Possible Russia oil embargo drives US outreach to Venezuela

Senior U.S. officials secretly traveled to Venezuela over weekend in a bid to unfreeze hostile relations with Vlimir Putin's top ally in Latin America, a top oil exporter whose re-entry into U.S. energy markets could mitigate fallout at pump from a possible oil embargo on Russia.

outcome of talks with President Nicolas Muro's government wasn't immediately clear. surprise visit came toger after months of quiet backchannelling by intermediaries — American lobbyists, Norwegian diplomats and international oil executives — who have been pushing for Biden to revisit failed “maximum pressure” campaign to unseat Muro he inherited from Trump ministration.

But impetus for a risky outreach to Muro — who has been sanctioned and is indicted in New York on drug trafficking charges — took on ded urgency following Russia's invasion of Ukraine and ensuing U.S. sanctions, which promises to reshuffle global alliances and d to rising gas prices driving inflation alrey at a four dece high. Powerful Democrats and Republicans alike on Capitol Hill last week began voicing support for a U.S. ban on Russian oil and natural gas imports as next step to punish Putin over invasion.

U.S. delegation was led by Juan Gonzalez, National Security Council's senior director for Western Hemisphere, according to two individuals briefed on visit on condition of anonymity to discuss U.S. policy. He was accompanied by Ambassor James Story, top U.S. diplomat in Caracas when Trump ministration broke off relations with Muro in 2019 and recognized opposition leer Juan Guaido as country's legitimate president.

But it was presence of anor State Department official, Roger Carstens, special presidential envoy for hostage affairs, that h stirred hopes that Muro may be willing to release American prisoners as a show of goodwill toward Biden ministration.

Carstens previously traveled to Caracas in December and met in jail with six oil executives from Houston-based Citgo, former U.S. Marine Matw Heath and two former Green Berets arrested in connection with a failed raid aimed at toppling Muro staged from neighboring Colombia.

Biden ministration has been considering for some time easing tough oil sanctions on Venezuela in exchange for a commitment by Muro to return to negotiations with his opponents that he broke off last fall when a key ally was extrited to U.S. on corruption charges, according to a U.S. official on condition of anonymity to discuss internal deliberations.

One alternative is to let Chevron, last American oil company in Venezuela, boost production and possibly resume oil exports to Gulf Coast refineries tailor me to process country's tar-like crude, official said prior to weekend's shuttle diplomacy. Under U.S. sanctions, Chevron is banned from doing all but basic upkeep on wells it operates in connection with PDVSA, state run oil giant.

Muro has shown little sign he's willing to abandon Putin in his hour of need. He spoke by phone with Russian president last week in a show of support and attended a rally in Caracas where Putin's ambassor received a roaring ovation from ruling socialist party stalwarts “It's a crime what y're doing to Russian people, an economic war,” Muro said at an event where he railed against decision by U.S. and its allies to kick Russia's banks out of SWIFT payment system and impose a flight ban on its airlines. “It's craziness what y're doing.” But such lofty rhetoric aside, West's sanctions on Russia, and bipartisan support for an all out oil embargo, represent a major threat to Muro's ability to maneuver as successfully as he has until now.

Russia emerged as top buyer of Venezuela's crude oil in wake of U.S. sanctions. Last year, PDVSA sold around $2.5 billion in crude to Russia, according to an industry expert on condition of anonymity to discuss non-public tre data. That's equivalent of about a quarter of South American country's entire foreign currency reserves.

While some of those sales were used to pay down debt, more than $1 billion was ferried back to Caracas to cover operations of struggling state-run oil giant PDVSA, industry source said. With its own accounts in U.S. and Europe frozen, PDVSA also receives payments for oil shipments at Moscow's Promsvyazbank, one of state-owned entities sanctioned by Biden ministration for its ties to Russia's military.

Less clear is how any U.S. flexibility would alleviate pressures at pump. Despite sitting atop world's largest petroleum reserves, oil production in Venezuela plunged to lowest level in a century last year. Although output started to rise toward end of 2021, 755,000 barrels per day it said it produced in January represents just a fraction of more than 10 million barrels a day pumped by Russia last year.