USA and Venezuela: from enemy to friend?

In the middle of the war against Ukraine, the USA and Venezuela are exploring a rapprochement. Washington’s priority is to replace Russian oil imports. This would not only require political will, but also a lot of money.

In the Orinoco belt in particular and in the region around Maracaibo, Venezuela’s second-largest city in the north-west of the country, drill rods are still being drilled down to extract oil. But the technology is ailing. The South American country has never set up sufficient cash reserves for the necessary maintenance of the systems.

Many conveyor systems were closed. The oil business could experience a new renaissance in Venezuela as a result of the Ukraine war. But a lot would have to happen for that to happen, says Venezuelan economist Antulio Rosales of Canada’s University of New Brunswick.

Around 700,000 barrels a day are currently being produced in Venezuela, after production has even been increased in view of rising prices. What is certain is that production is at a minimum level for what the market would need to stabilize prices and also compared to the production capacity that Venezuela historically had, says the economist.

High investments necessary

Venezuela’s President Nicolás Maduro announced a few days ago that he would increase oil production to up to two million barrels a day by the end of the year. The production volume would thus be tripled. However, that is still small compared to the ten million barrels of crude oil that Russia produces every day, explains Venezuelan economist Alejandro Márquez Velázquez, who teaches at the Latin America Institute in Berlin.

Venezuela cannot simply compensate for the oil produced in Russia that is no longer available to the market due to the sanctions. It requires a very large investment – ten to fifteen billion dollars in the next five to ten years, calculates Marquez Velazquez.

In 2018 the contacts broke off

Of course, if the US seriously considers replacing Russian oil imports with Venezuelan ones, it will have to lift the sanctions, says Antulio Rosales. But that doesn’t happen overnight. There will be a negotiation process, the resumption of talks between the Maduro government and the opposition, and setting the stage for democratic elections in 2024 will play a big part in that.

The visit of a high-ranking US delegation almost two weeks ago came as a surprise. This was the first time US diplomats had direct contact with Maduro again. The US broke off diplomatic relations with the authoritarian Venezuelan President after his controversial re-election in 2018. The United States repeatedly tightened sanctions against him and recognized opposition leader Juan Guaidó as interim president. Now Washington is taking a step towards Maduro.

A key ally of Russia

Shortly after the Russian invasion, Maduro sided with Russian President Vladimir Putin. Venezuela is considered one of the Kremlin’s most important allies in the region, explains Venezuelan economist Rosales. The Russians have supported the South American country with arms and in the defense sector, and have also invested in the oil market.

This support has certainly been important for the survival of the South American country in recent years. Now Venezuela itself has to fear the effects of the sanctions against Russia. “If the Venezuelan oil market had to choose between maintaining Russian support or investing from the North Atlantic countries, many domestic players would be better off choosing the North Atlantic countries,” says Rosales.

Maduro firmly in the saddle

That would also apply to Maduro’s government, says the economist. “Maduro could pragmatically reach agreements with, for example, the US to facilitate deals in the oil market, while continuing to support Russian aggression in the discourse.”

Although the US rushed to pledge its continued support to interim President Guaidó shortly after the US delegation’s visit to Venezuela, Maduro seems firmly in the saddle. But he will only be able to count on investments if they are accompanied by a political rapprochement with the USA and thus a resumption of dialogue with the opposition.