Guest Op-Ed: Biden and Big Oil Say Venezuela Is Open For Business

On October 18^th , the Biden administration unveiled the landmark Barbados agreement signed in conjunction with the Venezuelan government and opposition. The agreement authorizes six-month licenses for oil and gas transactions, dealings with Venezuela’s state-run gold mining firm, Minerven, plus the lifting of a trading ban on certain sovereign bonds, equity, and debt from Venezuela’s state oil-firm, PDVSA. In exchange, Caracas agreed to lift bans on opposition candidates, allow foreign electoral observers in next year’s presidential election, and begin releasing political prisoners including “wrongfully detained US citizens.”

As expected, the agreement has been a boon to Venezuela’s hydrocarbons industry. Venezuela is now expected to boost oil production to more than 1 million barrels a day, a 25 percent increase, with an additional increase of 300,000 barrels a day by 2025. The trouble for Washington, however, is that thus far, the regime has not upheld its end of the bargain. On the contrary, Caracas has shown repeated contempt towards both the Venezuelan opposition and its backers in the White House. 

Since October, the regime has released only five political prisoners and went as far as to arrest a US citizen soon after the agreement took effect. Days later, the opposition held presidential primaries where Maria Corina Machado secured a resounding nomination. Machado, however, is currently banned from assuming elected office with Washington giving Caracas until November 30^th to lift the suspension. Just hours before the deadline, Caracas acquiesced with a half-measure: the opposition can now legally contest candidate suspensions before December 15^th .

Further complicating matters is Venezuela’s increasing belligerence over a border dispute with its Caribbean neighbor, Guyana. On December 3^rd , Venezuela held a referendum authorizing the annexation of the region known as the Esequibo – a largely untouched but Guyanese administered territory bordering the two countries. 

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The dispute has an energy dimension to it. The Esequibo harbors the bulk of Guyana’s newfound oil and mineral wealth, including the entirety of the offshore Pomeroon, Roraima, Kaieteur, and Demetara fields as well as most of the prized Stabroek oil field. Together, these concessions represent more than 11 billion barrels of Guyana’s proven oil reserves with Exxon and Hess holding the most lucrative contracts—the latter of which will pass to Chevron ahead of next year’s planned $53 billion acquisition. Barring a major disruption, Guyana is on course to see oil production increase to one million BPD by 2027. 

To that end, Caracas has moved aggressively to claim sovereignty over Guyana’s resource wealth. In the wake of the vote, Maduro announced the creation of a special military zone near the disputed border with Guyana. In a similarly symbolic gesture that has nonetheless spooked Exxon, Maduro announced the creation of PDVSA Esequibo and CVG Esequibo, claiming that the regime will begin offering “operating licenses for the exploration and exploitation of oil, gas and mines in our Guayana Esequiba.” 

With all this in mind, the threat of an invasion is not trivial. Yet, the motives behind Maduro’s belligerence are mostly electoral and diplomatic. On the one hand, the dispute over the Esequibo serves the electoral purpose of dividing the opposition. By fostering a climate of war and stoking nationalist grievances, Maduro may be able to prevail (with minimal fraud) over the opposition or outright suspend presidential elections in 2024. On the other hand, by threatening Guyana, Caracas now has an additional bargaining chip that it can leverage over the Biden administration. 

On the former, the Esequibo referendum has already served its intended purpose with the opposition playing straight into the regime’s trap. In the lead up to the vote, Maria Corina Machado urged a boycott of the referendum while others such as former presidential candidate Henrique Capriles participated in the initiative on patriotic grounds. In turn, Caracas proceeded to arrest members of Machado’s campaign on charges of treason for "destabilizing and conspiratorial actions" against the referendum. 

It thus begs the question; how long can we realistically expect sanctions relief to last in Venezuela? The answer lies with Big Oil and oil prices. Thus far, the Biden administration has refused to even partially revoke licenses despite increasingly brazen acts from the regime. The White House, it seems, is more concerned with lowering gas prices than fortifying Venezuela’s democratic opposition. This might seem disingenuous considering that the US is currently undergoing a renewed oil boom. After years of setbacks due to the demands of climate activists as well as oil producers’ refusal to invest in pumping oil over stock buybacks, the administration is finally on course to oversee record oil production. It may be that Biden is concerned he may further lose support from progressives if he continues to boost domestic production. 

Relatedly, another and perhaps more salient factor is that Biden is caving to the interests of multinational oil producers now active in Venezuela. In the weeks and months before October 18^th , Venezuelan bonds jumped as investors bet big on a détente citing leaks from the negotiations between Washington and Caracas. As I write this, Repsol and Eni are negotiating contract terms with PDVSA over rights to the largest offshore gas field in South America. Both they and other multinationals appear unconcerned by the threat of snapback sanctions. It may well be that the electoral stipulations of the Barbados agreement served as nothing more than cover for key stakeholders in the Venezuelan oil market.

Is it wise, then, to invest in or do business in Venezuela? Personally, I would advise against it. At best, sanctions relief is likely to last until the terms of the Barbados agreement expire in March (or until 2025 when Biden likely leaves office). Moreover, the preexisting risks to doing business in Venezuela remain unchanged. The country is among the most corrupt and violent on the planet. Operating costs and contingencies due to crime, extortion and arbitrary state detention are a major risk for foreign companies. Further, the country’s oil and port infrastructure are still highly dilapidated and prone to oil spills. Consider, for instance, that the expected increase in oil production of 1.4 million bpd by 2025 is only a fraction of the country’s 3.5 million bpd in 2010. 

Still, assuming a high tolerance for risk, the example of Repsol shows there’s ample room for short-term (and possibly medium-term) gains. For the time being, the signs from Biden and Big Oil are clear: Venezuela Is Open For Business.

Juan David Rojas is a writer and consultant covering issues of security, energy and political economy in Latin America. You can find him on X, formerly known as Twitter, and contact him at juanda.rojasro (at) gmail.com.

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