As crackdown deepens in Venezuela, Chevron says keep the oil flowing

Two years ago, the Biden administration scaled down Trump-era sanctions to let Chevron resume operations in Venezuela as part of an effort to persuade Maduro’s authoritarian government to hold free and fair elections. As chaos erupted on the streets of Caracas following this year’s election, the State Department said all evidence showed Maduro’s opponent, Edmundo González, had won by a landslide.

In meetings with White House and State Department officials days after the election, Chevron executives said its presence in Venezuela bolsters global oil supplies and U.S. energy security, according to people familiar with the talks. The executives said Chevron also serves U.S. interests as a bulwark there against geopolitical adversaries gaining additional footholds in the country.

Maduro has since rounded up hundreds of dissidents, testing whether the Biden administration will reimpose stricter sanctions, including on the oil sector, the country’s most important industry.

Chevron was careful not to advocate specific policies, according to a person familiar with the talks. But its message—that its oil production should continue in Venezuela—has carried weight with the administration, say people familiar with the matter.

The U.S. has condemned the electoral crackdown but is so far eschewing severe reprisals. Behind the scenes, it is maintaining communications with the regime and encouraging Venezuela’s neighbors Brazil and Colombia to help negotiate a resolution, while also considering targeted sanctions on individuals in Maduro’s regime. Over the weekend, U.S. officials said they seized a jet used to fly Maduro and his lieutenants to Iran, Russia, Cuba and other countries.

“Chevron regularly engages on energy-policy issues with stakeholders in Washington, D.C., and all over the globe," Chevron spokesman Bill Turenne said. “We have been a constructive presence in Venezuela for over a century, where we have dedicated investments and a large workforce."

A big presence

Chevron’s position in Venezuela is important to the company. It is the last remaining U.S. oil giant in a country that says it has the world’s largest oil reserves. The company has recently tried to show investors it has enough oil reserves to keep growing in coming years.

Pumping oil in Venezuela, where Chevron has around 250 employees, with another 3,000 working across its joint-venture operations, is also helping the company recoup billions in debt owed by Venezuela. European oil companies that have Venezuelan operations and are owed money, such as Spain’s Repsol and Italy’s ENI, have pushed U.S. officials for continued engagement as well.

Democrats are trying to keep a lid on gasoline prices in an election year, and so far representatives for the oil industry have succeeded in persuading the administration to keep Venezuelan oil flowing. Spiraling tension in the Middle East is bolstering their case, though Venezuelan supply is too small to have more than a psychological effect on the market. It exports as many as 600,000 barrels a day.

Chevron said it has remained apolitical in Venezuela. On a recent call with investors, Chief Executive Mike Wirth said his company has found it is generally best to work with an incumbent government without taking positions that would make it difficult to continue with another, subsequent government.

“We’re a commercial player, not a political player," Wirth said.

But Chevron plays an outsize role in Venezuela’s sanctions-hit economy. The company’s business in Venezuela generates about 20% of national crude exports and 31% of the government’s total oil income, said Asdrúbal Oliveros, head of the Venezuelan financial consulting firm Ecoanalítica. It is one of the few avenues for Caracas to reap full market price for its crude, much of which is sold on the black market at steep discounts, he said.

Chevron has told U.S. officials that its presence in Venezuela has helped the impoverished country avoid total collapse, people familiar with the matter said.

Stringent sanctions under former President Donald Trump failed to dislodge Maduro. The Biden administration shifted away from Trump’s “maximum pressure" policy as it became clear Maduro’s regime was adapting to the impact on Venezuela’s economy.

Critics of the Biden administration’s decision to allow Chevron to return to its jointly operated oil fields in Venezuela say it has provided an economic lifeline to Maduro, which has ultimately weakened the hand of Venezuela’s opposition.

“Chevron ended up front-running all other interests the U.S. said it had with regard to Venezuela—democracy, the fight for human rights, migration and the fight against corruption," said Pedro Burelli, a former board member for Venezuela’s state-owned oil giant Petróleos de Venezuela.

Meanwhile, pressure from Congress to adopt a more forceful stance on Maduro is brewing ahead of November elections. Proposed bipartisan legislation, called the Valor Act, would codify sanctions in a way that would make them difficult for the White House to calibrate.

The long view

The loosening of sanctions marked a breakthrough for Chevron’s fortunes in Venezuela.

Chevron’s entreaties to top officials failed to deter the Trump administration from imposing sanctions on Venezuela’s oil sector in early 2019. After sanctions were imposed, Wirth paid visits to top officials, including Elliott Abrams, who served as a special envoy overseeing Venezuela policy under Trump.

Abrams said Wirth visited him three times, and told Abrams that if the sanctions policy persisted, Chevron could leave Venezuela, which would be a devastating blow to the country’s economy and oil industry.

“Our response was, ‘You will go back if you can make money,’" Abrams said.

In the months leading up to the July 28 election, Maduro banned key rivals from participating, relocated voting stations, concocted a deliberately confusing ballot and disenfranchised nearly all Venezuelan voters overseas.

In response, the Biden administration in April withdrew a blanket license for oil companies to operate in Venezuela, but privately encouraged them to file for individual licenses that allowed the activity to continue almost seamlessly.

Since the election, Biden administration officials have signaled they won’t force oil companies permitted to do business with Venezuela to pull out.

Vote tallies showed González won by a giant margin despite Maduro’s efforts to rig the election. Maduro warned that if his victory wasn’t recognized by the West, Venezuela could replace Western oil companies with allies in the Brics group of countries, which includes Russia and China.

Ali Moshiri, a former Chevron executive who led its operations in Latin America, said Chevron has typically taken the long view when conflict erupts in countries where it operates. The outcome of the election, he said, will be decided in the streets of Venezuela and by the international community.

“It is too early for anybody to react," Moshiri said.

Alan Cullison and Kejal Vyas contributed to this article.

Write to Collin Eaton at collin.eaton@wsj.com and Jenny Strasburg at jenny.strasburg@wsj.com