US President Joe Biden on Tuesday announced an embargo on Russian oil. A few days earlier, Washington resumed negotiations with Venezuela. Such a rapprochement between the two cold countries since 2019 is explained by the desire of North America to find an alternative to Russian black gold. But nothing suggests that Nicolas Maduro will succumb to the sirens of lifting US sanctions.
Can the friends of my enemies become my friends? At least temporarily. That is what the United States is now trying to find out from Venezuela, a traditional ally of Moscow, and US President Joe Biden announced on Tuesday, March 8, an embargo on Russian oil.
Venezuelan President Nicolas Maduro and the US administration confirmed on Tuesday that a “high-ranking” North American delegation visited Caracas over the weekend.
This is the first time since the diplomatic break between the two countries in 2019. Former US President Donald Trump at the time accused Nicolás Maduro of fraud in the Venezuelan presidential election, closed the US embassy, and openly sought to overthrow the regime by recognizing Juan Guaidó, then chairman of the National Assembly, as the legitimate president of the country. and by imposing harsh economic sanctions.
Calm the Panic in the Stock Market
This meeting took place at a time when Russia has unleashed a war of conquest in Ukraine for almost two weeks. What is the connection between the fighting raging in the heart of Europe and the relationship thousands of kilometers away between Washington and Caracas? This is oil and, above all, the embargo imposed by Washington on the export of Russian hydrocarbons.
The White House does not hide its intentions. The US administration is considering suspending sanctions against Venezuela in exchange for resuming oil exports to the US in the interests of “American energy security,” the US assured. The delegation also met with Juan Guaidó to “discuss our ally’s national security interests.” [nord-américain]”, the office of the self-proclaimed president and opponent Nicolás Maduro said in a statement.
“The United States needs to raise as much noise as possible around these negotiations to calm financial markets,” said Alexandre Barades, a financial analyst at IG France, who was contacted by France 24.
The buzz in the media since the end of last week around the desire of the West to turn off the Russian gas and oil valve has sowed a wave of panic in global stock markets. “Monday’s reaction to the approach of oil prices to $140 [son plus haut niveau en dix ans]was the sum of all the fears of investors between the economic consequences of the war and a possible halt in Russian oil imports,” the analyst concludes.
Financial markets began to pick up a bit when Germany announced on Monday that it does not want to go completely without Russian hydrocarbons. The prospect of a US initiative seemed less ominous than the prospect of depriving the world of all five million barrels of crude oil a day (and more than two million barrels of petroleum products a day).
“The psychological factor is very important here. If investors understand that the US is looking for a more or less short-term alternative to Russian oil, they will be less tempted to see everything in black, to imagine a worst-case scenario that could push oil prices up to $200 or more,” Alexander Barades said.
Venezuela, an alternative to Russian oil?
It is also necessary to know whether the Venezuelan oil will be able to replace the imported from Russia. In theory, yes: “Last year, the United States imported about 650,000 barrels a day of Russian oil, about the same amount it bought from Venezuela before sanctions were imposed in 2019. For Washington, Russia served as a stand-in for Venezuela, so if sanctions were lifted, we might consider going back to the pre-2019 situation,” explains Igor Hernandez, a Venezuelan energy specialist at the Baker Institute at Rice University in Houston ( Texas), contacted by France 24.
In practice, Venezuela’s ability to quickly respond to the needs of US black gold is limited. The economic crisis hitting the country and US sanctions against Venezuela’s energy sector have left infrastructure in poor condition. “In 2021, oil production has been increased to an average of 600,000-650,000 bpd. [contre 560 000 barils par jour en 2020]and there is still room for improvement. But we are very far from production capacity until 2019,” emphasizes Igor Hernandez. Before the US sanctions, the state-owned oil company PDVSA (Petroleos de Venezuela SA) could produce more than a million barrels per day.
It will be difficult for the company to gain momentum in the first place, “because it is very limited in its ability to use the money from oil exports, even if the sanctions are lifted,” notes Igor Hernandez. PDVSA has close ties to Russian banks that have themselves been sanctioned, making it difficult for the Venezuelan group to manage cash.
“They may have to resort to the private sector (banks, investment funds) to finance their activities,” said Igor Hernandez. But who will give them money? PDVSA is indeed far from recovering all of its current creditors. “We will also need credible indications that the government will honor any contracts that PDVSA signs, and the Maduro regime does not have a very good record in this area,” recalls the Baker Institute specialist.
Therefore, it will probably be necessary that “the United States itself help to rebuild the Venezuelan oil sector,” notes Alexandre Barades. This would be politically very risky for President Joe Biden, since Nicolás Maduro does not smell of holiness in the United States, Republicans, or most Democrats.
Maduro ready to betray Putin?
Even if Venezuelan oil flows again, Nicolás Maduro will still have to agree to play the American game. Is the lifting of sanctions enough to convince the Venezuelan leader? By agreeing to sell its oil to Washington, Caracas would give Joe Biden the opportunity to increase the pressure on Vladimir Putin…an ally of Nicolás Maduro. Venezuela has so far been a staunch supporter of the Kremlin’s master, and “it recognized the independence of the two separatist regions of Donbass just hours after Vladimir Putin’s announcement,” recalls Maximilian Hess, an American researcher who has worked on relations between Russia and Venezuela at the Foreign Policy Research Institute. contacted France 24.
For this expert, “Nicolas Maduro will primarily seek to find out if what Washington is offering can help him and his circle of relatives. If that’s not enough, he’d rather play the card of loyalty to Russia than he still considers it as insurance in case the political and social situation in Venezuela becomes too dangerous for him.”
From this point of view, the lifting of sanctions may not be enough. “Nicolas Maduro will be in a much better mood if Joe Biden makes concessions on other points, such as the various legal proceedings initiated in the United States against members of the Venezuelan government and PDVSA,” emphasizes Maximilian Hess.
Nevertheless, the lifting of sanctions remains an important carrot. “This will allow Venezuela to redirect some of its exports from China to the US, which will be much cheaper. [en frais de transport] and improve the financial situation of the country,” notes Igor Hernandez. And then, above all, “given that Russia has not invested much money in Venezuela since 2019, Nicolas Maduro has nothing to fear from Moscow’s retaliation if it accepts the offer,” the American researcher said.
For the United States, negotiations with Venezuela are not just about oil. “We have to weigh this against the current US efforts to reach a new deal with Iran. The purpose of which, of course, is to allow the Iranians to export oil again, but also to move Tehran away from the bosom of Moscow, ”experts interviewed by France estimate. 24.
In other words, Washington pledged to do everything to diplomatically isolate Moscow in the international arena. “If the United States manages to convince Venezuela and Iran, it will be a big symbolic blow,” admits Maximilian Hess. But the United States has already, he said, managed to hurt Russia very badly by persuading South Korea, “which has traditionally always sought to spare Moscow,” Singapore and Switzerland, to let Moscow go.
