Time to Revoke the Licenses Permitting U.S. Oil Companies to Work in Venezuela

Some of the main financial pillars of support of the Maduro regime in Venezuela are, very unfortunately, some of the world’s major oil companies, including Chevron.  How did that happen?

The Treasury Department on November 26, 2022 issued General License 41 “authorizing Chevron Corporation to resume limited natural resource extraction operations in Venezuela.” Why did it do that? Treasury explained:

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.

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Venezuela

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This authorization prevents PdVSA from receiving profits from the oil sales by Chevron. GL 41 authorizes activity related to Chevron’s joint ventures in Venezuela only, and does not authorize other activity with PdVSA. Other Venezuela-related sanctions and restrictions imposed by the United States remain in place; the United States will vigorously enforce these sanctions and will continue to hold accountable any actor that engages in corruption, violates U.S. laws, or abuses human rights in Venezuela….

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The announcements by the Unitary Platform and the Maduro regime are important steps in the right direction to restore democracy in the country. The United States welcomes and supports the reopening of negotiations between the Unitary Platform and the Maduro regime, as part of our longstanding policy to support the peaceful restoration of democracy, free and fair elections, and respect for the rights and freedoms of Venezuelans.

There are today two important points to make about that license and Chevron’s activities: first, that the basis for the license has now been blown to bits by the Maduro regime, and second that the lack of transparency involved should not be acceptable.

The first point is simple: the license was granted as a reward and inducement to Maduro. It was defended by the Biden administration as a human rights measure. It was supposed to lead to what Treasury called “the peaceful restoration of democracy, free and fair elections, and respect for the rights and freedoms of Venezuelans.” That did not happen; on the contrary Maduro has seized four more American hostages, stole the July 28 election, forced its winner Edmundo Gonzalez into exile, and launched a brutal new crackdown. So why is the license still there? That’s the question the democratic forces in Venezuela are also asking, and they have called upon the Biden administration to end this and other licences. “We want them canceled … this is a lifeline to the regime,” their spokesman said.

The second point, transparency, is more complex—but has happily been explained by Jose Ignacio Hernandez, formerly a professor of law in Venezuela and then the top legal officer of the Interim Government the United States supported. Hernandez is now living in exile in the United States. Hernandez writes (the article is in Spanish) that oil company contracts are supposed to be governed in Venezuela by the country’s constitution and its hydrocarbon law. But these have in essence been illegally overridden by the 2021 “Anti-Blockade Law” that Maduro pushed through the illegal National Assembly. As Reuters described it,  “the law, which applies to the country's key oil sector, allows companies to sign deals confidentially to avoid being sanctioned themselves.”

So how does anyone actually know what’s going on? Hernandez wrote that:

there is no public information on the percentage of oil revenue that Maduro is capturing. General License 41 expressly prohibits the payment of royalties and taxes to the Government of Venezuela, which would violate the Constitution. But according to the media, Chevron somehow managed to pay, at least, the royalty and the extraction tax, perhaps because the payments are made in bolivars, not in dollars. In reality, the joint venture is responsible for paying for these concepts. Still, since the operation was transferred to Chevron, the royalties and taxes are ultimately paid with the proceeds from Chevron's exports.

Complicated? Indeed. What is clear is that the whole purpose of the “Anti-Blockade Law” is to prevent transparency. And as Hernandez wrote, the “lack of transparency is severe, considering that Venezuela is one of the most corrupt countries in the world. As the Human Rights Council-appointed Fact-Finding Mission has concluded, there is a clear link between corruption and the grave human rights violations committed by the Government of Venezuela. Hence, deepening the study of the relationship between private companies and human rights in Venezuela is crucial.”

Companies like Chevron have armies of lawyers to ensure that they do not violate the law, and I assume they have never done so. And my complaint and that of Venezuelan democrats against General License 41 is addressed to the United States government, not an oil company that works lawfully under it. But what about the Venezuelan end? Is the Anti-Blockade Law actually lawful? What if it violates the Venezuelan constitution and hydrocarbon law? Is it a good practice for a U.S. firm to deal with a vicious, brutal, anti-American regime – one that takes U.S. citizens hostage – without full transparency about its activities?

Private companies don’t make the rules they have to live by, and navigating around U.S. sanctions, exceptions from those sanctions, an illegal and despotic regime, Venezuela’s constitution and laws, new regime “laws” that are passed by an illegal institution, and a democratic opposition saying “stop” cannot be easy. But that’s all the more reason for complete and total transparency.

The best outcome is for Treasury to solve all these problems for Chevron by eliminating General License 41. It did nothing for democracy in Venezuela and is helping only the Maduro regime.