Venezuela’s oil, not alleged drug trafficking, caught Trump’s eye

For weeks, United States President Donald Trump and his officials said the rhetoric and military posturing against Venezuela was aimed at countering the flow of narcotics.

But abundant evidence, including Trump’s own words in the aftermath of the abduction of President Nicolas Maduro, suggests that Washington’s true interest lies in Venezuela’s vast proven oil reserves – the largest in the world, estimated at about 303 billion barrels.

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The US president initially framed Saturday’s attacks on Caracas as an anti-drug operation, with officials calling it an arrest of “two indicted fugitives” on narcotrafficking charges. Maduro was indicted in the Southern District of New York courts for alleged “narco-terrorism conspiracy and cocaine importation conspiracy”, among other charges.

But within hours of the US attacks on Caracas that killed dozens of civilians, officials and military personnel, Trump pivoted to openly discussing oil and US control of Venezuela.

In a press conference at his Mar-a-Lago residence in Florida, the US president claimed the US would “run the country” for now, rebuild oil infrastructure, and “take out a tremendous amount of wealth out of the ground” to sell to global customers, including rivals China and Russia.

Maduro has consistently denied involvement in the drug trade and has accused Washington of using this charge as an excuse to get to oil and other resources, even as the Trump team labelled Venezuelan-trafficked fentanyl a “weapon of mass destruction” and launched air strikes on boats accused of moving narcotic substances.

(Al Jazeera)

Oil vital to Venezuela’s recovery

The sudden abduction of the Venezuelan president has not yet translated to any major shift in the power structure of the South American nation.

Vice President Delcy Rodriguez has been ordered by the constitutional chamber of Venezuela’s Supreme Court to serve as acting president “to guarantee administrative continuity and the comprehensive defence of the nation” as a legal framework is devised for the future.

She had also been serving simultaneously as finance minister and oil minister, giving her enormous influence over the nation’s embattled economy and efforts to vitalise the underdeveloped oil sector that produces less than it should as a result of sanctions and mismanagement.

Trump said the US would not occupy Venezuela if Rodriguez “does what we want”. He also declined to endorse the opposition leader, exiled Nobel laureate Maria Corina Machado, saying she does not have the approval or “respect” of the people.

What the US wants from Rodriguez is likely to revolve around Venezuela’s oil, which Trump and other US officials have characterised as US oil – based on the South American country’s nationalisation of its oil industry between the 1970s and the 2000s, forcing most US oil companies out.

“If you remember, they took all of our energy rights, they took all of our oil from not that long ago. And we want it back,” said Trump in December.

In his typically forthright manner, Trump has also said that Venezuela’s oil reserves would cover any costs the US incurs from its attack on the country, and “the damages” allegedly caused by Venezuela to the US.

Oil is vital to Venezuela, and the US had used its importance to pressure the country prior to the abduction of Maduro.

US sanctions targeting Venezuelan oil have been a core element of US policy toward Venezuela since 2017, especially under combined Trump-era directives. The state-owned oil company Petroleos de Venezuela, SA (PDVSA) is blacklisted, and Washington has taken measures restricting the shipment of diluents that are needed for heavy crude.

A host of oil traders, companies and ships that transport the goods have been sanctioned, including last month, while Trump ordered a blockade of sanctioned oil tankers entering or leaving Venezuelan waters, which led to at least two tankers being confiscated.

US sanctions and pressure are some of the main reasons why Venezuela’s oil exports are not comparable to the country’s oil reserves.

Venezuela’s oil exports averaged about a meager 950,000 barrels per day (bpd) in November, and the US “oil embargo” knocked them down to around 500,000 bpd last month, according to preliminary figures based on ship movements.

In comparison, major oil exporters like Saudi Arabia and Russia export millions of barrels per day on average.

Francisco Rodriguez, the former head of the economic advisory of the Venezuelan National Assembly, said gold and oil reserves are among the country’s main hopes for economic recovery.

“If the US moves to remove the sanctions and clear the hurdles for investors to come back in, you can get the oil output to 2.5 million barrels per day in the scope of three to five years,” he told Al Jazeera from the US state of Colorado, pointing out that production currently stands at below one million barrels per day.

“I think what the Trump administration is saying is that we need to prioritise the recovery of the oil sector and get the economy on a manageable basis so that we think about more orderly political transition,” the former official said.

“But if you try to directly hand over the power to the opposition right now without having set the basis for economic recovery, that can actually be quite dangerous and lead to chaos.”

What does this mean for OPEC and others?

At least in the short term, the Venezuela developments do not mean a major change for the Organization of the Petroleum Exporting Countries (OPEC). But things could drastically change with time.

Venezuela cannot quickly raise production due to its ageing infrastructure, and unilateral US seizures of tankers near Venezuela’s waters only led to an uptick in oil prices before another stabilisation.

Venezuela’s upstream oil infrastructure, particularly under PDVSA, has suffered from more than a decade of underinvestment, so some wells are mechanically compromised, restarting shut-in wells often requires full workovers or redrilling, not simple reactivation, and routine preventive maintenance largely ceased after the US embargoes.

The crude cannot flow or be exported without diluents, which are being blocked by the US, while storage, blending, and upgrading facilities are bottlenecked, with many operating well below nominal capacity.

But theoretically, if a US-directed Venezuela manages to rapidly boost output in the future, OPEC will face a supply glut or will have to adjust quotas. This would give Washington indirect but major influence inside the group and over global supply, disrupting the delicate balance members have been trying to keep for years.

West Asia neighbours like Iran and Saudi Arabia are also directly affected if Caracas leans towards the US in the long term.

The anti-US and Israel establishment in Iran has lost another major ally in Maduro, after the fall of top leaders of the Tehran-backed “axis of resistance” over the past two years.

Iran has also been hampered in efforts to develop its oil sector due to stringent Western sanctions, and like Venezuela under Maduro, Iran sends most of its oil at heavily discounted prices through a shadow fleet of ships to China. A robust return of Venezuelan oil to the market would further undermine Iranian oil.

Saudi Arabia was not a close ally of the Maduro establishment like Iran, but it also risks future oversupply that may push global prices down if Venezuela makes a comeback. That may force Riyadh to cut production and weaken its price leadership in the global market.