Machado wins opposition primary in Venezuela, but questions remain on election

Maria Corina Machado, who has called to privatize Venezuelan state-owned oil company PDVSA, won the Venezuelan opposition's presidential nomination by a landslide in elections held Oct. 22, but her path toward participating in the election remains hazy.

Recent sanctions relief from the US was conditioned on Venezuela acting by the end of November to set a timeline and process to allow banned candidates, like Machado, to run in the general elections slated for the second half of 2024. But there may be wiggle room for the Venezuelan government to delay a decision on reinstatements, and for the US to limit sanctions snapbacks.

A timeline and process to reinstate candidates is not necessarily the same thing as reinstatement, said Kevin Book, managing director of research at ClearView Energy Partners. If Maduro provides a process in December, a decision on reinstatement could still be months away, Book said in an Oct. 23 email.

And the scope of any snapback of sanctions may still be undecided within the Biden Administration, Book said. If the government of Venezuelan President Nicolas Maduro defies the conditions, US Secretary of State Antony Blinken's warning that the US will "reverse steps," appears to leave room for Washington to reverse some, but not all the sanctions, he said.

"I cannot pretend to know what Maduro will do, but a free and fair election against Machado would not appear to be compatible with his reelection," he said.

Export options

Following the signing of two agreements between representatives of Maduro and a sector of the opposition, the Office of Foreign Assets Control (OFAC) of the US Treasury Department issued 4 general licenses partially suspending for six months the sanctions on the Venezuelan oil and mining sector.

Despite the short length of the sanctions relief, companies operating in Venezuela have a clearer picture with more room to maneuver to recoup their debts and to consolidate their operations with the expectation that the situation will improve in the short to medium term, S&P Global Commodity Insights said in a recent Oil Market Briefing.

US purchasers can now buy directly from Venezuela without going through Chevron, and it is expected that exports to the US will increase in short order, the Oct. 20 briefing said. "Opening Venezuelan crude to the broader market means that the country will likely decrease its discount on crude sold to mainland China, meaning more barrels will be sold to US refiners," the briefing said.

But production is expected to be slow to rebound. "Even in the case that the license is extended beyond six months, it will take time for upstream investment to begin and to have an impact on Venezuela's production capacity, which we currently estimate between 800,000 b/d and 850,000 b/d," the briefing said.

"Six months is a relatively short period for investments in the oil industry. However, it will probably have positive repercussions in the oil areas of the country," said Juan Fernandez, a Miami-based analyst who was one of the leaders of the protests against the government of the late Hugo Chavez in 2001-2002.

"The oil sector requires structural changes both legal, as well as fiscal to allow with total openness the participation of the private sector in all areas of the oil and gas sector, to get out of the deep crisis of the sector," said Fernandez, who is part of Maria Corina Machado's oil policy team.

"The conditions for the partial and temporary lifting of sanctions to turn into concrete results and be progressive, indicates the need for political change," he added.

Landslide win

Machado won the Oct. 22 primary with more than 93% of the vote, according to a preliminary bulletin from the electoral commission.

"It is a political mistake to underestimate what is happening with Machado. At this moment she is the only opposition leader who has an emotional connection with the electorate, but that strength makes her become a real threat to the government," said Jesus Seguías, director of polling firm Datincorp.

"The big question now is whether the government is ready to surrender and hand over power not to just any opposition but to María Corina Machado, who without disqualifications would win the presidential elections in 2024," Seguías added.

The opposition's primary elections were carried out without much incident, and without needing intervention of the National Electoral Council which is controlled by Maduro. Venezuelans living abroad also participated -- something the government has not allowed in previous elections.

"We began the construction of a great national coalition. For all Venezuelans who want the same thing, to displace this tyranny," said Machado from her campaign command on the night of Oct. 22.

But Machado, a 56-year-old engineer, has political hurdles to overcome before she can face Maduro in a presidential election scheduled for the second half of 2024. Maduro has said that Machado is disqualified from running for office but has not been able to legalize that disqualification.

Since 2019, the US has maintained sanctions against Maduro's government officials and the country's main company PDVSA, after Nicolas Maduro was sworn in as president for a six-year term, following elections that were not recognized by more than 60 countries.