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HomeMarketU.S. eases sanctions as Venezuela government and opponents resume talks

U.S. eases sanctions as Venezuela government and opponents resume talks

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Venezuela’s government and its opposition on Saturday agreed to create a U.N.-managed fund to finance health, food and education programs for the poor, while the Biden administration eased some oil sanctions on the country in an effort to boost the newly restarted talks between the sides.

The agreement signed in Mexico City by representatives of President Nicolás Maduro and the opposition, including the faction backed by the United States and led by Juan Guaidó, marked the resumption of long-stalled negotiations meant to find a common path out of the South American country’s complex crisis.

The U.S. government, in response, agreed to allow oil giant Chevron
CVX,
-0.29%
to pump Venezuelan oil.

See: Chevron gets new U.S. license to pump oil in Venezuela again

The broad terms of the agreement for the United Nations-managed social fund were announced by the head of a group of Norwegian diplomats guiding the negotiations.

Venezuelan resources held in the international financial system will be directed to the fund, though neither side in the talks nor Norway’s chief facilitator, Dag Nylander, said whether the U.S. or European governments have agreed to allow frozen assets to be funneled to the new mechanism.

“In line with UN norms and procedures, (the fund’s) objective would be to support the implementation of social protection measures for the Venezuelan people,” Nylander said.

“The parties have identified a set of resources belonging to the Venezuelan state frozen in the international financial system to which it is possible to progressively access, understanding the need to obtain the authorizations and approvals” from foreign institutions and organizations.

A U.N. report published earlier this year estimated humanitarian needs at $795 million to help about 5.2 million people in Venezuela through health, education, water and sanitation, food and other projects.

Under President Donald Trump, the U.S. ramped up economic sanctions against Venezuela and granted Guaidó authority to take control of bank accounts that Maduro’s government has in the Federal Reserve Bank of New York or any other U.S.-insured banks.

Guaidó declared himself Venezuela’s interim president in January 2019, arguing that his capacity as then-president of the country’s National Assembly allowed him to form a transitional government because Maduro had been re-elected in a sham vote in late 2018. Dozens of countries, including the U.S., Canada and Colombia, recognized him as Venezuela’s legitimate leader.

European banks also hold Venezuelan frozen assets.

About 7 million people have left Venezuela amid a complex political and humanitarian crisis. Three-quarters of those who remain in the country live on less than $1.90 a day, an international measure for extreme poverty.

About $3 billion is expected to be progressively directed to the fund.

The dialogue formally began in September 2021, but Maduro’s delegates walked away from negotiations in October 2021 after businessman Alex Saab was extradited on money laundering charges from Cape Verde to the U.S. Maduro conditioned a resumption on the release of Saab. He remains in custody, but his wife, Camila Fabri de Saab, is now part of Maduro’s delegation.

The U.S. Treasury Department on Saturday announced its decision to allow California-based Chevron to resume “limited” energy production in Venezuela after years of sanctions that have dramatically curtailed oil and gas profits that have flowed to Maduro’s government.

Under the new policy, profits from the sale of energy would be directed to paying down debt owed to Chevron, rather than providing profits to Venezuela’s state-run oil company Petroleos de Venezuela S.A., commonly known as PDVSA.

Treasury’s move “brings added transparency to the Venezuelan oil sector,” Chevron said in a statement.

The company added that the decision “means Chevron can now commercialize the oil that is currently being produced from the company’s Joint Venture assets. We are determined to remain a constructive presence in the country and to continue supporting social investment programs aimed at providing humanitarian relief.”

A senior U.S. administration official, briefing reporters about the U.S. action under the condition of anonymity, said that easing the sanctions was not connected to the administration’s efforts to boost global energy production in the wake of Russia’s invasion of Ukraine and that the decision was not expected to impact global energy prices.

The agreement over the social fund is part of a broad agenda that is expected to advance in December, including the conditions for the presidential elections that are supposed to take place in 2024, the release of political prisoners and the withdrawal of decisions that bar many politicians from running for office.

The fund is a tangible result from a process that many see with skepticism after negotiations mediated by the international community in previous years failed to bring the sides to an agreement.

David Smilde, senior fellow at the Washington Office on Latin America and professor at Tulane University, said that after the long break in negotiations, “it is up to the two sides to show the exhausted Venezuelan population that they can actually address their needs and return the country to a functioning democracy.”

“However, this should be seen not as the end point of the negotiations but as a restart,” Smilde said. “The more important issues of justice and democracy are on the agenda for future meetings. Making progress will be difficult, but both sides have much to gain by rising to the occasion.”

Credit: marketwatch.com

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