flights, will wait until after the elections. There are incentives to have it happen before, not only because of the migrant crisis but also because of the need of consulates to have Venezuelans in  the U.S. vote in the 2024 presidential elections. 

Ultimately, it will allow the United States to compete against the Russian, Iranian and Chinese influence on nearby Caracas. Or so they hope.

Is more sanction-lifting coming?

That will depend on what happens during the next six months. Individual sanctions related to human rights abuse, corruption or drug trafficking claims are more difficult to lift. Some people, like Diosdado Cabello and many military officers involved in torture and killings, don’t expect those sanctions to be removed from them, so they have no reasons to support a more moderate path for Chavista rule.