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The U.S. Is Preparing to Reimpose Sanctions on Venezuela

The United States has ordered all U.S. entities involved in business relations with Venezuelan miner Minerven to start unwinding these relations ahead of a return to a sanction regime in April, after the six-month sanction relief agreed in October 2023 expires.

The move follows threats by Washington that it will reimpose sanctions on Caracas if the Maduro government does not stick to its promise to hold democratic elections.

Since that government instead confirmed a ban on the opposition candidate, Maria Corina Machado, the U.S. had to make good on the threat.

Sanctions, which target primarily Venezuela’s oil industry—the biggest contributor to foreign income—were eased in October in exchange for the abovementioned promise. The U.S. had warned at the start that straying from the original agreement for democratic elections would automatically lead to a return of the sanctions.

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

"Price discounts on Venezuela's crude had reduced a lot and cashing sales proceeds became easier for state company PDVSA. That was helping Maduro," the director of the Latin American Energy Program at Rice University's Baker Institute, Francisco Monaldi, told Reuters.

"If the license is withdrawn in April, the proceeds will be reduced again and the scenarios of strong economic growth and a competitive election will fade," he added.

Following the easing of the sanctions 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 now dimmed. Analysts have also forecast a higher risk of domestic fuel shortages if the sanctions snap back in April.

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By Charles Kennedy for Oilprice.com

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