The US government may soon reduce sanctions on Venezuela, allowing Chevron and other oil companies to resume oil drilling there. This comes just hours after OPEC+ countries announced a cut in oil supply by two million barrels per day (bpd). A report by the Wall Street Journal (WSJ) said that lifting sanctions may allow oil exports from Venezuela to the US and Europe.
In return, the Venezuelan government led by Nicolas Maduro has agreed to resume talks with the Opposition and hold a free, fair presidential election in 2024, the WSJ report added. The deal also includes freeing up millions of dollars of Venezuelan funds that have been frozen in the US.
The funds, once released, will be used by Venezuela to recover from the economical slump, they are in currently. It recorded an inflation rate of 114.1 per cent year-on-year in September.
During the 1990s, Venezuela was among the top suppliers of oil to the world. It exported over 3.2 million barrels per day. Following corruption, mismanagement and underinvestment, oil production fell. The situation was exacerbated by the sanctions imposed by the Donald Trump government.
The agreement, which is expected to be revealed by the end of October, may also bring the pressure down on the Maduro government. However, this is one of the several potential pitfalls of the deal.
Experts quoted in the WSJ report said that Maduro may use the new money to maintain his authoritarian grip on the country. This may also impact opposition leader Juan Guaido’s legitimacy. In 2019, he was declared “Venezuela’s legitimate president” by the US government.
Also, even if the sanctions are lifted, the state of infrastructure in the South American nation is such that it may not be able to increase the oil supply considerable in the near and medium terms.
Nevertheless, the country is now exporting about 450,000 barrels a day and could double that figure in a matter of months, WSJ added.