US eases Venezuela oil sanctions as Iran war drives crude prices higher

The Trump administration has issued a sweeping new sanctions licence allowing US companies to trade directly with Venezuela's state oil company, as surging crude prices driven by the conflict with Iran push Washington to hunt for new sources of crude to steady global markets.

The Treasury Department's Office of Foreign Assets Control on March 18 issued General Licence 52, permitting qualifying US companies to purchase Venezuelan crude and conduct a broad range of dealings with state-run oil firm PDVSA and its subsidiaries – including upstream activities – that would otherwise fall under sanctions restrictions. The White House separately announced a 60-day waiver of Jones Act requirements, opening US coastal trade routes to non-American ships for the duration of the waiver.

Brent crude climbed a further 6.3% on March 18, hovering around $109.94 a barrel, roughly $37 higher than before the outbreak of hostilities between the US, Israel and Iran.

"This licence will benefit both the United States and Venezuela, while supporting the global energy market by increasing the supply of available oil," the Treasury said. "It will also help incentivise new investment in Venezuela's energy sector."

The measures mark a dramatic reversal of a policy that had for years shut Venezuela's government and its oil industry out of US commercial markets, and represent a significant acceleration of the Trump administration's phased approach to reopening Venezuela's oil sector following the capture of former president Nicolás Maduro in a US military operation in January.

Under previous licensing arrangements, individual companies, with the exception of Chevron, Repsol, Eni, Shell, BP and Maurel et Prom, were required to seek specific authorisation before commencing exploration or production activities. The new licence eliminates that requirement, providing a fast track for energy companies to begin operations.

The immediate driver is Iran's near-total shutdown of the Strait of Hormuz, through which roughly a fifth of the world's seaborne crude normally transits. The supply disruption amounts to between 10mn and 11mn barrels per day globally, a shortfall Venezuela can only partially address. Analysts at Orinoco Research estimate Venezuela could add between 200,000 and 300,000 additional barrels per day (bpd) in 2026.

White House press secretary Karoline Leavitt described the Jones Act waiver as a step to "mitigate the short-term disruptions to the oil market" as US forces pursue what the administration has dubbed Operation Epic Fury, and said it would "allow vital resources like oil, natural gas, fertiliser, and coal to flow freely to US ports."

The licence does not constitute a full lifting of sanctions. Revenue from Venezuelan oil sales must be deposited into a designated US-controlled escrow arrangement, bypassing direct payment to Caracas, an architecture established under Executive Order 14373 following Maduro's ouster. Commercial activity with counterparties linked to Russia, Iran, North Korea, Cuba or designated Chinese entities is excluded, as are settlements in gold, digital currency or in-kind exchange.

Furthermore, the licence stipulates that sales of Venezuelan petroleum or petrochemical products to destinations other than the US must be notified in advance to the state and energy departments. Sanctions on PDVSA's external debt have not been lifted, OFAC specified.

Venezuela holds the world's largest proven crude reserves but suffered a production collapse that took output from around 3.5mn bpd at the start of the Chávez era in 1999 to fewer than 400,000 bpd by 2020, eroded by two decades of mismanagement, corruption and punitive US measures. Output has since begun recovering, with analytics firm Kpler projecting production of between 1.1mn and 1.2mn bpd by year-end if sanctions relief is sustained.

Critics of the move argue that the expansion of commercial access rewards Venezuela's current leadership – drawn from Maduro's ruling party and loyal to the Chavista establishment – while human rights abuses, repression and corruption persist.

The government of acting president Delcy Rodriguez has shown encouraging signs, enacting a broad amnesty law and moving to open the oil industry to private investment. But it has yet to announce a timetable for free elections, the release of all political prisoners or the restoration of press freedoms, despite Washington's stated three-phase transition plan.