The ice is melting: Venezuela’s oil and gas are flowing to world markets

The ice is melting: Venezuela’s oil and gas are flowing to world markets
The ice is melting: Venezuela’s oil and gas are flowing to world markets

Since 2015, the US has applied extensive economic sanctions against Venezuelan officials, companies and state-owned enterprises. Barack Obama’s administration introduced these measures in response to government repression of peaceful protests. After 2018, they expanded in response to the uneven and very likely rigged presidential election in which the current president of the country, Nicolás Maduro, won. Former US President Donald Trump then imposed sanctions on trade in Venezuelan oil, which is the country’s most important export.

Trump’s cabinet expected the imminent overthrow of President Maduro. The government in Caracas, however, has proven resilient. It survived military threats, failed coups, mass riots and economic collapse. Large-scale sanctions were more likely to fall on ordinary people without significant political or leadership positions. They failed to bring about a regime change.

When US President Joe Biden took office in 2021, it was unclear whether and to what extent he would maintain his predecessor’s Venezuelan policy. American sanctions are rarely lifted. Later that year, the US Treasury Department revised its sanctions measures. Indeed, a large number of cases showed the ineffectiveness of trade restrictions, which only exceptionally achieved the set goals. Whether it is regime change, renunciation of nuclear weapons, or democratization, the US may begin to advance its foreign policy agenda in other ways.

In the case of Caracas, Washington bet on negotiations with the government and the opposition. At a meeting in Barbados a few weeks ago, the parties involved agreed to hold fair presidential elections in the second half of next year. One of the conditions for their holding is the presence of international observers, another is the possibility of the candidacy of opposition representatives. As a goodwill gesture, the US Treasury issued a six-month license to trade in Venezuelan oil, natural gas and gold.

“A new era is dawning for Venezuela,” President Maduro commented on the conclusion of the agreement. “We are ready for a new era with the US, an era of respect, equality and progress.”

The release by the United States is according to the US Department of the Treasury “in line with sanctions policy and responsive to democratic developments” in Venezuela. By the end of November, the White House expects to restore political rights to all opposition presidential candidates who were previously banned from participating. This also applies to María Corina Machadová, who belongs to the favorites of the anti-government camp. “The U.S. is ready to change or withdraw its concessions at any time if Maduro’s officials do not honor their commitments,” supplied by the US Treasury Department.

Last week, however, the Venezuelan Supreme Court suspended the results of the opposition presidential primaries. The court’s decision, which the opposition sees as an extension of the government’s hand, comes after the start of an investigation into the conduct of the elections and the members of the organizing commissions. The public prosecutor suspects them of violating electoral rules, financial crimes and conspiracy. María Corina Machadová repeatedly insists on the transparent and fair course of the primaries, which took place on October 22 without the help of state authorities. Out of more than thirty million Venezuelans, about 2.3 million citizens of the country cast their votes.

The investigation puts Caracas at risk of a strong response from the United States. “We urge Nicolás Maduro and his representatives to honor the commitments they signed up to when they signed the Political Plan Agreement,” said a spokesman for the US State Department. “The US government will respond if Maduro and his government do not live up to their commitments.” If opposition candidates are not allowed to participate in next year’s presidential election, the US will find itself in an awkward situation. They will have to decide whether to reimpose earlier economic sanctions.

However, the White House has a very strong interest in an agreement with Venezuela. The first groping between representatives of the Biden administration and representatives of the Maduro regime occurred during the first weeks of the Ukrainian-Russian war. At the time, Washington was dealing with a sharp rise in gas prices on the world market and was trying to isolate Moscow as much as possible. Therefore, the US began to ease anti-Venezuelan sanctions, including the issuance of the first permits to trade in Venezuelan oil to the US company Chevron. President Biden publicly presented this initial concession as an endorsement of political rapprochement between the Maduro government and the Venezuelan opposition.

In addition, the current Israeli-Palestinian war, its regional expansion and the subsequent global energy crisis may increase the importance of Venezuelan raw materials. Iran has already proposed to OPEC to impose an embargo on oil exports to Israel’s allies, similar to the one in 1973. However, neither OPEC nor OPEC+ (including Russia and other producers) supported the idea. “However, Iran can do a lot of things directly or indirectly, especially through its affiliate Hezbollah in Lebanon, Shiite militias in Iraq, militias and terrorist groups in northern Syria, and engaging [jemenských] They’re rushing,” warned Karen Young of the New York Center for Global Energy Policy. “That’s going to be a real risk to the price of oil going up… If they attack the oil infrastructure in Saudi Arabia or the Emirates or even Kuwait, prices will skyrocket.”

At the same time, world markets do not suffer from a lack of oil, but from its politicization caused by economic sanctions. The Ukrainian-Russian war and the Israeli-Palestinian conflict record Venezuela, whose oil production can be used by the United States as an insurance policy against undesirable developments. “It’s a bit of a safety valve for other players to understand that there may be more supply in the market,” Karen Young believes.

Venezuela’s oil production is around 750,000 barrels per day, according to the English-language blog Caracas Chronicles. Before the U.S. announced it was temporarily lifting sanctions, Venezuela’s production growth next year was estimated at another 200,000 bpd (almost a million bpd in total). As Caracas Chronicles reported, such an increase represents less than 0.2% of global production. A more drastic increase would require extensive and long-term investment in Venezuelan deposits.

With the presidential election campaign in the United States approaching, migration is also taking center stage. Poor economic conditions, food shortages and limited access to healthcare have prompted more than 7.7 million people to flee Venezuela since 2015. CNN called this migration wave historic “the most extensive in the Western Hemisphere”whose participants “they often chose to go north”. An agreement on deportations also became part of the tripartite agreement between the US, Maduro’s government and the Venezuelan opposition at the beginning of October. A few weeks later, on October 19, the first repatriation flight from American territory to Venezuela took place.

In September alone, US authorities detained over 50,000 Venezuelans in the south of the country. According to the Caracas Chronicles, this is the largest number of migrants from a country other than Mexico registered there in one month. “The US is interested in easing economic tensions in Venezuela to relieve some of the pressure,” said political economist Antulio Rosales of Canada’s York University. “Biden can then sell it as a success in reducing the flow of migrants, for which he is heavily criticized by Republicans.”

US President Joe Biden is betting on a new strategy towards Venezuela and is ready to cancel at least part of the imposed economic sanctions. They did not lead to the desired result of regime change. The most visible innovation is the US willingness to allow the trading of Venezuelan oil, natural gas and gold in exchange for the holding of free presidential elections under the supervision of international observers. However, the White House is probably also motivated to cooperate with Caracas by the threat of an escalation of the Israeli-Palestinian conflict, which can cause a steep rise in the price of oil. Venezuela’s reserves are among the largest in the world, and their entry into the market can partially cover the shortfall from Middle Eastern countries. President Biden is also thinking about his re-election bid. The solution to migration and the agreement with Nicolás Maduro will certainly bring him political points in the election race, thanks to which it will be possible to deport Venezuelans from American territory back to their homeland.

Resources: National Public Radio, Forbes, Foreign Policy, CNN, Reuters, Caracas Chronicles

The article is in Czech

Tags: ice melting Venezuelas oil gas flowing world markets


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