The decision of the United States government to revoke a license that authorized transactions in the Venezuelan oil and gas sector could force the state-owned Petróleos de Venezuela (PDVSA) to once again sell crude oil at a discount in the global hydrocarbon market and will cause the invoice collection and payment process to become more “cumbersome.” ”, say specialists.
In response to the signing of a agreement on electoral guarantees between the government and the opposition Unitary Platform, in October last year the US issued general license 44 for six months, but warned that it would be renewed “only” if Venezuela complied with its commitments to hold free and fair presidential elections.
The Venezuelan government has insisted that it is prepared to live without the licenses, which have been described as a policy of “extortion and blackmail.”
This week, the Minister of Petroleum and president of PDVSA, Rafael Tellechea, said that crude oil production is around one million barrels per day and assured that it will continue to grow “with or without sanctions.”
Rafael Quiroz, economist and expert in the oil industry, maintains that in addition to seeing the need to grant preferential prices, for Venezuela there will be “complications” from an administrative point of view because international banks will have greater demands on the “ cumbersome” procedures for the purposes of payment and collection of oil invoices by PDVSA.
“It is not that the flexibility had eliminated all the obstacles around the Venezuelan oil trade, but they had made something more flexible (…) we will have to give discounts to our clients abroad again to compensate them for the risk they take when trading with PDVSA in the midst of sanctions “, he said to the VOA.
Quiroz, head of the chair of economics and oil policies at the Central University of Venezuela (UCV), also estimates that there will be a reduction in Venezuelan oil revenues.
“For the purposes of the revenue budget to the national treasury, that will undoubtedly be resented,” he said. “A kind of myth has been established on the issue of sanctions, because the drop in Venezuelan oil production has been going on since 2005, when that word did not exist in the vocabulary of Venezuelan oil policy. What the sanctions have done is hinder the collection of the oil bill, because a kind of triangulation has to be done.”
He also specified that, from October to date, Venezuela stopped sacrificing some 3,000 million dollars as it was not forced to give discounts.
The cancellation of the license will lead Venezuela to stop selling its oil to natural markets such as the United States and Europe, which, according to the economist and financial consultant, Alejandro Castro, leads to a sale “at 25% less than the market value.” and implies a “much higher” freight cost.
Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute at Ryerson University, in Houston, Texas, believes that license 44 managed to improve PDVSA's cash flow, but less than expected.
Furthermore, he highlights that despite the cancellation of license 44, license 41 remains in force, which, he assures, “is the one that has effects on oil production.”
At the end of 2022, the Treasury Department issued license 41 that authorized the American company Chevron to resume limited natural resource extraction operations in Venezuela, but prevents PDVSA from profiting from those oil sales.
“If GL 44 is not renewed, 41 still exists and perhaps the European one is approved, production would continue to rise and would probably pass one million barrels per day, but then it would decline again. If Chevron's license is cancelled, production this year would not reach 900 and would begin to fall, but I don't see it,” he commented last week.
The Venezuelan economy could grow 4.5% at the end of the year, according to the most recent report on the situation in Venezuela published by the Institute of Economic and Social Research of the Andrés Bello Catholic University (UCAB), which warns that behavior will depend of “internal political stability, the intensity with which international sanctions are applied and the rigorous control of monetary financing of the public sector deficit.”
The Maduro government estimates a growth of 8%.
Joe Biden's administration acknowledged that Maduro has complied with “certain aspects” of the agreements signed in Barbados, including the establishment of an electoral calendar and the invitation to electoral observation missions, but questioned whether opposition candidates have been blocked.
The Unitary Platform and the winner with 90% of the votes of the opposition presidential primary, María Corina Machado, have denounced that the government has not complied with the agreements signed in Barbados, including the respect of each political actor to choose their candidate.
The coalition of opposition parties and Machado, disqualified from holding public officereported that the government prevented them from registering Corina Yoris, an 80-year-old philosopher designated as their successor candidate.
But, they managed to provisionally register the diplomat Edmundo González and have until April 20 to make candidate substitutions with effect on the electoral ballot. They are currently holding talks to define their strategy.
[Con información de Álvaro Algarra y Adriana Núñez Rabascall, corresponsales de la VOA en Caracas]
Connect with the Voice of America! Subscribe to our channels Youtube, WhatsApp and to the newsletter. Turn on notifications and follow us on Facebook, x and instagram.
