Podcast - White House Policy and the Congressional Landscape for Venezuela

Stephanie Goldstein: Thank you for joining us for our episode of our "Global Markets Policy & Power" podcast. We're joined today by my colleagues, Beth Viola, chair of the Energy & Natural Resources Industry Sector Group, Ambassador Nathan Sales and Jim Noe, both members of our Regulatory Practice Group here at Holland & Knight. In this episode, they'll unpack how the White House, Treasury, State and the Department of Energy (DOE) are working together and where priorities may diverge. They also plan to examine what Congress is watching, where bipartisan support holds and what signals companies should take seriously as they evaluate whether and how to engage. So let's get started.

So since January, we've seen a rapid series of executive actions, particularly through OFAC general licenses, as we heard in our last episode, easing certain restrictions on Venezuela's energy sector. From your perspectives, how significant is this shift in practical terms for companies?

Amb. Nathan Sales: Well, I think the policy response out of Washington since the arrest of Maduro has been very significant for the private sector. So let me take a step back for a second and look at the big picture. The administration has articulated a three-phase process for the reconstruction and rehabilitation of Venezuela and its reintegration into the global economy. So phase one is stabilization, phase two is recovery and phase three is political transition. The administration's vision for Venezuela is eventually to hold elections and transition the country from the Chavista-era socialist dictatorship to a free market democracy. But a lot has to happen between now and then for the policy and strategy to take effect.

I think when it comes to the private sector, rather than the administration issuing a blanket removal of sanctions, you're seeing a much more bespoke, customized, tailored approach. And the reason for that, I think, there are several, but one of the reasons for that I think is because Washington wants to maintain as much control as possible over the country's transition through those three stages of recovery. Issuing general licenses for the energy sector creates great opportunities for, certainly energy companies, but also for companies in adjacent industries: infrastructure companies, logistics companies, transportation companies and so on. While the headlines are accurate – sanctions are being lifted or suspended – it's still a very, very complicated sanctions landscape. And the reason for that, again, is because we're seeing piecemeal, incremental policy change in Washington in response to piecemeal and incremental political transition and economic transition in Venezuela. So the bottom line is, it's not a free-for-all, there's still lots of sanctions-related risks in addition to political-related risks and reputational risks. So this is a place where it's very prudent for companies eyeing a return or entry into Venezuela to do their homework and make sure that they are fully compliant.

Stephanie Goldstein: So rather than a single executive order moment, this has been more of a rolling recalibration of sanctions and policy. So how should companies interpret the pace and sequencing of those decisions?

Amb. Nathan Sales: Well, again, I think the pace of sanctions changes in Washington reflects the administration's efforts to bring Venezuela along through these three phases of recovery and restoration in a deliberate way. You're not seeing Washington open the floodgates to Western investment in Venezuela but, rather, a more measured approach. And that, I think, reflects Washington's desire to put the Venezuelan economy and eventually Venezuelan law and government on a stable footing in a deliberate way that is sustainable instead of opening up the doors to immediate activity, which creates opportunities for American adversaries to potentially get into the market, creates opportunities for local Venezuelan authorities who may not be on board with the new direction to potentially cause mischief. So what we're seeing is a centralized approach where policy is being determined in Washington and then being rolled out on the ground in Venezuela in a very deliberate fashion.

Stephanie Goldstein: Jim, earlier this year on our webinar, you highlighted the Department of Energy's role in coordinating engagement. How would you describe DOE's role today and how it fits alongside Treasury, State and the White House? Is there still a clear front door for industry?

Jim Noe: Yeah, I think there's probably a couple of front doors for industry. Clearly in the early stages of the first stage that Ambassador Nathan just described, the Department of Energy was out in front of the administration and really the tip of the spear in engaging with the Venezuelans, both from a governmental perspective but also in engaging with the national oil company, PDVSA (Petróleos de Venezuela S.A.), that holds the exclusive rights to oil and gas natural resources in Venezuela. But over time, we've seen the White House continue to increase its role in both the engagement between U.S. and Western companies interested in investing in Venezuela, as well as helping those companies engage with PDVSA directly on evaluating potential investment and operational opportunities in Venezuela.

