Raphael John-Lall

Amer­i­can en­er­gy econ­o­mist Fran­cis­co Monal­di is call­ing the lat­est meet­ing be­tween Prime Min­is­ter Stu­art Young and Unit­ed States Sec­re­tary of State Mar­co Ru­bio “pos­i­tive” and says it gives hope for the Drag­on gas agree­ment and the en­er­gy re­la­tion­ship be­tween Venezuela and T&T.

Monal­di, who is a lec­tur­er in en­er­gy eco­nom­ics at Rice Uni­ver­si­ty’s De­part­ment of Eco­nom­ics and al­so lec­tures in en­er­gy man­age­ment at the Jones Grad­u­ate of School of Busi­ness in the Unit­ed States, told Sun­day Busi­ness Guardian that the li­cences for the Drag­on gas agree­ment could have been can­celled and they were not and this is good news.

“The meet­ing does not even say any­thing about li­cences be­ing pos­si­bly can­celled right now, which is what could have hap­pened. This comes fol­low­ing the an­nounce­ment by Ru­bio ear­li­er that all li­cences is­sued dur­ing the Biden era for the de­vel­op­ment of en­er­gy re­sources in Venezuela were go­ing to be can­celled. I think that it is pret­ty pos­i­tive for T&T. It buys a lot of time for things to be dis­cussed and ne­go­ti­at­ed,” he said.

Speak­ing at a post-Cab­i­net news con­fer­ence on Thurs­day, Young said he was op­ti­mistic and re­port­ed that Ru­bio promised that the US would not hurt T&T. On whether the Of­fice of For­eign As­sets Con­trol (OFAC) li­cence for the Drag­on field will be re­newed when it ex­pires in Oc­to­ber, Young said “things are flu­id.”

The men met at a meet­ing in Ja­maica on Wednes­day.

In the con­ver­sa­tion, Ru­bio in­di­cat­ed he was pleased with the in­for­ma­tion Young pro­vid­ed on Drag­on gas deal. He said US for­eign pol­i­cy is not meant to harm T&T as it per­tains to en­er­gy se­cu­ri­ty.

Monal­di al­so ex­pressed the view that the meet­ing be­tween Prime Min­is­ter Young and Ru­bio comes at a “cru­cial time.”

“The sec­ond thing that I think is im­por­tant to note is the very tim­ing that this meet­ing oc­curred which pro­vides a lot of hope for T&T and its en­er­gy projects be­cause let us face it, this is a very cru­cial mo­ment right now. That is be­cause it is the mo­ment in which the an­nounce­ments of the re­vi­sion of the whole pol­i­cy and the max­i­mum pres­sure on Venezuela is hap­pen­ing. So, these li­cences have sur­vived for the mo­ment, part­ly be­cause of this meet­ing. It could have been a dif­fer­ent sit­u­a­tion if they had gone for the max­i­mum pres­sure ini­tia­tive.”

The US Gov­ern­ment has al­so ex­tend­ed the pe­ri­od for the wind down of Chevron’s op­er­a­tions in Venezuela un­til May 27, which Monal­di al­so said is an­oth­er ex­am­ple of good news.

“So, if we do not see any ac­tion in terms of the li­cences in the next few days and par­tic­u­lar­ly be­fore the ex­pi­ra­tion of the Chevron li­cences, and even if the Chevron li­cence ex­pires on May 27, that could be a sig­nal that this will be left for lat­er and that there is po­ten­tial for get­ting the li­cence re­newed, which is ul­ti­mate­ly what is nec­es­sary for any of these projects to have any vi­a­bil­i­ty.”

Monal­di al­so said US Spe­cial en­voy Richard Grenell wants to come to an agree­ment with Venezue­lan Pres­i­dent Nicolás Maduro and it would be an “Amer­i­ca first” pol­i­cy which al­lows U.S. com­pa­nies to car­ry out projects in Venezuela. This is part of Trump’s prag­mat­ic trans­ac­tion­al ap­proach in which im­mi­gra­tion is the top is­sue and some of the en­er­gy re­sources will be used as lever­age for de­por­ta­tion.

“In that world, there is some pos­si­bil­i­ty for the T&T projects to move for­ward be­cause they could in­cor­po­rate the US com­pa­nies or there could be a way to make it in­to that vi­sion of ‘Amer­i­ca First.’ At this point, I do not think that we know which per­spec­tive is go­ing to dom­i­nate the US Gov­ern­ment. Be­cause the ex­ten­sion of the li­cences to Chevron shows that there is some space for ne­go­ti­a­tion.”

