The Russian invasion of Ukraine has significantly altered the politics of oil worldwide.
With western sanctions being set to squeeze Russia, its price has jumped.
Now there’s an American willingness to lift sanctions on Venezuela’s main export product.
Mr Maduro, Venezuela’s dictator, ceased to be recognized by the US after his reelection in 2018 was deemed to be fraudulent by international observers.
In 2019, the Trump administration imposed harsh sanctions on Venezuela’s oil production and Maduro turned to Russia, China and Iran for help selling it.
However, as a result of the continuing political repression, a large portion of the talent required to maintain the oil industry fled the country.
Oil production took a dive and the country is now extracting a fraction of the output in years past, which averaged 2.3 million barrels per day over the previous 50 years, and was down to an estimated 760,000 barrels in 2021.
All sectors of the economy in Venezuela have been deeply affected by Maduro’s policies and approximately 6 million people have emigrated to neighboring countries. The suffering he’s inflicted on his compatriots is enormous.
Sobered, perhaps, by the extent of his atrocities, or simply in his attempt to survive their repercussions, Mr Maduro, even before the Ukrainian tragedy, had signaled to the US that he was willing to do business in exchange for the lifting of their sanctions.
And so the Biden administration recently sent a delegation to Caracas to meet with Maduro’s representatives.
There are obstacles to overcome.
Venezuela, which had been defaulting on a $60 billion debt for the last few years, has now offered assets, including oil reserves, to restructure such debt.
But it will take time for Venezuela to increase production.
One such obstacle is that their oil producing infrastructure is in a state of disrepair and would require considerable outside investments over several years to get it back to working order.
On the plus side, American companies have shown an interest in investing, though they would want legal safeguards, a tough issue in a country with the lack of an independent judiciary.
We can also anticipate that there will be political opposition to a deal. As part of the sanctions imposed in 2019, control of Citgo, the US operating refining subsidiary owned by Venezuela, was transferred to representatives of the opposition. They will likely want assurances, such as Maduro agreeing to the release of political prisoners and to holding free elections in 2024.
Venezuela needs to get back to producing oil. Their oil is heavy in sulfur and high in emissions, so it is a major contributor to global warming, which limits its attractiveness to investors.
The world still needs oil but there is a rush to improve the technologies to make solar, wind and hydrogen power our main sources, and to accept nuclear power as a transitional source.
So time is running out for oil.
It is sad to see how a country as rich as Venezuela has wasted the opportunities it was given.
I am reminded of the distinguished Venezuelan writer and thinker, Arturo Uslar Pietri, who once said, ‘We have to sow our oil’. As in, let’s use this precious but finite resource, to diversify and grow other industries.
Venezuela has plenty of human talent.
Its politics, however, have wasted it.
Oscar Valdes. Oscarvaldes.net, medium.com, anchor.fm, buzzsprout, apple and google podcasts