The United States has spent years tightening sanctions on Venezuela, attempting to choke off the oil revenues that sustain President Nicolás Maduro’s government.
Washington has imposed sweeping restrictions on Venezuela’s state oil industry, threatened to seize or block tankers carrying the South American country’s distinctive heavy crude and warned companies around the world against doing business with Caracas.
In early December, the US seized a sanctioned oil tanker off the coast of Venezuela, the first such seizure tied to Venezuelan oil under the current pressure campaign.
The vessel involved, widely reported as the Skipper, added a geopolitical risk premium to oil markets and drew sharp condemnation from Caracas as “theft”.
Washington has since seized a second oil tanker east of Barbados. US authorities are also actively pursuing a third tanker linked to Venezuela that attempted to evade boarding and is under a judicial seizure order.
Officials say the vessel is part of a so-called shadow or ghost fleet used to bypass sanctions, and if captured the US intends to retain the ship and its cargo.
Yet amid this near-total blockade, one American oil major continues to operate inside the country: Chevron.
The apparent contradiction has fueled accusations of hypocrisy and confusion over how US sanctions are applied. In reality, Chevron’s presence in Venezuela highlights the underlying causes of Washington’s fraught relationship with the country and helps illuminate the background to the latest escalation.
Once the largest oil exporter in the world
Venezuela’s rise to prominence began with early 20th-century oil discoveries that made it a global exporter by the 1940s, with successive governments negotiating terms with foreign firms until PDVSA’s creation in 1976 formalised state control.
At the start of the 20th century, Venezuela was a poor, agrarian country on the margins of the global economy. That changed abruptly in the 1910s and 1920s, when vast oil reserves were discovered beneath Lake Maracaibo and the eastern plains, triggering a rush of foreign investment led by US and European companies.
By the interwar years, global oil majors — including predecessors of Chevron, Shell and Exxon — dominated Venezuela’s oil sector. The Venezuelan state, weak and authoritarian under military strongmen such as Juan Vicente Gómez, offered generous concessions in exchange for royalties and taxes. Oil revenues quickly eclipsed agriculture, transforming Venezuela into one of the world’s leading exporters by the 1940s.
Under President Isaías Medina Angarita, Venezuela reformed its oil sector without rupturing relations with the United States, raising taxes on foreign companies through negotiated changes that preserved production and investment. A pro-western moderniser who aligned Venezuela with the Allied war effort and cut ties with the Axis powers during the Second World War, Medina was nonetheless overthrown in 1945 — a move Washington did not actively oppose or intervene to prevent.
First wave of Western-led nationalisation
Venezuela’s repeated military coups in the first half of the 20th century entrenched dependence on foreign oil companies, who relied on oil for revenue and stability, while the end of military rule after 1958 created the political stability that ultimately made nationalisation possible.
During the presidency of Carlos Andrés Pérez, whose economic plan, “La Gran Venezuela”, called for the nationalization of the oil industry, Venezuela officially nationalized its oil industry on 1 January 1976 at the site of Zumaque oilwell 1. This was the birth of Petróleos de Venezuela S.A. or PDVSA.
Unlike some nationalisations elsewhere, this was initially seen as a technocratic success, since PDVSA was run by Western-trained managers, reinvested profits and maintained close ties with international markets.
For two decades, PDVSA became one of the most respected national oil companies globally. It expanded refining capacity abroad, including in the United States, and kept production high. Venezuela remained a reliable supplier, and foreign firms continued to operate through partnerships and service contracts.
Mismanagement and decline in oil prices
By the 1980s and 1990s, however, the cracks widened. Oil prices fell, debt rose, and economic mismanagement eroded living standards. The political system — dominated by two centrist parties — lost legitimacy, accused of corruption and elite capture of oil wealth.
It was in this context that Hugo Chávez, a former army officer who had led a failed coup attempt, emerged as a national figure. He channelled widespread anger at inequality, foreign influence and the perceived betrayal of Venezuela’s oil riches.
Chávez and the US
For much of Chávez’s presidency, US oil companies including Chevron and ExxonMobil operated openly in Venezuela, supplying US refineries with heavy crude even as political relations deteriorated.