Hurt for US com­pa­nies

Venezue­lan econ­o­mist Franc­si­co Ro­driguez who teach­es eco­nom­ics at the Uni­ver­si­ty of Den­ver in the US has al­so tak­en an op­ti­mistic po­si­tion.

On his X ac­count on Mon­day, he said the ex­ten­sion of the Chevron li­cence in Venezuela is not in­tend­ed to cut off Venezue­lan oil ex­ports, but rather would be a strat­e­gy de­signed to “favour sales to the US over oth­er des­ti­na­tions.”

On so­cial me­dia, he not­ed that many li­cens­es of this type are is­sued for short pe­ri­ods and are con­stant­ly re­newed.

“The best ex­am­ple is Gen­er­al Li­cense 5, which has been re­newed 18 times. It wouldn’t be sur­pris­ing if we en­ter a sim­i­lar pat­tern with Chevron,” he em­pha­sised.

Re­gard­ing the im­po­si­tion of tar­iffs, the econ­o­mist not­ed that Venezuela “can still ex­port oil to the US, but is now threat­ened with sanc­tions if it sells to oth­er coun­tries.”

“As long as cur­rent li­cens­es re­main valid (and Chevron could re­new them), the pol­i­cy en­cour­ages sell­ing more oil to the US, not less,” he added.

He not­ed that Trump refers to “sec­ondary tar­iffs,” but that term “doesn’t ex­ist” in ei­ther US trade law or in­ter­na­tion­al prac­tice.

“In the lit­er­a­ture, it usu­al­ly refers to re­tal­ia­to­ry tar­iffs in trade wars, not pun­ish­ments for trad­ing with third par­ties,” he added.

Ro­dríguez em­pha­sised that this ap­pears to be an at­tempt to re­place sec­ondary sanc­tions with tar­iffs, “but there’s a key prob­lem: US sanc­tions tar­get spe­cif­ic com­pa­nies, not en­tire coun­tries. Tar­iffs don’t work that way.”

“The US al­so has no way to con­trol Venezue­lan crude sales. Much of it moves through ship-to-ship trans­fers. Wash­ing­ton doesn’t have ac­cess to cus­toms da­ta from Chi­na or many oth­er coun­tries. En­force­ment is es­sen­tial­ly im­pos­si­ble,” he said.

An­oth­er promi­nent Venezue­lan econ­o­mist Luis Vi­cente Leon on his X ac­count on Tues­day said the sit­u­a­tion could evolve in dif­fer­ent ways but made a sim­i­lar ar­gu­ment to Ro­dri­huez. Leon said the lat­est move of the Unit­ed States is de­signed to en­sure its com­pa­nies are the on­ly play­ers in Venezuela’s en­er­gy mar­ket.

“For now, we know that Chevron’s wind­down pe­ri­od has been ex­tend­ed for two more months, and the re­main­ing li­cences re­main ac­tive. In light of the re­cent­ly is­sued ex­ec­u­tive or­der, the oil pro­duced by these com­pa­nies can still en­ter the Unit­ed States du­ty-free. This means it will be cheap­er than oil from the rest of the world. If the de­ci­sion is made to change oil pol­i­cy with a new Trump-style li­cens­ing sys­tem, what ap­pears to be a pol­i­cy of max­i­mum pres­sure could in­stead be­come a pol­i­cy of ‘max­i­mum Amer­i­can con­trol’ over Venezue­lan en­er­gy, which could con­tin­ue to flow in­to that coun­try’s mar­ket. That would come with a price ad­van­tage that would al­low the US to in­flu­ence oth­er heavy oil sup­pli­ers. It would be an un­con­ven­tion­al and high­ly ques­tion­able strat­e­gy, cre­at­ing a mo­nop­oly (or rather, a sin­gle-buy­er monop­sony) for Venezue­lan en­er­gy.”

Leon said that Trump would kill sev­er­al birds with one stone.

“He con­trols the world’s largest oil mine, buys cheap­ly, push­es down en­er­gy prices, and re­duces Chi­nese in­flu­ence in the re­gion, all while in­dulging rhetoric against the Maduro Gov­ern­ment, al­beit with­out pro­duc­ing po­lit­i­cal change. For its part, be­yond eth­i­cal con­sid­er­a­tions, Venezuela could con­tin­ue send­ing oil to the North Amer­i­can mar­ket and even in­crease its pro­duc­tion for them.”