WASHINGTON

- For the first time in years, the government and the opposition in Venezuela managed, last Saturday, to achieve an important breakthrough in the negotiations between them, which Mexico embraces, with their reaching an initial agreement that was welcomed by the United States, as a result of which it allowed the “Chevron” oil company to resume its work in the same day. sanctioned country.

Washington gathered tense relations with Venezuela after Hugo Chavez, the former socialist president, came to power in 1999, and after Chavez's death in 2013, he rose to power behind him and his most important aide, Nicolas Maduro.

During all these years, Chávez's Unified Socialist Party (PSUV) controlled several key institutions including most of the judiciary, the Electoral Council, and the Supreme Court.

The reign of President Maduro, which has been going on since 2013, has witnessed a major collapse of the Venezuelan economy, and the shortage of basic supplies has become the norm, which has prompted more than 7 million people to leave the country.

A ray of hope on a long road

Maduro was re-elected in 2018 to a six-year term, but the election was widely dismissed as fraudulent.

And Washington, and many Western countries, recognized opposition leader Juan Guaido as interim president in 2019.

And the United States imposed sanctions on Maduro and his inner circle, and the Venezuelan oil industry, which worsened the economic situation, and it became difficult to obtain fuel and foreign exchange.

With mediation from Norway, the Venezuelan government and the opposition succeeded in reaching an agreement aimed at ensuring the gradual release of billions of dollars frozen abroad by a fund run by the United Nations, to be directed to health care, education and food aid.

A few days ago, the Venezuelan government and the opposition signed a preliminary agreement to find a way out of the political crisis in the country.

During the talks hosted in Mexico City, the capital of Mexico, the two sides issued a joint statement requesting the release of billions of dollars frozen abroad to help finance social projects.

In response to that progress, President Joe Biden's administration said it would allow US oil company Chevron to resume some activity in Venezuela, including importing Venezuelan crude into the United States.

Venezuela has seen spirals of economic collapse with mounting political discontent fueled by soaring hyperinflation, power outages, and shortages of food and medicine. Over the past decade, its gross domestic product has shrunk by 70%, and about 7 million people, or a quarter of the country's population, have left.

The US and Western sanctions only succeeded in consolidating the capacity of the Venezuelan regime, and with the continued support of the army for President Maduro, who kept the Venezuelan economy, barely afloat, by selling oil to China and other allies, and prompting the repercussions of Russia's war on Ukraine, and the embargo imposed on Russian oil imports. , the United States to search for new sources of energy.

And the US Treasury announced that it would authorize the oil giant, Chevron, to resume its limited oil operations in Venezuela after the Maduro regime and the political opposition announced the resumption of talks in Mexico.

The move was expected after the Biden administration discussed easing sanctions earlier this year when official delegations were sent to Caracas, the capital of Venezuela, to negotiate a prisoner exchange that released 7 Americans.

What does easing sanctions on Venezuela mean?

Easing sanctions would help Venezuela rebuild its oil industry and allow its crude oil to start flowing to global markets again, including the United States, which was the number one buyer of Venezuela's oil.

Venezuela has the largest proven oil reserves in the world, and it used nearly 3 million barrels of oil per day before the imposition of US sanctions, and this number decreased to only 534,000 last October.

The launch of the oil sector will help revive Venezuela's ailing economy, which shrank by about two-thirds between 2014 and 2020 due to corruption, mismanagement and sanctions. The growing economy, in turn, will boost President Maduro's political fortunes if he runs for president again in 2024.

The gradual lifting of sanctions would inject more Venezuelan oil into the global market, a key goal amid the energy shock from Russia's invasion of Ukraine, and American re-engagement could help weaken the growing influence of Russia and China in Venezuela.

Further easing of sanctions could help improve Venezuela's economy and reduce the flow of Venezuelan migrants abroad, especially the United States. A recent United Nations report stated that the number of Venezuelan refugees has reached more than 7.1 million since the political and economic tensions that the country has witnessed since 2018.

The current average monthly wage in Venezuela is about $25, while the price of a basket of goods that covers the monthly needs of a family of 4 was about $370 at the end of September, according to the Venezuelan Non-Governmental Finance Observatory.

US license to Chevron Corporation

News of Washington's issuance of a license to Chevron to resume oil production in Venezuela sent a surge in the value of years-old troubled Venezuelan bonds.

The value of Venezuelan sovereign and state oil company bonds rose as investors expected the Biden administration to ease further sanctions and restrictions on Venezuela.

This step is unlikely to lead to a significant increase in oil production immediately, but these results may appear in the coming weeks and months after the restoration and modernization of the dilapidated infrastructure of the oil industry in Venezuela.

Chevron has 4 frozen joint ventures with the giant state-owned Venezuelan oil company, and the limited license allows oil to start pumping and exporting to the United States again, and the proceeds will be directed to paying billions of dollars of accumulated debt that Venezuela owes to Chevron, and it is prohibited to pay any return or taxes to the ruling Venezuelan regime.

Western openness to Venezuela allows for optimism about the liberation of more than $3 billion of the Venezuelan government's assets, which are currently frozen in US and European banks.

Some reports also indicate that Venezuela has 20% of the world's proven oil reserves, more than any other country, and the war in Ukraine has made everyone more nervous about oil supplies, and thus made the cost of isolating Venezuela seem much higher than before.

After decades of mismanagement and sanctions, Venezuela's oil industry is too dilapidated to make much difference to global oil markets in the short term, but Washington and others are thinking in the long term.