Can Venezuelan Oil Replace the Russian Supply?

On March 6, a representative of the Biden administration traveled to Caracas to meet with Venezuelan President Nicolás Maduro. The visit was one of those that Western diplomats are undertaking to various oil giants with the goal of increasing the injection of hydrocarbons into the global energy market, to compensate for the shortage caused by the sanctions against Russia. These arrangements have involved approaching undemocratic regimes known for their precarious history with regard to human rights, including Turkmenistan, Nigeria, Saudi Arabia and even Venezuela.

This “exploratory” meeting evidenced Joe Biden’s willingness to leave aside the “energy transition” in the face of a possible lack of oil a few months from the midterm elections in November.

But, then again, the diplomat’s direct dialogue with Maduro’s government also reveals a change in U.S. foreign policy toward Venezuela, despite the fact that White House press secretary Jen Psaki refused to recognize Maduro as the Venezuelan leader. It should be noted that the Venezuelan government, with strong military and diplomatic ties to Russia, does not have the capacity to accept compromises with anyone. Its power is based on a form of extractive feudalism controlled by different factions protected by the state, so the government cannot rely on the actual technical capacity to sustainably increase a possible upturn in oil production.

Today’s PDVSA* devoid of the highly skilled workforce that it had some years ago and with seriously deteriorating facilities, could hardly serve as the strategic anchor of the new U.S. energy geopolitics, at least in the short or medium term.

Currently, Venezuela produces around 740,000 barrels of oil a day, which doesn’t make up even one-tenth of the current Russian production. A possible reactivation of the industry will have a very limited effect on the current global energy crisis. But aside from these disadvantages, Venezuela boasts the largest proven oil reserves in the world. And although the heavy or extra-heavy Venezuelan crude oil requires a higher level of investment for its extraction, refinement and transportation, it yields better profits in high-priced contexts, as currently seems to be the trend.

Thus, Venezuelan oil is once again attractive, just as big companies like Chevron have declared. A reactivation of oil exploitation could, in any case, compensate the U.S. for the partial or total volume currently coming from Russia, that is to say, some 550,000 barrels of oil a day on average in 2021.

Bad News for the Venezuelan Democratic Cause?

A possible, and still unlikely, rapprochement between the White House and Miraflores in order to provide the U.S. with oil could prop up the Maduro government and turn it into a new obstacle for the democratic cause that many Venezuelans, inside and outside the country, have been assembling for years.

This was recognized by Juan González himself, the deputy assistant secretary of state for western hemisphere affairs and member of the diplomatic group that visited Caracas. However, in the middle of a world crisis in which U.S. energy security is threatened, these concerns have become secondary for the Biden administration.

Independently from the two-sided diplomacy that the Maduro government continues to practice, the democratic cause must make note of what has happened and focus on continuity. It must assume that a possible return to democracy will not depend exclusively on the diplomatic direction that the main players of the world order assume it to be.

In any case, the Russian invasion of Ukraine and its impact on the world energy market have created a new political framework that the Venezuelan dictatorship will try to take advantage of in order to position itself after years of sanctions and international isolation — something that has worsened recently, given that a large part of the money from Venezuelan oil sales remains in Russian bank accounts sanctioned by the U.S. This could accelerate a new step in the negotiation process with the opposition, unilaterally suspended some months back by the U.S. government. There is still much to decide in a changing and uncertain international context.

*Editor’s note: PDVSA is a Venezuelan state-owned oil and natural gas company.