December 14, 2022

IntelBrief: Washington Shifts Policy on Venezuela

AP Photo/Matias Delacroix

Bottom Line up Front

  • The United States is shifting from a “maximum pressure” strategy on the regime of Venezuelan President Nicolas Maduro to a policy that offers economic inducements for political reform.
  • The new Venezuela policy dovetails with U.S. and European efforts to identify additional global oil supplies to substitute for Russian oil imports.
  • Critics doubt that U.S. incentives will cause the Maduro regime to implement significant reforms to produce free and fair presidential elections in 2024.
  • Venezuela’s oil industry has deteriorated due to neglect and mismanagement, complicating efforts by U.S. energy major Chevron to expand the country’s oil exports in the near term.

The United States has been shifting policy toward the regime of Venezuelan President Nicolas Maduro, whose government has been consistently accused by U.S. and international officials of authoritarian repression, failing to hold or abide by the results of free and fair elections, economic mismanagement, and cooperation with narcotics trafficking. The Trump administration pursued a “maximum pressure” campaign against Venezuela consisting of the imposition of extensive U.S. sanctions and formal recognition of opposition leader Juan Guaidó as the country’s legitimate leader. Guaidó declared himself interim president in January 2019, arguing that his capacity as then-president of the Venezuelan National Assembly allowed him to form a transitional government because Maduro had been re-elected fraudulently in late 2018. Dozens of countries, including the U.S., Canada, and Colombia, extended Guaidó recognition as Venezuela’s legitimate leader. In March 2020, then-U.S. Attorney General Wiliam Barr announced criminal charges against Maduro and several of his political associates, accusing them of cooperating with the Colombia-based Marxist armed opposition group FARC (Revolutionary Armed Forces of Colombia) to “caus[e] tons of cocaine to enter and devastate American communities…” Yet, U.S. measures, including alleged covert aid to a Guaidó-led uprising attempt in April 2019, failed to dislodge Maduro.

Assessing the maximum pressure strategy as unlikely to remove Maduro or compel him to reform, U.S. officials have changed course. Since mid-2021, U.S officials have engaged the Maduro regime directly and offered economic incentives to try to induce his regime to ease repression, release Americans improperly incarcerated in Venezuela, undertake political reforms, and break with the U.S. adversarieswith which his regime has aligned, including Russia, Cuba, and Iran. U.S. and allied officials took note of the success of some oppositionists in state and local election races in Venezuela in 2021 - elections observed by a European Union (EU) delegation – as a possible sign that Maduro might be willing to increase political space for opposition supporters. Yet, that same EU election observation mission (EOM) reported that, although there were some improvements to the electoral conditions, there were still acute structural issues – such as the use of state resources in campaigns, and arbitrary disqualification of candidates, among others – that endanger such improved conditions. U.S. officials, particularly those responsible for obtaining the release of detained Americans abroad, have visited Caracas for talks with their Venezuelan counterparts, and other U.S. officials have engaged Venezuelan officials at multilateral meetings abroad. Seeking to respond positively to the outreach, Maduro has released some American detainees. In October 2022, his government released seven imprisoned Americans, five of which were oil executives, in exchange for the U.S. releasing two nephews of Maduro’s wife who had been jailed for years on drug smuggling conspiracy convictions.

After Russia’s February invasion of Ukraine, U.S. leaders saw an opportunity to blend further incentives for the Maduro regime with efforts to increase global supplies of oil to compensate for Russian oil exports reduced by U.S. and European sanctions. Some U.S. officials - as well as Venezuela critics and oppositionists exiled in the United States - questioned whether the Maduro regime would respond positively to U.S. offers that would primarily benefit the living standards of his population. Evidence of his regime’s neglect of the welfare of the population and the country’s deteriorating conditions is exemplified by the UN Office for the Coordination of Humanitarian Affairs (OCHA) needs report, which estimates that Venezuela’s humanitarian needs amount to $795 million to help about 5.2 million people in Venezuela through health, education, water and sanitation, food, and other projects. Moreover, the economic deterioration and political repression in the country has created what according to the UN High Commissioner for Human Rights (UNHCR) remains one of the largest displacement crises in the world – as of June 2022, 6.1 million Venezuelans have left the country.

Yet, other U.S. leaders saw a U.S.-led revival of Venezuela’s dilapidated oil export sector as a sufficient inducement to persuade Maduro to undertake significant reforms insofar as expanding oil exports might improve the regime’s political popularity. In May 2022, U.S. officials licensed U.S. energy major Chevron and other U.S. companies to perform the upkeep of oil wells they own jointly with state-run oil giant Petroleos de Venezuela (PdVSA) – but not to export oil from Venezuela. U.S. officials offered to allow exportation if the regime took concrete steps to reform.

The new U.S policy appeared to start bearing fruit in November 2022 when the Maduro regime and the “Unitary Platform” opposition coalition led by Guaidó held meetings in Mexico City. On November 26, the two sides announced agreement to begin formal talks in December on the restoration of democratic institutions, the release of political prisoners, and the holding of a free and fair presidential election slated for 2024. They also announced the acceptance of a “Mesa Social” agreement under which $3 billion in Venezuelan assets held abroad will be used to address the dire humanitarian needs of the population. Once cleared for release by the countries where they are held – a potentially complicated and time-consuming process – the distribution of the assets is to be controlled by the United Nations and monitored by the Venezuelan opposition. A joint statement by the United States, the EU, Canada, and the United Kingdom welcomed the announcements. The political talks between the Venezuelan government and opposition were set to resume this month, but a date has yet to be confirmed. The head of the opposition delegation has stated that the next phase of talks would enter a challenging phase, including a discussion of human rights and political issues.

The announcements in Mexico City sufficed for U.S. officials to proceed with the next stage of U.S. strategy. On November 27, the Treasury Department licensed Chevron Corporation to resume limited production and exportation of oil from Venezuela. The Treasury Department stated that: “This action reflects longstanding U.S. policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy.” Yet, many still question whether U.S. strategy will accomplish either substantive political reform or expansion of global oil supplies. Many experts assess that Maduro will likely pocket U.S. concessions while stalling any meaningful reforms or allowing free and fair elections that might result in his defeat. Global oil experts assess that Chevron will have difficulty quickly refurbishing its assets in Venezuela, which have suffered from years of neglect and mismanagement by Venezuelans appointed for loyalty rather than oil sector expertise. In late 2022, Venezuela is producing only about 700,000 barrels per day of crude oil – dramatically below its assessed maximum capacity of over 2 million barrels per day. Still, U.S. officials seem to assess that its policy will advance U.S. objectives more effectively than the maximum pressure strategy.