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Biden allows Eni and Repsol to export Venezuela’s oil

The European energy majors received special US authorisation and will tap Maduro’s oil to help Europe disengage from Russia. As with Saudi Arabia, the Russian war in Ukraine had the White House reconsidering global relations (and striving to lower fuel prices at the pump)

Green light on Maduro’s oil. The Biden administration “will not object” if Eni and Repsol resume work to sell Venezuela’s oil. That’s according to a letter it sent to the Italian and Spanish energy majors and seen by Reuters.

  • The concession waives Washington’s sanctions against Nicolas Maduro’s regime and includes a single clause: Venezuelan oil will have to serve Europe.

Here’s the reasoning. The US is trying to manage crude oil prices – which have risen dramatically due to the Russian invasion of Ukraine – in the medium to long term. Now that the European Union has targeted Moscow’s oil exports with new sanctions, Russian production is expected to fall, further altering prices.

Bargaining with autocracies. The war and its effects are causing tectonic shifts in the US’ global relations, some of them resulting in backtracking.

  • Since March, the Biden administration has been working to rebuild relations with Venezuela, an illiberal regime led by an anti-Western pariah, which the US and EU have placed under sanctions years ago.
  • It also started mending fences with Saudi Arabia, a kingdom whose human rights track record was much criticised by Joe Biden even on the campaign trail.

Nevertheless, Riyadh is one of the main US partners in the complex region that is the Middle East (which is enjoying newfound centrality due to the disruption of the energy market).

  • Interest crossover has recently led Saudi Arabia to instruct OPEC to increase oil production in order to balance the Russian drop (and thus rebalance the supply/demand rules).

Now it is Venezuela’s turn. And Washington is conceding on exports while pushing the Maduro regime to open a dialogue with Juan Guaido’s opposition (whose failed coup in 2019 was supported by the US).

  • In May, Washington instructed Chevron – the largest US oil company active in Venezuela – to restart discussions with the State-owned petrol company, PDVSA, to plan future operations in the country.
  • On that occasion, the Biden administration confirmed a six-month sanctions waiver to Chevron and sent the two letters to Eni and Repsol.

Little oil, massive implications. The volumes that Eni and Repsol will be allowed to export should be limited, and they won’t impact the oil market all that much. However, the Biden administration’s decision is symbolic, as it implies that Washington is willing to break the status quo.

  • Keeping prices down serves global stability, assists Europe in differentiating itself from Russia, and reduces the price of fuel at the pump for American consumers (who will be voting in the midterm parliamentary elections in a few months).

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