US President Joe Biden announced an embargo on Russian oil on Tuesday. A few days earlier, Washington had reopened negotiations with Venezuela. This rapprochement between two countries that have been cold since 2019 is explained by the North American desire to find alternatives to Russian black gold. But nothing says that Nicolas Maduro will give in to the sirens of a lifting of American sanctions.
Can the friends of my enemies become my friends? At least temporarily. This is what the United States is currently trying to find out with Venezuela, a traditional ally of Moscow, as 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 traveled to Caracas this weekend.
This is a first since the diplomatic rupture of 2019 between the two countries. Former US President Donald Trump at the time accused Nicolas Maduro of electoral fraud in the Venezuelan presidential election, closed the US embassy and openly sought to overthrow the regime by acknowledging Juan Guaido, then President of the National Assemblyas the legitimate president of the country and by imposing heavy economic sanctions.
Calming the stock market panic
This meeting comes as Russia has launched for almost two weeks a war of invasion in Ukraine. What is the relationship between the fighting raging in the heart of Europe and relations a few thousand kilometers away between Washington and Caracas? It is oil and, above all, the embargo decided by Washington on Russian hydrocarbon exports.
The White House has made no secret of its intentions. The US administration is considering suspending sanctions on Venezuela in exchange for a resumption of oil exports to the United States in the interest of “American energy security”, assured the United States. The delegation also met with Juan Guaido to “discuss the national security interests of our ally [nord-américain]”said the office of the self-proclaimed president and opponent of Nicolas Maduro.
“The United States must make as much noise as possible around these negotiations to reassure the financial markets”, assures Alexandre Baradez, financial analyst at IG France, contacted by France 24.
The media noise since the end of last week around the Western desire to cut off the Russian gas and oil tap has sown a wave of panic on the world stock markets. “Monday’s reaction, when the price of oil came close to $140 [son plus haut niveau en dix ans]was the sum of all the fears of investors between the economic impact of the war and that of a possible stoppage of Russian oil imports”, summarizes the analyst.
Financial markets began to pick up a bit when Germany announced on Monday that it was reluctant to do without Russian hydrocarbons altogether. The prospect of a U.S. initiative seemed less ominous than that of a world deprived of all of Russia’s five million barrels per day of crude oil (and more than two million barrels of refined petroleum products per day). .
“The psychological factor is very important here. If investors understand that the United States 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 the worst-case scenario which might push oil prices up to $200 or more,” said Alexandre Baradez.
Venezuela, an alternative to Russian oil?
It is still necessary to know if Venezuelan oil can replace that imported from Russia. In theory, it does: “The United States imported regarding 650,000 barrels a day of Russian oil last year, which is roughly what it bought from Venezuela before the imposition of the sanctions in 2019. For Washington, Russia served as a substitute for Venezuela, so if the sanctions were lifted, we might think of returning to the situation before 2019,” explains Igor Hernandez, a specialist in the energy sector in Venezuela at Baker Institute at Rice University in Houston (Texas), contacted by France 24.
In practice, Venezuela’s ability to respond quickly to American black gold needs is limited. The economic crisis hitting the country and US sanctions once morest the Venezuelan energy sector have left infrastructure in poor condition. “In 2021, oil production has been increased to between 600,000 and 650,000 barrels per day on average [contre 560 000 barils par jour en 2020], and there is still some room for improvement. But we are very far from the production capacities of before 2019″, underlines Igor Hernandez. Before the American sanctions, the public oil company PDVSA (Petroleos de Venezuela SA) might produce more than a million barrels per day.
The company will find it difficult to get up to speed, first and foremost “because it is very limited in its ability to use the money from oil exports even if the sanctions were to be lifted”, notes Igor Hernandez. PDVSA has strong ties to Russian banks which are themselves subject to sanctions, which complicates cash management for the Venezuelan group.
“They will probably have to resort to the private sector (banks, investment funds) to finance their activities,” said Igor Hernandez. But who is going to lend them money? PDVSA is indeed still far from having reimbursed all its current creditors. “We would also need credible signs that the government will honor any contracts that PDVSA signs, and the Maduro regime does not have a very good reputation in this area,” recalls the Baker Institute specialist.
It would therefore probably be necessary for “the United States themselves to help rebuild the Venezuelan oil sector”, notes Alexandre Baradez. Which would be a politically very risky undertaking for President Joe Biden, as Nicolas Maduro is not in the odor of sanctity in the United States, neither among Republicans, nor among most Democrats.
Maduro ready to betray Putin?
Even if Venezuelan oil starts to flow once more, Nicolas Maduro still has to agree to play the American game. Can the lifting of sanctions be enough to convince the Venezuelan leader? By agreeing to sell its oil to Washington, Caracas would offer Joe Biden the possibility of increasing the pressure on Vladimir Poutine… the ally of Nicolas Maduro. Venezuela has so far been an unwavering supporter of the master of the Kremlin, and “it recognized the independence of the two separatist regions of Donbass, just hours following Vladimir Putin’s announcement”, recalls Maximilian Hess, researcher American who worked on relations between Russia and Venezuela at the Foreign Policy Research Institute, contacted by France 24.
For this expert, “Nicolas Maduro will above all seek to know if what Washington is proposing can help him and his circle of relatives. If this is not enough, he will prefer to 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 perspective, the lifting of sanctions may not be enough. “Nicolas Maduro will be much better disposed if Joe Biden makes concessions on other points, such as the various legal proceedings initiated in the United States once morest members of the Venezuelan government and PDVSA”, underlines Maximilian Hess.
The lifting of sanctions nevertheless remains a significant carrot. “It will allow Venezuela to redirect part of its exports from China to the United States, which will cost much less [en frais de transport] and will improve the country’s finances”, notes Igor Hernandez. And then, above all, “given that Russia has not invested much in Venezuela since 2019, Nicolas Maduro does not have much to fear from retaliatory measures on the part of Moscow if it accepts Washington’s offer,” said the American researcher.
For the United States, negotiations with Venezuela are not just regarding oil. “You have to put that in parallel with the current US efforts to finalize a new deal with Iran. Which certainly aim to allow the Iranians to export oil once more, but also to move Tehran away from the bosom of Moscow”, say the experts interviewed by France 24.
In other words, Washington has undertaken to do everything to isolate Moscow diplomatically on the international scene. “If the United States manages to convince Venezuela and Iran, it would be a great symbolic blow”, recognizes Maximilian Hess. But the United States has already, according to him, succeeded in hurting Russia very badly by convincing South Korea – “which traditionally has always sought to spare Moscow” – Singapore and Switzerland to let go of Moscow.