In the 2006-07 period, Chávez ordered all foreign oil companies operating in the Orinoco Belt to convert their projects into majority state-owned joint ventures with PDVSA holding at least 60%.
Companies that accepted stayed on under worse terms, and companies that refused were effectively pushed out. ExxonMobil refused the new terms, its assets were nationalised and Exxon exited Venezuela and later won arbitration cases against the Venezuelan state.
ConocoPhillips also refused the new terms, its assets were seized and the company exited, and it also filed major international arbitration and largely won.
Chevron accepted renegotiation, stayed in Venezuela throughout Chávez’s presidency and beyond, operating minority stakes under PDVSA control.
US sanctions during the Chávez years were limited and targeted, focusing mainly on arms restrictions and a small number of individuals accused of illicit activity, rather than the economy as a whole.
US tensions escalate under Maduro
It was only after Chávez’s death, and amid the deepening political and economic crisis under Nicolás Maduro, that Washington shifted strategy — first imposing financial sanctions in 2017 and later, in 2019, targeting Venezuela’s oil sector directly, marking a decisive break in the more transactional relationship that had existed before.
Since 2019, US sanctions have targeted PDVSA and the broader oil trade, blocking financial access and outlawing most exports. The measures were designed to deny Maduro access to hard currency, while pressuring his government into negotiations with the opposition.
Enforcement has included aggressive action against shipping. Tankers suspected of carrying Venezuelan crude have been threatened with seizure, denied insurance or barred from ports. The US has also sanctioned intermediaries accused of disguising the origin of Venezuelan oil and routing it through third countries.
The result has been a shadow oil trade, with Venezuelan crude sold at steep discounts, often to buyers in Asia, through opaque networks of traders and ship-to-ship transfers.
Chevron’s exception
Chevron is the sole major US oil company still operating in Venezuela because it has been granted a specific licence by the US Treasury. Issued by the Office of Foreign Assets Control (OFAC), the licence allows Chevron to produce and export Venezuelan oil under strict conditions.
Chevron is allowed to operate in Venezuela only in oil projects it already shared with PDVSA. It cannot start new projects or significantly increase production.
Chevron’s operations are structured so that cash flows and profits do not directly benefit PDVSA or the Venezuelan state under current sanctions licences.
The funds are instead used to cover basic operating costs such as staff, maintenance and transport for between a third and a fourth of Venezuela’s oil production.
Chevron is paid in… oil?
PDVSA failed for years to pay its share of operating costs and bills in their joint ventures. In effect, Chevron is being repaid in oil, rather than paying Venezuela in cash. The Venezuelan government does not receive fresh revenue from these operations — no dividends, no budget income, no direct cash transfers.
The licence is temporary and must be renewed periodically, giving Washington the ability to revoke it if political conditions deteriorate.
Why Washington allows it
US officials argue that Chevron’s continued presence actually strengthens sanctions enforcement rather than undermining it.
First, Chevron provides transparency. Oil produced under its licence is traceable, insured, and sold through formal channels, reducing Venezuela’s reliance on illicit traders and hard-to-monitor shipments.
From Washington’s perspective, allowing limited, supervised exports is preferable to driving all Venezuelan oil sales underground.
Second, Chevron’s operations are tied to debt repayment. PDVSA owes Chevron hundreds of millions of dollars after failing for years to cover its share of joint-venture costs. Allowing Chevron to recover those losses through oil shipments settles existing obligations without injecting fresh cash into the Venezuelan state.
Third, the arrangement offers leverage. The licence can be tightened, expanded, or revoked depending on Caracas’s behaviour, particularly around elections and negotiations with the opposition. In this sense, Chevron functions as a pressure valve rather than a reward.
Critics, including Venezuelan opposition figures and human rights groups, argue that any oil production ultimately benefits the Maduro government and weakens the moral force of sanctions.
If US President Donald Trump, who has deployed warships to Venezuela’s coast, were to attack and overthrow the government, no company would be better placed than Chevron to help rebuild the country’s battered oil industry.
If, instead, Trump were to strike a deal with Maduro, Caracas would need to maximise oil exports to generate cash — again playing to Chevron’s advantage.
