(Bloomberg) -- The Trump administration is giving Chevron Corp. one month to stop producing oil in Venezuela, delivering a heavy blow to Nicolas Maduro’s autocratic regime.
The U.S. Treasury set an April 3 deadline for the oil major to wrap up operations, giving it just 30 days instead of the normal six-month wind-down period. The narrow time frame is an unexpected hit to Maduro, significantly ratcheting up pressure on him to quickly make a deal with Trump over democratic reforms and accepting more migrants from the US.
“Closing down Chevron’s operations in a month is an almost impossible task,” said Geoff Ramsey, a senior fellow at the Atlantic Council in Washington. “I would bet the administration is leaving space for the license to be renewed in April, if new terms are negotiated.”
Chevron, which has a Treasury Department waiver to operate in Venezuela despite US sanctions, is a key driver of the nation’s economic growth. The company has ramped up production in recent years to supply about 20% of Venezuela’s output, helping tame sky-high inflation and inject hard currency into the country’s private sector.
Ending Chevron’s production in Venezuela could eventually remove up to 200,000 barrels a day from the global market. Much of that oil is shipped to US refineries on the Gulf Coast, which are designed to run the country’s heavy crude. It’s unlikely to have an immediate impact on oil prices, especially after OPEC unexpectedly decided to lift production this week, beginning with a 138,000 barrel-a-day increase in April.
West Texas Intermediate declined 1.55% to $67.48 at 11:13 a.m. in New York, the lowest this year.
Chevron said in a statement it would abide by Treasury’s decision. “Chevron conducts its business in Venezuela in compliance with all laws and regulations, including the sanctions framework provided by U.S. government,” the company said. Chevron shares fell 0.9%.
Dollar bonds from Venezuela and its state-owned oil company fell. Sovereign notes due in 2027 slipped 1.5 cents to 18.5 cents on the dollar, according to indicative pricing data compiled by Bloomberg.
Some critics, especially Florida Republican lawmakers, argue Chevron is providing an economic lifeline to Maduro even after he reneged on pledges for democratic reforms last year. Trump has also criticized Maduro for failing to accelerate the pace of flights of migrants from the US quickly enough.
“We are hereby reversing the concessions that Crooked Joe Biden gave to Nicolás Maduro, of Venezuela, on the oil transaction agreement,” Trump wrote last week in a social media post. Secretary of State Marco Rubio followed up saying he will provide “foreign policy guidance” to “terminate all Biden-era oil and gas licenses that have shamefully bankrolled the illegitimate Maduro regime.”
Venezuela has said the US decision would be “harmful” and cause “damage to the US, its people and its companies.”
Shortly after his inauguration, Trump sent a delegation to Caracas led by advisor Rick Grenell in an attempt to start direct talks with Maduro. The meeting appeared to be a fresh start after years of tension. It resulted in the release of six American prisoners and the restart of deportation flights. It’s not clear if oil sanctions were discussed.
The presence of the Houston-based oil giant brought transparency to Venezuela after a period of sanctions imposed during Trump’s first term. In those days, the country relied on ghost cargoes and small traders, resulting in billions of dollars of lost revenue for state-run Petroleos de Venezuela SA between 2020 and 2022.
Chevron’s joint ventures with PDVSA are estimated to have contributed about $4 billion in tax payments over the past two years, representing about a quarter of the regime’s total revenue over the same period, according to the Caracas-based consultancy Ecoanalítica.
If the company ceases operations and oil production drops 30%, Venezuela’s economy could shrink by as much as 7.5% this year, according to the Finance Observatory, an opposition-led research group.
The revenue Chevron generates in dollars from rising oil production stays in the country and mostly gets reinvested in local currency through private banks. Those banks can then lend to companies that help boost the economy — all out of the clutches of the government. Some of the money trickles down to consumers, helping fuel an incipient recovery that’s seen luxury stores, retail chains and car dealerships open in the capital even as a majority of Venezuelans continue to live in poverty.
Venezuela’s political situation remains in crisis after Maduro declared victory last year after elections that were widely considered fraudulent. Following the vote, opposition leader María Corina Machado presented evidence that she says proves Maduro lost by a significant margin.
In an interview last week with Trump’s son, Donald Trump Jr., Machado celebrated the decision to revoke Chevron’s license, which she said gives the regime funds to persecute the opposition.
“This is a big step, and sends a clear and strong message that Maduro is in serious trouble and that President Trump stands with the Venezuelan people,” Machado said. “This is the right thing to do and at the right time to do it.”
(Updates starting with context and analyst quote starting in the fifth paragraph.)
