Secret Meeting Between Venezuela and the U.S. as Oil Sanctions Loom

U.S. and Venezuelan government officials met secretly this week ahead of the expiry of oil sanction relief next week.

The meeting, in Mexico City, discussed the possibility of reforms in Venezuela, Bloomberg reported citing unnamed sources, with a focus on elections.

The United States granted a six-month oil sanction waiver to Caracas last year after the two sides discussed election reforms that would have given Venezuela’s opposition a chance in the upcoming vote in July.

However, just months later, the Maduro government effectively banned the opposition’s leader, Maria Corina Machado, from running for office, prompting threats from Washington that the sanctions would snap back.

Following the sanction waiver last October, Venezuela had planned to expand its oil production from below 800,000 bpd to over 1 million bpd. The prospects of that happening have dimmed since then as the threat of the return of sanctions hung over PDVSA’s head. Analysts have also forecast a higher risk of domestic fuel shortages if the sanctions snap back on April 18.

The easing of the sanctions helped Venezuela boost its oil export revenues, with expectations for this year at $20 billion, according to Reuters estimates from January, versus a total of $12 billion in oil revenues for last year. If the sanctions are reimposed, however, the outlook will change drastically.

Bloomberg cited one Venezuela-based analyst as estimating the potential losses at $2 billion for this year alone. Another said that the lifting of the sanctions for six months has boosted the country’s oil revenues by an additional $740 million.

The return of sanctions will also affect the U.S. as it would put an end to heavy crude imports from Venezuela. These started flowing to Gulf Coast refineries once again after the sanction suspension entered into effect in October. The suspension expires on April 18.

By Irina Slav for Oilprice.com

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