Trump to hit Venezuelan oil buyers with tariff, extends Chevron's wind down

Trump's new policy relieves some pressure on Chevron to quickly exit Venezuela after the U.S. Treasury Department on March 4 gave it 30 days to wind down operations. Trump had issued the initial wind-down after he accused President Nicolas Maduro of not making progress on electoral reforms and migrant returns.

Treasury said on Monday it would wait seven more weeks until May 27 before terminating a license that the U.S. has granted to Chevron since 2022 to operate in sanctioned Venezuela and export its oil to the United States.

Chevron's extension came hours after Trump announced the new tariff, saying Venezuela has sent "tens of thousands" of people to the United States who have a "very violent nature."

The two moves temporarily focus Trump's pressure on buyers of Venezuelan crude oil other than the United States, such as China, though it is uncertain how his administration will enforce the tariff.

"The United States has long abused illegal unilateral sanctions and so-called long-arm jurisdiction to grossly interfere in the internal affairs of other countries," said Guo Jiakun, spokesperson at the Chinese foreign ministry, on Tuesday.

"China firmly opposes this."

David Goldwyn, president of consultancy Goldwyn Global Strategies, said the moves allow a compromise between those in the Trump administration who were concerned about pushing Western companies out of Venezuela and those, including Secretary of State Marco Rubio, who are concerned about enriching Maduro's administration.

"This potentially provides a sweet spot for both of them," Goldwyn said.

Punishing foreign buyers of Venezuela's oil with tariffs could hit its crude exports, forcing price discounts, and have a similar effect to secondary sanctions on the country that Trump imposed during his first term in 2020.

The extension of Chevron's wind-down period would secure payments to the company for oil cargoes delivered to U.S. customers, while avoiding a collapse in crude volumes exported from Venezuela in coming weeks, especially to the U.S., according to analysts and sources.

Trump, who has made illegal migration one of the top priorities of his administration, earlier this month invoked the 1798 Alien Enemies Act to justify the deportation of alleged members of Venezuelan gang Tren de Aragua without final removal orders from immigration judges.

Chevron said it had no comment.

Venezuela's government said it firmly and categorically rejected the "new aggression" announced by Trump.

"This arbitrary, illegal, and desperate measure, far from weakening our resolve, confirms the resounding failure of all sanctions imposed against our country," the Venezuelan government said in a press release.

SWITCH TO RUSSIAN?

The 25% tariff to be imposed on buyers of Venezuelan oil will take effect on April 2 and would be combined with any existing tariffs, according to the executive order. The tariff will expire one year after the country last imported Venezuelan oil, the order said.

The tariff would apply to countries that buy Venezuela oil through third parties, the order said.

Oil prices rose 1% on Trump's tariff announcement, although the gains were capped as the U.S. extended the wind down period of the Chevron license.

Oil is Venezuela's main export and China, which is already the subject of U.S. tariffs, is the largest buyer. In February, China received directly and indirectly some 503,000 barrels per day of Venezuelan crude and fuel, some 55% of total exports.

"We call on the United States to stop interfering in Venezuela's internal affairs and abolish illegal unilateral sanctions against Venezuela," said the Chinese foreign ministry spokesperson.

India, Spain, Italy and Cuba are other consumers of Venezuelan oil.

Tariffs imposed by China on imports of certain types of Venezuelan oil in past years led to a decline in the volume of Venezuelan crude received by Chinese buyers, which ultimately forced state company PDVSA to widen price discounts to its most important market.

Rubio this month said foreign buyers of Venezuelan oil would be notified of a policy change, but many joint-venture partners of PDVSA continued taking cargoes, according to company documents.

PDVSA is also readying a plan to reorganize operations at its largest joint venture with Chevron, the Petropiar project at the Orinoco Belt, and secure oil exports from there.

Maduro has rejected U.S. sanctions, saying they are illegitimate measures that amount to an "economic war" designed to cripple Venezuela. But he has cheered what his government says is the country's resilience despite the measures.

Goldwyn said the new tariffs could have the ironic effect of increasing global demand for Russian oil. "China and India are unlikely to risk additional tariffs to access Venezuelan heavy oil, when they can buy Russian crude."