I think that engagement has really evolved where the White House is standing firmly in the front door and has taken on probably the leading role in the engagement process. And partly because, as Nathan mentioned, this is a multifaceted effort by the administration that involves a number of federal agencies. You know, we've mentioned a few on this podcast. The Department of Energy is obviously centrally involved in all things Venezuela, particularly with respect to oil and gas activity, but it involves the Treasury Department and the OFAC process, as well as the Energy Dominance Council that sits at the White House. And so frankly, the White House has a very centralized sort of traffic cop role, if you will, in helping coordinate the engagement among the various agencies on the U.S. side, and then also between the Venezuelan government and the U.S. government, and then with engagement with the industry that has an interest in being part of the rehabilitation of the oil and gas in mining sectors in Venezuela.

Stephanie Goldstein: Thanks, Jim. On the heels of that question, what does that tell us about the main priorities of the administration at this point?

Jim Noe: Well, I think as Nathan mentioned, there's a very deliberate approach that the administration has taken with Venezuela. And that really serves a couple of different priorities for the administration. One is that the administration, and the White House in particular, they want eyes and ears on the companies that are pursuing investment opportunities, particularly in the all-important oil and gas sector in Venezuela. The administration clearly wants to have some role in shepherding the companies that share the interests of the United States of America and that can be part of the advancement of the rehabilitation and bringing Venezuela into the modern era.

And so, the White House certainly wants to have a direct and ongoing, almost day-to-day, involvement in the engagement between industry and PDVSA and the Venezuelan government. And also, I think it's – from a practical perspective, the Venezuelans, since this tentative opening up of their economy and international investment opportunities, are also relying on the White House to take cues with who the counterparties that, at least the administration would prefer the Venezuelans engage with. Rather than companies and countries that may have a contrary interest to the geopolitical and diplomatic and economic interest of the administration. So all of that being said, the White House and the administration in particular has taken a literal day-to-day involvement in helping shepherd and encourage the engagement between investors in the U.S. and international oil and gas sector with the counterparts in Venezuela.

Stephanie Goldstein: Thanks, Jim, and another question for you. Obviously, there are multiple agencies at play, which means there are multiple objectives at play, like economic stabilization, geopolitical positioning, energy supply and the political transition. So how aligned are the agencies around all of their goals, and do you see any kind of potential tension?

Jim Noe: I don't see tension necessarily, but what is inherent in this entire process is some level of uncertainty. I mean, there's obviously a lot of fundamental questions that remain unanswered that any U.S. company or Western investor would have to have answered before they start to aggressively effectuate their investment objectives in the country. And so, I wouldn't describe it as tension, but there's still a lot of other shoes to drop that are fundamental to understanding what the environment will look like from a regulatory perspective, a legal perspective, who's the government long-term, what role PDVSA plays in oil and gas developments in Venezuela over the mid- to long-term. Obviously, the sanctions and OFAC issues have to be crystallized and expanded to allow companies to actually start doing deals in the country. And so it's not necessarily tension, but there's just a lot of uncertain questions.

And nonetheless, there's an encouragement from an economics perspective, and certainly from a Trump Administration perspective, of ensuring that investment dollars flow to Venezuela, sooner rather than later, that Venezuelan oil and gas production increases, sooner rather later. And that latter point has become even more important just given the geopolitical issues that we're seeing that are still ongoing in the Middle East. There are substantial oil deposits right in the back door that require a short voyage from Venezuela into U.S. refineries, and so certainly that interest in ensuring that Venezuelan production improves over the short term is an objective of the administration, and it's running into a lot of these unanswered questions. So I wouldn't call it tension, but there's obviously a lot of uncertainty that surrounds the engagement with both the Trump Administration and certainly with the Venezuelan government and with the national oil company, PDVSA.

Stephanie Goldstein: Thanks, Jim. So we're going to pivot to Beth and talk more about congressional activity. So how engaged is Congress right now, Beth? Is this an area of active oversight, or is the administration largely driving policy without significant pushback?

