Move in US election year could push up oil prices, but Washington says Maduro has not made promised electoral reforms.

The administration of US President Joe Biden said it would not renew a licence that expired early on Thursday, and which had partially eased the punitive measures since October after a US-backed election deal was reached between the government and the Venezuelan opposition in Barbados.

“[Venezuela’s President] Nicolas Maduro and his representatives have not fully met the commitments made under the electoral roadmap agreement,” said US Department of State spokesperson Matthew Miller.

“Therefore, General License 44 – which authorised transactions related to the oil and gas sector with Venezuela – will expire after midnight and not be renewed.”

As the clock ticked down on the deadline, the US Treasury Department announced on Wednesday that it had issued a replacement licence giving companies 45 days to “wind down” their business and transactions in the OPEC country’s oil and gas sector.

Nicolas Maduro and his representatives have not fully met the commitments made under the electoral roadmap agreement. Therefore, General License 44—which authorized transactions related to the oil and gas sector with Venezuela—will expire after midnight and not be renewed.

— Matthew Miller (@StateDeptSpox) April 17, 2024

“We are concerned that Maduro and his representatives prevented the democratic opposition from registering the candidate of their choice, harassed and intimidated political opponents, and unjustly detained numerous political actors and members of civil society,” Miller added.

The government has barred several key political opponents from participating in the July 28 presidential race, despite agreeing with the opposition last October to hold a free and fair vote.

General License 44 broadly authorised oil and gas transactions with Venezuela’s state-owned oil company PDVSA. It was introduced by the US after the government agreed to reforms that would bring more competitive elections with international observers.

The reimposition of sanctions means that Venezuela’s fuel sales are expected to take a major hit, while US oil companies operating in Venezuela will have to scramble to seek special authorisations.

If the US does not grant enough individual authorisations, PDVSA is expected to resort to little-known intermediaries to sell its oil under price discounts, mainly to Asia.

“We are open [for business], willing to keep progressing along with all foreign companies that want to come,” Venezuela’s Petroleum Minister Pedro Tellechea told reporters after the US announcement.

“Venezuela is ready to secure the stability of global oil markets that we need so much.”

Economic blowback for the US

While hitting the Venezuelan economy, the US sanctions also carry risks for Biden as he runs for re-election since they could result in a jump in domestic oil prices or pressure from Venezuela’s government leveraging its migration policy.

Venezuela has previously warned it would cancel migrant repatriation flights for Venezuelans, hundreds of thousands of whom have crossed into the US in recent years, if Washington continued with its “economic aggression”.

The October 2023 agreement collapsed after state institutions loyal to the government disqualified Maduro’s main challenger, Maria Corina Machado, from running.

Machado said the reimposition of sanctions was the result of “a brutal wave of repression”.

Maduro, the successor of the late Venezuelan leader Hugo Chavez, is seeking a third six-year term after 11 years in office marked by sanctions, economic collapse and accusations of widespread repression.

Dozens of countries, including the US, rejected the results of the 2018 elections that were won by Maduro and boycotted by the opposition.

But years of sanctions and other pressure failed to dislodge Maduro, who enjoys support from a political patronage system, the military and from Cuba, Russia and China.