US lifts most sanctions previously imposed on Venezuela's oil industry

US President Donald Trump's administration lifted a large part of the sanctions previously imposed on Venezuela's oil industry on Thursday evening (overnight into today CET). This comes as Venezuela approved a reform of its oil sector. Reuters reported the news, noting that the Trump administration intends to expand oil production in the South American country after US forces abducted President Nicolás Maduro from the country less than a month ago. The latest move is intended to make it easier for US companies to sell Venezuelan crude oil, and the administration in Washington said further restrictions on Venezuela would soon be lifted. Existing US sanctions on Venezuelan oil production itself remain in place for now.

The US Treasury Department announced that it had authorized transactions with the Venezuelan government and state oil company PDVSA that are “ordinarily incident and necessary to the extraction, export, reexport, sale, resale, supply, storage, marketing, purchase, delivery or transportation of oil of Venezuelan origin, including the refining of such oil, by an established entity based in the United States.”

The license excludes any transactions involving individuals or entities based in or controlled from Russia, Iran, North Korea or Cuba.

An unnamed White House source told Reuters that the measure “will help the flow of existing product” from Venezuela and that further sanctions relief would be announced soon.

After Maduro's arrest, Trump said the US wanted indefinite control over the sale of Venezuelan oil and the proceeds from it. He also said US companies would invest $100 billion in oil production in Venezuela and bring it to historic highs after years of underinvestment and mismanagement. Washington and Caracas have meanwhile agreed to sell 50 million barrels of Venezuelan oil through European companies Vitol and Trafigura.

The US administration's decision to issue such a broad and general license represents a significant departure from its previous strategy of granting individual sanctions waivers to companies wishing to do business in Venezuela, Reuters noted. After Maduro's first re-election as president in 2019, which Washington did not recognize during Trump's first term, the US Treasury Department designated the entire Venezuelan energy industry as subject to US sanctions.

On Thursday, Venezuela passed a law to privatize the oil sector, promising private companies control over oil production and sales and allowing disputes to be resolved independently, including outside Venezuelan courts. The government has thus abandoned one of the principles of the socialist movement that has governed the country for more than two decades. Shortly after parliament approved the law, acting President Delcy Rodríguez signed it in a ceremony.

“This law allows us to make a truly historic and qualitative leap and turn these oil reserves, the largest on the planet, into the greatest source of prosperity a nation can have,” said Maduro's former vice president.

Reuters noted that oil producers such as Chevron, Repsol, ENI and Reliance Industries, as well as some US oilfield services companies, have in recent weeks expressed interest in licenses to expand production or exports of oil from Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC). However, expanding production in the South American country would require further US authorizations, Reuters reported.

Jeremy Paner, a lawyer at New York law firm Hughes Hubbard & Reed and a former investigator for the US Treasury Department's Office of Foreign Assets Control (OFAC), told Reuters that the current authorization is broad in the sense that it allows many activities, including the refining, transport and lifting of Venezuelan oil. However, he said, it is narrow in scope because it applies only to US companies.