The move in a U.S. presidential election year could push oil prices higher, but Washington says it has not implemented electoral reforms promised by President Maduro.
The United States has reimposed sanctions on Venezuela's vital oil sector, accusing the government of failing to adhere to democratic principles ahead of July elections.
The administration of U.S. President Joe Biden announced it would not renew permits that expired early Thursday after a U.S.-backed election deal was reached between the government and Venezuelan rebels in Barbados. The permit had partially relaxed punitive measures since October.
“[Venezuela’s President] “President Nicolas Maduro and his representatives have not fully fulfilled their commitments under the Election Roadmap Agreement,” said U.S. State Department spokesman Matthew Miller.
“Therefore, General License 44, which authorized transactions related to the oil and gas sector with Venezuela, will expire after midnight and will not be renewed.”
As the deadline looms fast, the U.S. Treasury announced Wednesday that it has issued replacement licenses that give companies 45 days to “wind down” operations and trade in the OPEC member country's oil and gas sector.
Nicolas Maduro and his representatives have not fully fulfilled their promises under the electoral roadmap agreement. Therefore, General License 44, which authorized transactions related to the oil and gas sector with Venezuela, expires after midnight and is not renewed.
— Matthew Miller (@StateDeptSpox) April 17, 2024
Miller also said that “Mr. Maduro and his representatives have prevented the democratic opposition from registering candidates of their choice, harassed and intimidated political opponents, and unfairly targeted numerous politicians and members of civil society. “I am concerned that he was detained,” he added.
Despite reaching an agreement with opposition parties last October to hold a free and fair vote, the government has barred several key political opponents from participating in the July 28 presidential election.
General License 44 broadly authorized oil and gas transactions with Venezuela's state-owned oil company, PDVSA. The system was introduced by the United States after the government agreed to reforms that would result in more competitive elections with international observers.
The reimposition of sanctions means Venezuelan fuel sales are expected to take a big hit, while U.S. oil companies operating in the country will have to scramble to seek special permits.
If the U.S. does not grant sufficient individual permits, PDVSA is expected to rely on little-known intermediaries to sell its crude at discounted prices, primarily to Asia.
“We are open [for business]we are ready to continue moving forward with all foreign companies that wish to participate,” Venezuelan Oil Minister Pedro Telechea told reporters after the US announcement.
“Venezuela is ready to ensure the stability of the global oil market that we so badly need.”
Economic headwinds for the US
While U.S. sanctions would hurt Venezuela's economy, they also carry risks for Mr. Biden, who is seeking re-election, as they could lead to soaring domestic oil prices and pressure from the Venezuelan government through its immigration policies.
Venezuela has previously threatened to cancel deportation flights for hundreds of thousands of Venezuelans who have entered the United States in recent years if the United States continues its “economic aggression.”
The October 2023 agreement collapsed after state institutions loyal to the government disqualified President Maduro's main challenger, María Colina Machado, from running.
Machado said the reimposition of sanctions was the result of a “wave of brutal repression.”
Maduro, the successor to late Venezuelan leader Hugo Chávez, is seeking a third six-year term after an 11-year tenure marked by sanctions, economic collapse and accusations of widespread repression. .
Dozens of countries, including the United States, have rejected the results of the 2018 election, which Maduro won and the opposition boycotted.
But years of sanctions and other pressure have failed to oust Maduro. Mr Maduro enjoys support from the political patronage system, the military, Cuba, Russia and China.