The US is not planning to cancel the company-specific licenses it has given to Chevron and other oil companies to allow them to operate in Venezuela, despite widespread questions about Nicolás Maduro’s claims that he won the July 28 presidential election.

“We are obviously in the process of evaluating these election results and we have to see where this comes out,” a senior official in the Biden administration told reporters during a July 29 briefing. “I can’t get into hypotheticals with respect to what our overall licensing policy will be,” the official said.

“That being said, it is not currently under consideration that we would retroactively alter licenses that have previously been given,” the official said.

Maduro, the current Venezuelan president, and leading opposition candidate Edmundo González both claim that they won the presidential election. Maduro says he won with 51.2% of the vote, but he has not provided voting records to prove that outcome. González says exit polls show he won with 70% of the vote.

The US is calling for the immediate publication of detailed precinct-level polling to verify the election outcome, a second senior administration official said.

US sanctions policy has still been a success, the first senior administration official said. Despite the problems with the election, Venezuela did in fact hold a presidential election and allowed an opposition candidate to be on the ballot, the official said. That process only came about as result of US calibrations to its sanctions policy over the past year, the official said.

“Now that we are faced with potentially a new scenario, we are going to take that into account as we map forward where we may head with respect to sanctions towards Venezuela,” the official said.

Market impact

For now, the impact of the election on the oil market is unclear.

“At a high level, we would suggest that upside risks to crude prices could emanate from US sanctions, interruptions to production from civil unrest, and/or Maduro making further aggressive moves against neighboring Guyana’s oil-rich Essequibo region,” ClearView Energy Partners said in a July 29 note.

Downside oil price risks “might be less acute,” the note said, because events on the ground could take days or weeks to play out and because of the lag time before new production comes onstream.

In the short-term, other factors beyond the Venezuelan election are more relevant to global markets, Rachel Ziemba, a senior advisor at Horizon Engage, said in an email. “But these results argue against sizeable medium-term increases in oil output and investment from Venezuela,” she said.

Policy options

The initial US stance on sanctions was not a surprise to some following the issue.

“We don’t expect to see an immediate change in the US sanctions posture, but I suspect we won’t be seeing new licenses any time soon,” Fernando Ferreira, director of geopolitical risk service at Rapidan Energy Group, said in an email.

Washington will probably focus on a multilateral diplomatic push with key regional countries to pressure Maduro to audit the election results and keep the regime from cracking down on protests, Ferreira said.

In practice, the US and regional leaders are likely negotiating to encourage the government to concede and form a viable power-sharing agreement, Ziemba said. “Ultimately, I think they are likely to take a back seat and see how the people and opposition respond,” she said.

The first line of action for the US and other countries will be diplomatic, including not recognizing the legitimacy of the election and limiting Venezuela’s access to international forums, David Goldwyn, chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group, said in an email.

This approach also includes leveraging normalization and sanctions relief with progress on political space for opposition parties, access to media, conduct of future elections and treatment of political prisoners, Goldwyn said.

Source: Platts