Oil: a key factor in the internationalisation of the Venezuela crisis?

Oil: a key factor in the internationalisation of the Venezuela crisis?

Juan Guaidó – the self-declared interim president of Venezuela – in the centre, flanked by US vice president, Mike Pence, and regional leaders, at the emergency meeting of the Lima Group on 25 February in Bogota, Colombia.

(AP/Martin Mejía)

All the components of a global crisis are present in Venezuela, where the international community is involved, in some way or another, or feels it has to take sides, and some observers are speaking of a return to the Cold War. First of all, as if harking back to the Soviet era, both the United States and Russia are supporting one of the sides in the conflict. Also, whilst most western democracies and their allies are backing the opposition, a good part of the world’s most authoritarian or least democratic governments are backing Nicolás Maduro.

Other narratives are reinforcing the idea, such as the mantra of the imperialist (US, of course) attack on Venezuela, a country seeking its independence for the second and final time. Oil, a key component in any conspiracy theory, is also present. On this occasion, as on others in the history of the 20th century, although the struggle for control over natural resources could be driving international geopolitics, it is not reason enough in the case at hand, even though Venezuela, in addition to oil and gas, has important deposits of uranium, thorium, coltan and gold.

What has led us to the current crisis is that, for the last 20 years, the foreign policy of the Chavista regime has been consistently centred on a tale of good (Simón Bolívar, his reincarnation in Hugo Chávez and the Venezuelan people) and evil (the traitorous national oligarchy supported by Yankee imperialism).

During this time, following initial support from Fidel Castro, essential in securing his first electoral victory in 1998, Chávez allied with Russia, China, Iran and Belarus, and later with Syria and Turkey.

At regional level, the struggle began as a crusade against the United States’ masterplan for the continent, the Free Trade Area of the Americas (FTAA). The ALBA (Bolivarian Alternative for the Peoples of America), the genuine Latin American revolutionary and anti-imperialist response to Washington’s hegemonic project, was launched to counter it. The ALBA soon went on to become the Bolivarian Alliance of the Peoples of Our America, which included new populist Bolivarian or leftist rulers such as Evo Morales, Daniel Ortega and Rafael Correa. Other leftist governments (Brazil, Chile, Paraguay, Uruguay) or openly populist governments (that of the Kirchner couple) converged with Chávez.

The role of oil

The argument that oil is a key factor in the current Venezuelan crisis does not hold water. To start with, in addition to the international community’s refusal to recognise the legitimacy of Maduro’s election in 2018, there is the economic crisis, (hyperinflation, debt, soaring exchange rates and food and medicine shortages), the social and humanitarian crisis provoked by the Chávez administration and made worse by Maduro. It is not a new conflict, or one that has been artificially-engineered to plunder Venezuelan oil and gas resources. The problem lies elsewhere.

There are other arguments. The United States coexisted with Chavismo for two decades without making oil a source of confrontation. Between 1999 and 2014 Venezuela received almost one billion dollars (about €878 billion) in oil revenues without any trouble. Not only that, the US regularly imported Venezuelan oil, and CITGO, the US subsidiary of Petróleos de Venezuela (PDVSA), was able to operate under completely normal conditions. The two countries most interested in Venezuelan crude are China and Russia. China needs to import it, even if it is in payment of the large loans made to the country, while Russia, through Rosneft and other companies, has invested more than $10 billion (about €8.8 billion). The United States, meanwhile, is practically self-sufficient when it comes to energy, and the Middle East and Persian Gulf are more important than Venezuela in terms of guaranteeing a regular supply of fossil fuels to international markets.

Then, finally, there is the deplorable state of the country’s oil sector. Although Venezuela has the world’s largest proven oil and gas reserves, most of it is heavy or extra heavy oil, which makes it difficult to extract and refine and makes it less competitive than that produced in other parts of the world.

And that is not all. In 1999, it was producing around 3,300,000 barrels a day, a figure that is now around one million and could, according to some estimates, fall to 600,000 barrels in the coming months. Added to this is the persistent lack of investment and the diversion of funds to social projects, along with the neglect and corruption. Reviving the oil sector would require multimillion-dollar investments that would reduce profit margins and delay the redemption of the capital invested there.

If it is not oil that has led Donald Trump to support Juan Guaidó, then what is his chief motive? The question is relevant, given that this is the first time, since the failed coup in 2002, that something like this has happened and, moreover, under an administration with little interest in Latin America.

We should not overlook the downfall of the project to build the wall with Mexico, an idea that mobilised the voters most loyal to the president, who is seeking re-election in November 2020. With this in mind, Florida, one of the most pivotal swing states – where Republicans and Democrats are often neck and neck – is key. This was the reason behind John Bolton’s denunciation of the “troika of tyranny” (Cuba, Venezuela and Nicaragua), which is at the root of the current offensive. Cuban-American and Venezuelan-American voters are pleased with the move made by the White House.

For the international actors involved in Venezuela, the reasons for their involvement are diverse, as are the incentives for clinging on to or shifting their positions. Added to this is the deterioration in the domestic situation, which would, under normal circumstances, make Maduro’s endurance unsustainable. China is said to have granted Venezuela loans worth over US$60 billion (€53 billion) and although it has received nearly half in repayments the risk remains high. This increases the plausibility of reports regarding negotiations with the opposition to guarantee the preservation of its interests after a change of government and free elections.

Russia is different, given its obsession with being recognised as the other great power and its rivalry with the United States. Venezuela, it has to be said, is not Syria – especially from a geopolitical perspective – where Moscow has the Tartus naval base.

Many specialists believe that Putin will not go to extremes in the event that Maduro is overthrown, especially if he receives certain assurances that will allow him to maintain his economic positions. The other actors backing the Chávez regime, although providing important support, would play a minor role in the event of a major conflict.

The factor that contributed to the stance taken by the US and the EU in support of Guaidó was the position adopted by the Lima Group, comprised of over a dozen Latin American countries and Canada, which started out condemning the human rights situation in Venezuela and ended up defining Maduro’s regime as dictatorial. For the first time in the history of Latin America, many of its governments seriously committed themselves to a regional problem, such as that generated by the millions of Venezuelans scattered throughout South America.

This would have been unthinkable in the past, where the principle of non-interference in the affairs of third countries has usually prevailed. Now things are different and despite the limitations on the international community’s power to influence the outcome, the resolution of the Venezuelan conflict will depend, beyond what happens in the streets and institutions of Venezuela and what action the US takes, on what is decided in the capitals of Latin America.

This article has been translated from Spanish.