The Biden administration’s decision to ease sanctions on Venezuela and allow Chevron to return to its joint venture oil fields marks the end of Washington’s maximum pressure campaign aimed at ousting President Nicolás Maduro. Former President Donald Trump took U.S. sanctions to the extreme by barring oil companies from operating in the South American country, which has the world’s largest oil reserves, and recognising Juan Guaidó, the self-declared unelected acting President. This policy had little impact on Venezuela’s political crisis, for two reasons: first, Mr. Guaidó never managed to mobilise enough political capital to shake Mr. Maduro’s regime, powered by the Bolivarian grassroots movement; and then, the regime found a way to work around the sanctions by selling its heavy crude at a discounted price to China and other countries. The Biden administration followed the Trump line in its initial months, but started holding talks with Venezuela in March, a few weeks after the Russian invasion of Ukraine. While the U.S.’s official narrative is that the decision to ease sanctions was part of a larger political reconciliation process within Venezuela, the catalyst seems to be Ukraine and the energy crisis. Sanctions on Russia have pumped up prices. Mr. Biden’s attempts to revive the Iran nuclear deal have not succeeded so far. The move by Saudi Arabia and its allies to slash oil production has also mounted additional pressure on prices. The only option now to get more oil into the market is to allow Venezuela to do so.
To be sure, the easing of sanctions comes with riders. Chevron can produce oil from its fields in Venezuela, but the oil should be exported only to the U.S. Also, the sale proceeds should be used to pay back state-owned Venezuelan oil company PdVSA’s debt to Chevron (some $4.2 billion), and the licence can be cancelled any time. Even so, Mr. Maduro can claim victory in the U.S.’s clear U-turn. He has offered to begin talks with the opposition, but has not made any major concession beyond that. The U.S. move could also prompt European countries to revisit their policy towards Caracas. The return of foreign companies would allow Venezuela to ramp up its oil production. Mr. Maduro seems to have survived western attempts to isolate him, but his bigger challenge is to ride out the storm at home. The window of reengagement is his opportunity. He should embrace it with steps to address the critical failings of Venezuela’s economy, partly because of his own policies, mend ties with the West, and join serious talks with the opposition.