Chevron (NYSE: CVX) gets put on Venezuela ice
Chevron (NYSE: CVX) has once again had its operations in Venezuela frozen, with the administration of US President Donald Trump ordering the oil major to stop exports from the country but giving it a very narrow license to continue essential maintenance operations. This time around, all the maneuvering has been shrouded in secrecy amid aggressive lobbying and backroom politicking over one of Washington’s touchiest foreign policy dilemmas.
“This marks a shift: not in substance, but in transparency,” Venezuelan economist Francisco Rodriguez wrote in a post on X. “Whereas the Chevron-related general licenses of the past (under both Trump and Biden) were published online, this one remains confidential.”
He said the strategy gives the administration flexibility to alter terms at a future date and insulation from political pushback, especially from “hardliners who oppose any dealings with Venezuela’s oil sector.” It’s been a messy fight so far, with Chevron and Florida energy magnate Harry Sargeant III pushing for more engagement—and business—with strongman Nicolas Maduro and the regime that keeps him in power. On the flip side, Secretary of State Marco Rubio and House lawmakers Carlos Gimenez, Mario Diaz-Balart and Maria Elvira Salazar—all from Florida and with close links to the Cuban and Venezuelan exile communities there—want to starve the dictator out.
At the center of the debate is the age-old question of whether a tasty carrot works better than a big stick, and while there’s never been a definitive answer, one certainly remains: Venezuela continues to be at the geopolitical heart of key US interests that touch on border security, migration, drug smuggling, money laundering and energy policy. Failure, meanwhile, is being dished up to everyone but Maduro & Co.
Trump tried the stick back in his first term, when Chevron’s assets in the country were first frozen. Former President Joe Biden then got out the carrot and eased some restrictions in 2022 in exchange for promises of democratic reform that never came. After stealing a presidential election last year, Venezuela’s National Electoral Center didn’t even try to make results for recent regional and parliamentary elections—widely believed to be fraudulent—look real. Flying in the face of much academic literature about game theory and diplomacy that recommends a mixture of both punishment and promise in carefully calibrated strategies, Maduro eats every concession he can get and doesn’t flinch at the hits. He’s playing the long game, betting that Washington will eventually get bored, or distracted, and change course.
Venezuela’s propaganda machine has already been trying to cast the latest development with Chevron as a win.
“Notable lack of alarm in state media in Venezuela around the recent changes to the Chevron license, emphasizing the US energy giant will maintain a presence in the country and there will be ‘other markets’ for Venezuelan crude (read: China),” wrote Geoff Ramsey, a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.
What, then, is anyone supposed to do, besides shrug?
For Chevron, it’s simply got too much potential upside to walk away from. It needs reserves to book as the Permian basin—the biggest oilfield in the US—matures, with its attempt to move into neighboring Guyana held up in a London arbitration court. It’s been sensitive to human rights issues elsewhere, pulling out of Myanmar last year. But Venezuela’s world’s largest oil reserves mean it’s likely willing to tolerate what it wouldn’t for just one natural gas project in Asia. According to Amnesty International, at least 24 people in Venezuela died last year alone as a result of government repression. Nearly 8 million people have fled the country.
Chevron has more than a century of history in Venezuela, having first started exploration there in 1923. Its current assets in the country include interests in the Petroindependiente, Petropiar and Petroindependencia ventures with state oil company PDVSA. The crown jewel is its 39% stake in the Petroboscan JV that operates the Boscan field, believed to have as much as 35 billion barrels of original oil in place. While not all recoverable with current technology, that would be worth roughly nine times Chevron’s current market capitalization at current oil prices and is more than enough reason to fight tooth and nail to stay in the country. The company no longer recognizes proved reserves from its Venezuelan interests in financial filings but any return to business as usual would be an instant boon to its balance sheet, whenever it finally ends up happening and with whoever lands in power.
The Trump administration is walking a tightrope right through the heart of the Florida GOP, trying to keep two warring factions from open conflict. Its latest poker-faced move to appease hardliners while preserving Chevron’s ability to one day get its operations back in swing suggests it wants to keep its options open, as it simply might not have a better idea. Both sides may be able to frame the latest freeze as a win for their audiences, but it’s more likely to result in another big, singular loss for everyone that will perpetuate the status quo of glacial decline and misery.
But, as political risk analyst James Bosworth pointed out in a recent newsletter, the real wildcards ahead may come from outside the US, and the environment of low oil prices could hurt the Maduro regime just as much as sanctions.
“While China is a willing and eager buyer and he continues receiving support from other allies including Russia and Iran, none of that is guaranteed in the future,” he wrote. “Negotiations related to Ukraine, the Iranian nuclear program, or China-Taiwan all have potential impacts on the international support Maduro receives…the fact Venezuela’s president is opposed by a super-majority of the population remains a key weakness.”
It’s not all about the US, in other words. And as the quote made famous in Ernest Hemingway’s The Sun Also Rises suggests, change comes about “gradually, then suddenly.” You can count on Chevron doing everything in its power to keep waiting around in the meantime, because even the ice in Venezuela is hot with maddening potential.
