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Draconian US oil sanctions took effect on Venezuela last week after Washington refused to extend the licence of Chevron to operate in the country. The crackdown on the only big foreign oil operator in the Latin American country echoed the “maximum pressure” campaign waged by the first Trump administration to try to force out authoritarian President Nicolás Maduro.
That effort helped crater the Venezuelan economy but failed to achieve regime change. Maduro tightened his grip until the Biden administration loosened restrictions in 2022 to try to coax him towards free elections — a gambit which failed when he stole last year’s presidential vote.
With Maduro now in his 13th year in power and a history of US policy failure towards Venezuela, investors are questioning what will happen this time.
Venezuelan government debt prices have held broadly steady since President Donald Trump announced in February he was reimposing sanctions. The benchmark 2027 bond was trading this week at 18 cents on the dollar, up on the 16 cents it fetched at the start of the year and well above the 6-10 cent lows where it languished under maximum pressure sanctions.
“The bonds have kept most of the gains they had made since sanctions were relaxed under Biden,” noted one bondholder. “There’s an expectation that there is going to be some kind of resolution.”
That resolution could come in two forms. Venezuela’s embattled opposition hopes it would mean the fall of Maduro. But some investors are instead placing bets on an eventual deal between the Trump administration and Caracas.
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On at least two occasions this year, the US president’s special envoy Richard Grenell has met top Venezuelan officials to negotiate the release of US hostages as part of a broader deal, only for his negotiations to be blocked elsewhere in the administration. Last week, Grenell returned from talks in Antigua with a freed hostage and predicted that Chevron would secure an extension to its licence. The next day, Marco Rubio, secretary of state and a leading Venezuela hawk, contradicted him. There would be no extension and Chevron’s “pro-Maduro Biden oil licence” would expire as scheduled on May 27.
“This has become a personal fight between two senior officials and the considerations for the country are secondary to that tug of war,” said a second bond investor.
Venezuelan opposition figures insist that the Trump administration is committed to ousting Maduro. They say that Trump’s actions this year have been consistent with that objective and that Rubio now has extra power in his dual role as secretary of state and national security adviser. “People completely underestimate just how scared Maduro and his government are,” said one. “The US is not being swayed by Grenell.”
Others are less sure. “Grenell is the person who best mirrors Trump’s own America First objectives,” said one former Trump administration official. Trump, he argues, was disappointed with the Venezuelan opposition’s failure to oust Maduro during his first term and will not make the same mistake twice. A person in the oil business familiar with Venezuela agrees: “I believe the president’s intention is to engage with Venezuela. That doesn’t mean the secretary of state won’t run his own agenda or that this is a fait accompli. It will be a pragmatic process.”
Chevron and other oil industry executives with interests in Venezuela argue that pushing Western companies out simply makes more room for Russia and China, Maduro’s key allies, to expand their interests. Venezuela’s opposition rejects that argument, insisting that the only way to open up the oil sector to stable foreign investment is to restore democracy.
In the meantime Maduro has drawn closer to his foreign allies. He recently signed a strategic partnership with Russia and his vice-president Delcy Rodriguez went to Beijing in April to negotiate oil deals. His socialist government is now under fresh pressure. Chevron was producing at least a quarter of Venezuela’s oil before its licence expired, generating a vital source of hard currency.
Local economists had hoped for modest growth this year. Now, they expect a recession, plus higher inflation — which could trigger a fresh outflow of refugees, on top of the nearly 8mn who have already fled. “I have no idea what will happen next,” said the second bondholder, who complained that the US was not thinking its strategy through. “Under Biden, you had analysis paralysis. With the Trump guys you have no analysis”.
michael.stott@ft.com