Beth Viola: Well, Congress clearly has a lot on its plate right now, and while we do not hear a lot from Congress every day on Venezuela, the reality is this is still very much on their mind. Initially, the administration largely drove policy unilaterally, after the arrest of Maduro, but Congress has made clear that they do not want the administration – they've criticized the administration for the lack of prior authorization or notification regarding military action and economic intervention. We are starting to see hearings in the House regarding the legal basis for many of these actions. And I think one of the things we're going to see is a little bit more interest in how the billions in Venezuelan oil proceeds are being managed. I would say that we're going to start to see a little bit of fault lines develop here though, depending on what happens in a midterm election. We are seeing folks like Senator Van Hollen become very vocal around the need to have more transparency regarding that sanctioned oil fund and what that means in terms of the billions in oil sales that are being placed into a U.S.-controlled Qatari bank. I think that's important because if we start to see a lot of legislative mandates forcing independent audits of these multimillion-dollar deals, it could potentially slow down the execution of U.S.-led energy deals and will obviously create significant compliance and legal risk for global financial institutions that are currently acting as transactional gatekeepers.

And then I think as it relates to oversight, you know, we're going to probably see some additional questioning around the idea of democratically held elections and the fact that we are hearing that we may not see elections in Venezuela until late 2027. And so I think if Democrats take even one chamber in the Congress, there'll be a real interest in understanding why the U.S. is not working more closely with the Venezuelan government to see those elections happen sooner rather than later.

Amb. Nathan Sales: I think Beth made a really important point just now about the future of elections in Venezuela. Certainly, Democrats on the Hill will be looking into the administration's timelines for an election. But I think also, you're starting to hear from Republicans in Congress and in the sort of "think tank" ecosystem in Washington, a desire to see a concrete plan for elections. And I think the private sector will be watching this very closely as well because once you have elections scheduled, that's going to provide a very clear signal to the private sector, maybe the most clear signal we've seen to date, that Venezuela really is on a new and irreversible path transitioning to a free market democracy. For capital-intensive industries that have been burned in the past by expropriations, property and overregulation, that may be the kind of signal that a lot of capital is waiting for, before it's prepared, to go into the Venezuelan market in a big way.

Stephanie Goldstein: Thank you, Nathan, and thank you, Beth. That was super helpful. So my next question is related more to industry engagement. So for companies considering outreach, whether to Treasury, DOE or State, what does effective engagement actually look like right now? Has the process become more structured, or is it really just evolving?

Jim Noe: Stephanie, I think that's a good question. And it certainly has evolved over time. And we've seen it evolve since January. But I think one critical advice that we're telling companies that have an interest in pursuing, particularly oil and gas and mining opportunities in the country, is to engage with the administration. And the best way to engage with the administration at this point is to engage directly with the White House. The Energy Dominance Council that sits in the White House has really taken the lead. If you've noticed on recent trips to Caracas on behalf of the federal government, the leaders of that delegation on behalf of the Trump Administration have been members of the Energy Dominance Council at the White House. And while there's lots of inbound inquiries from industry players and investment companies that have an interest in Venezuela coming through all sources of the federal government, including the State Department, both in Latin America and adjacent countries, to Venezuela, certainly the Department of Energy in Washington. But all roads seem to be leaning back to the White House, and the advice is growing more and more that the road into Venezuela starts with the White House. And so what we're recommending clients to do as far as the engagement is, is to engage the White House. Obviously other agencies within the federal government might be necessary to engage, but really what we've seen is the most fruitful and most efficient way to engage the Trump Administration is through the White House.

Beth Viola: And I think likewise, we have seen a number of companies also engage with their congressional delegations. But to Jim's point, having members of Congress weighing in directly with the White House on behalf of U.S. companies, looking to advance their efforts on the ground in Venezuela, has also proven to be very, very helpful. But at the end of the day, Jim's right, the target is the White House.

Stephanie Goldstein: Thank you both. So another kind of industry engagement question for you. Many of the current authorizations are narrow, conditional and compliance-heavy. What's the biggest misconception companies have about what is and is not permissible today?

