The war in Ukraine and sanctions against Russia are the reason why the US is reevaluating its ties with energy producers. According to The Economist, Venezuela holds one-fifth of the world’s oil reserves.
Venezuela’s isolation was lifted as a result of the anti-Russia sanctions
The search for new oil-producing nations has already begun. The war in Ukraine and the sanctions imposed on Russia were the cause. Consequently, Venezuelan oil may replace Russian oil in the future.
Venezuela has 20% of world’s proven oil reserves
20% of the world’s proven oil reserves are located in Venezuela. This figure represents the biggest amount among the countries’ oil producers.
However, Venezuela’s oil industry has been ignored for too long to have a substantial short-term impact on global oil markets after decades of the country’s isolation and poor management in the region. However, the US and other nations have the long term in mind.
Sanctions on Venezuela
The US put sanctions on Venezuela’s mining, banking, and oil sectors under Trump. Joe Biden, the current president, is attempting to restore relations with Caracas gradually.
For instance, in the Venezuelan capital of Caracas, representatives of President Maduro’s government have already met with Biden’s representatives twice.
Additionally, the PDVSA, Venezuela’s official oil corporation, and American oil company Chevron were each given a restricted license by the Biden administration on November 26 to continue pumping and exporting oil to the United States.
The American corporation and the Venezuelan company currently have four frozen joint ventures.
Venezuela’s cumulative debt to Chevron, which totals billions of dollars, will be settled with the proceeds from oil production.
What risks does cooperation with Venezuela pose?
Venezuela has a lot of oil. However, there will be some challenges. First, part of PDVSA’s current infrastructure is in ruin. Venezuela’s underground oil extraction could be improved.
Second, the average oil production for this year is only expected to be 650,000 barrels per day, which is much lower than the intended target of 2 million barrels per day.
Third, Western governments risk supporting the long-reigning dictator Maduro, who has not made any efforts to reestablish democracy in the country.
Finally, oil supply to Europe will experience a challenge. After all, in this situation, foreign oil corporations like the Italian Eni or the Spanish Repsol should be free to operate. Additionally, a considerable increase in foreign investment will be needed, which looks doubtful.