The U.S. will not renew a license set to expire on Thursday that had broadly eased Venezuela oil sanctions, moving to reimpose punitive measures in response to President Nicolas Maduro’s failure to meet certain election commitments, senior U.S. officials said.

Just hours before the deadline, the U.S. Treasury Department announced on its website that it had issued a replacement license giving companies 45 days to “wind down” their business and transactions in the OPEC country’s oil and gas sector.

Washington had repeatedly threatened in recent months to reinstate energy sanctions unless Maduro made good on his promises that led to partial U.S. sanctions relief from October, following an election deal reached between the government and the Venezuelan opposition.

The sweeping sanctions on Venezuela’s oil industry were first imposed by the Trump administration in 2019 following Maduro’s re-election victory, which the U.S. and other Western governments rejected.

While Maduro has met some commitments under last year’s deal, he has failed to meet others, including allowing the opposition to run the candidate of its choice against him in the July 28 presidential election, the officials told reporters on Wednesday.

As a result, the Biden administration plans to allow the current six-month general license to expire without renewal just after midnight EDT (0500 GMT on Thursday), the officials said on condition of anonymity.

“The areas in which they have fallen short include the disqualification of candidates and parties on technicalities and what we see as a continued pattern of harassment and repression against opposition figures and civil society,” one official said.

The withdrawal of the most significant element of U.S. sanctions relief marks a major step back from U.S. President Joe Biden’s policy of re-engagement with the Maduro government.

The Biden administration, however, is stopping short of a full return to the “maximum pressure” campaign waged under former U.S. President Donald Trump.

Weighing on the U.S. decision have been concerns about whether reimposing sanctions on Venezuela’s energy sector could spur higher global oil prices and increase the flow of Venezuelan migrants to the U.S.-Mexico border as Biden campaigns for reelection in November.

 

STRUGGLE TO CRAFT SANCTIONS DECISION

Biden’s aides had struggled in internal deliberations to craft an approach that would punish Maduro but not hurt U.S. interests with the expiration of the license that has allowed Venezuela to freely sell its crude, U.S. sources said.

Venezuelan officials have insisted they are ready for any scenario and can weather renewed U.S. oil sanctions.

“We are prepared commercially,” Oil Minister Pedro Tellechea told reporters earlier on Wednesday at the Caracas headquarters of state oil firm PDVSA. “Logistically, we will continue producing.”

Some companies, he said, may be reluctant to invest in the face of Washington’s “unilateral measures” but most will continue.

Venezuela’s oil exports in March rose to their highest level since early 2020 as customers rushed to complete purchases ahead of the predicted expiration of the license, Reuters reported this month.

Since the easing of sanctions in October, however, Venezuela has made only slow progress toward rebuilding its production capacity, with its crippled infrastructure and lack of fresh investment continuing to place limits on what it can achieve.

The Biden administration is leaving open the possibility that it could eventually temper its response. One U.S. official said the latest action “should not be viewed as a final decision that we no longer believe Venezuela can hold competitive and inclusive elections,” adding that Washington would continue to engage with Maduro’s representatives.

Any activity under the expiring license will have to be completed by May 31, but companies can still revert to applying individually for specific licenses, the officials said. Securing approval will depend on how permissive the U.S. decides to be.

Certain U.S. authorizations separate from the expiring license will be untouched, including permission given to Chevron CVX.N since 2022 to sell oil in the U.S. from its Venezuela joint ventures as well as existing approvals for European firms to take Venezuelan oil.

Among the top U.S. concerns about Venezuela’s electoral conditions has been the crackdown on Maduro’s political opponents.

“We were particularly concerned by the fact that the Venezuelan authorities also blocked the leading opposition candidate Maria Corina Machado from running,” one U.S. official said.

Venezuelan authorities have maintained an election ban on Machado, who resoundingly won the opposition primary last October, and the opposition is currently holding internal negotiations about who could run as a substitute.

The U.S. has also decried a string of arrests in recent months of opposition politicians and activists.