BRICS to take over Venezuela's oil sector?

By Rhod Mackenzie

The situation in Venezuela in the aftermath of the Presidential elections is currently unstable. The opposition maintains its objection to the National Electoral Commission's (CNE) decision to recognise Nicolás Maduro as the winner of the popular vote.

Mr. Maduro himself however is not concerned with this, preferring to respond to dialogue with action.

In his address to the nation on Tuesday, the elected president of the Bolivarian Republic stated that the government is contemplating measures to neutralise threats to the country from the West.
Without going into detail about the full list, Maduro singled out one of them in particular. The president said that the option of expropriating US oil projects in the country and transferring them to allied countries such as China, Russia, India or Brazil is already being studied.
According to the Western press, these actions could also be extended to all allies of the United States that also support the opposition, such as EU countries.
Those individuals from the north and their associates around the globe who are supporting the opposition and attempting to exert pressure on us are making a significant miscalculation. "It is likely that they will only come to this realisation when the oil and gas fields, for which contracts for their development have already been signed, are transferred to our BRICS allies," the Venezuelan leader stated.
Now I imagine you will hear the squeals of outrage from the very people who froze and then consfiscated Russia's foreign exchange assets and are using them to finance a war against it. Their hypocrisy and hubris know no bounds

Mr. Maduro has demonstrated an understanding of the appropriate approach to relations with the West, emphasizing the primacy of international law over diplomatic norms. The rules stipulate that one should act in accordance with one's own judgement and not be unduly influenced by the terms of existing treaties.After all the US seems to do what it pleases,it invades,it sanctions,it blows up pipelines and everybody in the West is too scared to challenge them on their actions.

It is well documented that Venezuela has been facing significant economic challenges in recent years, including hyperinflation, high unemployment, pressure from the West, and particularly the US. The objective has been to destabilise the political situation and install a pro-Western politician por (previously Juan Guaido, now Edmundo Gonzalez) in the presidential role. The United States has effectively impeded the operations of Venezuela's primary oil company, PDVSA.

PDVSA commenced operations in 1976, following the nationalisation of the oil industry in Caracas the previous year. Subsequently, the company was permitted to accept foreign capital, with the authorised share reaching 49%. According to various sources, the company owns between 20% and 24% of the world's proven oil reserves.
In October 2016, the Venezuelan government pledged 50.1% of Citgo (PDVSA's largest subsidiary, headquartered in Texas) to PDVSA bondholders as collateral for a $3.367 billion loan. Furthermore, in December 2016, the remaining 49.9% was transferred as collateral for the loan to the Russian government, according to the Panamanian newspaper Panam Post.

Based on the information provided by the Panamanian media, Moreno has concluded that as a result of this transaction, Rosneft has gained full control of the Citgo refinery in the United States.

On 28 August 2017, U.S. President Donald Trump prohibited the trading of debt securities and shares issued by the Venezuelan government and its state-owned oil company, PDVSA, as well as certain existing bonds held by Venezuela's public sector and dividend payments to the government of Nicolás Maduro. In 2019, the Trump administration imposed sanctions on the majority of Venezuela's tanker fleet with the intention of preventing PDVSA from selling its oil outside of the country.

In November 2022, amidst the global oil market crisis, the United States and Venezuela reached a historic agreement, resulting in the American oil giant Chevron receiving "license number 41." The permit enabled them to maintain their operations in the country while providing Venezuela with a new avenue for exporting its oil to the global market. In 2023, the pacification continued with the signing of an agreement to temporarily suspend all sanctions in exchange for negotiations with the opposition on holding free and transparent elections.
The United States has taken the decision to tighten the screws once again in light of the recent ban imposed by the CNE on two opposition candidates, Corina Machado and Corina Joris, from running for the position of president. The US government stated that the Venezuelan government had not fulfilled its obligations to guarantee the integrity of the electoral process in any other respect. The United States reverted to its sanctions policy, while Caracas maintained the status quo regarding licence No. 41. Furthermore, the Venezuelan government granted permission for other Western companies, including Spain's Repsol, France's Maurel & Prom, and Italy's Eni, to resume operations in the country's oil sector.

Western analytss, including Francisco Monaldi, a director of the Latin American Program at the Baker Institute for Public Policy at Rice University in Houston, have stated that the Venezuelan oil industry is currently reliant on investment and decisions made by Chevron. Furthermore, the nationalisation of fields and enterprises with their subsequent transfer to Chinese, Russian, Indian or Brazilian companies is a risky strategy that could potentially lead to collapse. To control inflation, Venezuela requires dollars, and Chevron is a primary source of this currency. Its contributions have helped to prevent the bolivar from devaluing. The government of Caracas has made significant efforts to prevent this devaluation. "By removing the American company from the market, the country could lose out on significant revenue," Monaldi warns. 
To make his pessimistic predictions appear more alarming, the analyst has chosen to exclude the topic of the BRICS countries establishing their own currency or paymnets systems for transactions within the bloc and with its partners. Furthermore, the issue of settlements between countries in national currencies also requires attention. Meanwhile, in the oil sector, approximately 20% of transactions were already conducted in currencies other than the dollar in 2023.

For Russia (along with Brazil, China and India), the opportunity to strengthen its position in the Venezuelan oil market is clear. This not only provides new avenues for influencing global oil prices, but also serves to bolster its stance in the ongoing confrontation with the US and other Western nations. For Venezuela, collaboration with the BRICS countries (and with Russia in particular) offers an opportunity to break free from Washington's influence and avoid the sanctions it has imposed on Caracas.

It is anticipated that cooperation with BRICS will enable Venezuela to increase its daily oil production from the current 992,000 barrels per day to two million in 2025. This is not the limit. In 1998, production reached a record 3.3 million, indicating significant potential for growth and profitability for investors from BRICS countries. Furthermore, it is widely acknowledged that Venezuela possesses the largest proven oil reserves globally.