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Unilateral Enforcement Measures by the United States are the Main Reason for the Collapse of Venezue

Dr. Thomas Posado is currently a research scholar at the University of Paris 8. His research interests are focused on international politics, and his most recent publications include Social and Political Issues: Union-Government Relations in Contemporary Venezuela and The Bolivarian Regional State of Venezuela: Reflections of the Imbalance between the Chavez Government and the Labor Movement.

Thomas Posado: Unilateral Enforcement Measures by the United States are the Main Reason for the Collapse of Venezuela’s Oil Production

Since 2019, the Trump administration of the United States has implemented unilateral coercive measures against Venezuela’s oil industry, and Venezuela's oil production and exports have shown a significant decline in recent years. How has the Venezuelan government responded to this situation? Can Venezuelan oil trade with Chinese companies continue to deepen? Moreover, recent oil deals have been conducted through The Montana Investment Corporation of the United States. What does it have to do with PDVSA? In response to these questions, the Centre interviewed Dr. Thomas Posado for his views on the Venezuelan oil issue.

Venezuelan oil production is collapsing year after year. Whatever the sources studied, all attest to this rapid decline. The US Government Accountability Office estimates that Venezuela's daily oil production was stable at 2.4 million barrels from January 2011 to December 2015, before falling to just 0.34 million barrels in September 2020[1]. OPEC's data converge with these figures. Compiling the Monthly Oil Market Report monthly reports from 2001 to 2022, OPEC estimates from secondary sources that Venezuelan oil production is 3.001 million barrels per day in the fourth quarter of 2000, before eroding to 2.4 million at the end of 2006 and stabilizing between 2.3 and 2.4 until the end of 2015. From then on, production falls to a low of 0.362 million barrels per day in the third quarter of 2020 and then rises slightly to 0.652 million barrels per day by the end of 2021. With slightly higher data, the figures provided by the Maduro government directly to OPEC indicate the same dynamic from 2.587 million barrels per day at the end of 2015 to 0.406 in the third quarter of 2020 and rising slightly to 0.817 by the end of 2021[2].

Unilateral coercive measures by the US are a major reason for this collapse. From 2019, Donald Trump decided not only to recognize Juan Guaidó (against the practice in international relations of recognizing the actual head of state), but also to enact unilateral coercive measures with extraterritorial aims, which further suffocate the already beleaguered oil industry. The management of CITGO, a company owned by the Venezuelan state but operating in the United States and owning around six thousand service stations, has been entrusted to men appointed by Juan Guaidó. At the end of January, Venezuela was still exporting 587,000 barrels a day to its powerful neighbor on the other side of the Caribbean Sea. That figure has fallen to zero in the space of two months. This latest measure deprives the Maduro administration of its main source of liquidity and further suffocates it financially. While deliveries to its other trading partners (Russia, China) are essentially repayments of debts already contracted, those to Uncle Sam allowed Venezuela to acquire the foreign currency essential to the meagre imports of food and medicines. Since the end of April 2019, an embargo prohibiting any entity from using US currency to buy oil from PDVSA, the state-owned oil company, has been in place. These measures make it more difficult to import the diluents needed to use the heavy and extra-heavy oil extracted from the Orinoco Petroleum Belt, forcing Venezuela, the country with the largest proven oil reserves, to import its oil from Iran, a rare state with little to lose from potential US trade reprisals. Trading partners such as India that could replace the US as an outlet for Venezuelan oil have been threatened by the US administration.

However, the reasons for the collapse in production are deeper and cannot be reduced to these unilateral coercive measures. As we have seen, the fall in oil production accelerated from 2015, before the aggressive policies put in place by Donald Trump. Since 2003, PDVSA has been used to fuel the government's public policies. The proliferation of corruption cases testifies to a lack of transparency in its management (130,000 tons of food imported by a PDVSA subsidiary found rotting in May 2010, diversion of funds to the Banca Privada de Andorra in March 2015, the Morodo affair named after the former Spanish ambassador to Venezuela who allegedly received millions of euros with his son for fictitious advice to PDVSA in May 2019...). The number of workers in PDVSA fluctuates with a high amplitude (40,036 workers at the beginning of 2006, 164,847 at the beginning of 2018 and 83,370 at the end of 2019 (the last period for which we have data)[3]more according to clientelistic use than according to the needs of the company. The migration crisis (6 million Venezuelans outside their country) also affects PDVSA. Thousands of the company's workers have resigned to leave the country, leaving the company with a serious shortage of qualified and experienced personnel. Few investments have been made, with the exception of the Orinoco Petroleum Belt. This lack of maintenance of facilities can have tragic consequences for workers. Despite warnings from union leaders and accidents in previous months, in August 2012, the Amuay oil refinery, the largest in Latin America, was the scene of the second largest explosion in a structure of its kind in the world. A problem in two propane and butane gas tanks led to a large-scale flashover and explosion. In addition to the economic cost and environmental impact, the shock wave and fire caused a heavy toll of 48 deaths and 156 injuries (workers, guards and people living around the company). While this was undoubtedly the most severe event, it is part of a pattern of accidents at oil facilities such as the fire in the pumping chamber of the ERO station in February 2019 in the east of the country. These factors mean that oil production may recover somewhat but will not reach 2015 levels for many years.

Interviewer: Xue Zhiyu

Interview date: February 18, 2022

Collator: Luo Jing



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