Jim Noe: Well, Stephanie, I think one misconception is that some of the OFAC and international sanctions relief that I think some companies may be waiting on the sidelines before engaging with the Trump Administration or pursuing opportunities of interest to them, is to wait for that process to complete itself. And as Nathan said at the outset, the licensing and OFAC improvements and loosening of some of the restrictions that have been in place, in many instances for decades, will be a very deliberative process. There is certainly a carrot and stick approach that the administration is taking to ensure that this deliberative process that they've laid out is being followed lockstep with the Trump Administration and the Venezuelan government and frankly with PDVSA. And so I think the administration is encouraging companies to pursue interest, obviously within the confines of what is legally permissible in the current state of international sanctions with a little bit of understanding and hope, if you will, at this point that the international sanctions and OFAC licenses that are required to actually sign deals and effectuate deals and beginning investment in Venezuela will come in the future.

So I think one of the misconceptions is that there are still companies that are waiting on the sidelines for some of the OFAC and international sanctions issues to be resolved. And the White House is encouraging companies to at least explore within the confines of what is legally permissible at this point, with the understanding that those OFAC and international sanction issues will ultimately be addressed at the appropriate time when the Trump Administration believes that the Venezuelans have conducted the necessary local law improvements and policy changes that are necessary in the eyes of the administration. So one misconception is taking a wait-and-see approach. But there is an opportunity window that's open, and as the White House helps companies engage with pursuing, say, certain fields within Venezuela, those fields may be off the market informally, if you will, as the parties that are already engaged in the process are evaluating those fields with the aim of a potential transaction with PDVSA. So I do think one of the misconceptions is, do you wait until all of these fundamental questions get answered, or do you start pursuing potential opportunities that are obviously conditioned on the law changing to allow these investments to actually be effectuated?

Stephanie Goldstein: Thanks, Jim. And I have one more question to all three of you. If you had to distill it down, what would you say is the single most important signal coming out of Washington right now that companies should be paying attention to?

Jim Noe: One thing, which I think we've sort of touched on, is that, at least in the mind of the Trump Administration, Venezuela is open for business. Putting aside, obviously, the legal constraints that U.S. and Western companies are under and, obviously, additional OFAC and international sanctions adjustments have to be made. But I think one thing that is clear in our engagement with the Trump Administration is that Venezuela is open for business, the U.S. government stands behind companies, particularly U.S. and Western allied companies that have an interest in Venezuela. The White House is helping engage with the Venezuelans and with PDVSA to help those transactions continue to move along the process. So, you know, one takeaway is the Trump Administration believes that the country is open for business. They stand ready to help companies investigate opportunities, acknowledging that there's obviously some legal guardrails that we have to observe, at least at this moment.

Beth Viola: I was going to say the same thing. Venezuela is open for business, and the administration, the White House in particular, is willing to help U.S. companies that are trying to advance their business priorities on the ground in any way they can.

Amb. Nathan Sales: So I think those are the important signals that we're hearing from the White House right now, but we should also keep our eyes out for signals that have not yet come from the White House and that industry will be waiting for. And I think the most important one there is, again, the timing for a future election. I think investors in the private sector are excited about the opportunities presented by Venezuela's new direction, but they're also mindful of the fact that the transition is not yet complete. Delcy Rodríguez is playing ball with the United States right now, but she is a holdover from the old regime. And other figures from the older regime are still in positions of authority and are in, potentially, a position to disrupt or interfere with investments in the future, depending on which way the political winds in Caracas shift.

I think the most important way to set those concerns at ease will be for the administration to schedule elections. That doesn't mean the elections have to happen tomorrow. If they happen a year, two years from now, even something off into the future will have meaningful effects today because it will signal to the private sector that that three-phase process of stabilization, recovery and transition is well underway and is not going to stall out at the first step.

Stephanie Goldstein: Well, thanks to the three of you. This has been incredibly valuable. And thanks to everyone for listening. We look forward to continuing the conversation in our next episode.