Earlier this week, the United States government announced its intention to assume control over all Venezuelan oil sales for an undisclosed amount of time. This announcement occurs amid continued dire economic strife in Venezuela. Venezuela has the world’s largest proven oil reserves. Yet decades of underinvestment and corruption have cut its oil production in half and mismanaged it down to just one million barrels a day, making up less than 1% of worldwide production.
The move comes after decades of U.S. sanctions, which have existing sales of Venezuelan crude impossible. These severe sanctions have crippled the country’s oil industry. Recently, U.S. military strikes and a blockade of Venezuelan tankers have helped to aggravate the situation. The U.S. government has transformed its approach. It now very selectively rescinds sanctions to clear the way for Venezuela to transfer oil to the U.S.
Under this new plan, Venezuelan authorities are expected to “turn over” up to 50 million barrels of oil to the U.S. It’s important to note that the oil will be sold at market prices, with projections indicating this would bring in about $2.8 billion in revenue. This includes ensuring that the U.S. government retains control of such funds. This strategy seeks to hold the Venezuelan government accountable and ensure that the financial proceeds benefit the Venezuelan people—not corrupt members of the regime.
U.S. Secretary of State Marco Rubio said that they want to return revenue to the Venezuelan people. He further emphasized that this approach will not prop up the regime. He stated,
“We’re going to let the oil flow.”
Overall, these advancements made by the administration have been mostly welcomed by critics who have called to question the implications of U.S. control over Venezuelan oil resources. Senator Chris Murphy (D-CT) decried the plan as nothing short of a robbery, declaring that
“in a way that benefits the Venezuelan people – not corruption, not the regime – so we have a lot of leverage to move on the stabilisation front.”
Venezuela is reportedly working to reorient oil supplies, largely to the U.S. Such a shift will undoubtedly put pressure on other countries, particularly close producers Mexico and Canada, which produce heavy/sour crude oil. As soon as the TIFIA program was announced, analysts were sounding alarm bells. They point out that increasing Venezuela’s crude production will require years and billions of dollars worth of investments.
“They are talking about stealing the Venezuelan oil at gunpoint for a period of time undefined as leverage to micromanage the country.”
Venezuela’s oil industry has historically depended on an extensive web of connections to foreign markets. Over the past few years, China has become the biggest purchaser of Venezuelan crude. A move toward full U.S. control would make this reality a profoundly different place.
U.S. oil companies, including Chevron and many of the affected refineries, are set to gain the lion’s share of those advantages. They can take advantage of the expanded access to Venezuelan oil. Opponents are calling for more restraint and caution, claiming that these types of partnerships would continue to increase inequality and economic divide and further destabilize Venezuela.
The potential benefits for U.S. oil companies, such as Chevron and various refineries, are evident as they stand to gain from increased access to Venezuelan oil. However, critics urge caution, arguing that such arrangements could exacerbate existing economic disparities and bring further instability to Venezuela.