Salvador His first international performance outside of Latin America since 2018 Nicolás Maduro used it like a selfie hunter at a celebrity party: At the World Climate Conference in Sharm el-Sheikh, Egypt, the Venezuelan President had his picture taken with every head of state or government who crossed his path and didn’t run away fast enough: Emmanuel Macron from France For example, or António Costa from Portugal.
In front of EU Commission President Ursula von der Leyen, Maduro acted like an extra to document the closeness to Western power through the images on social media.
The US climate commissioner John Kerry excused a handshake with the autocrat Maduro by saying that he had surprisingly intercepted him. The United States has finally put a $15 million bounty on the “narco-terrorist” Maduro.
In 2018, then US President Donald Trump imposed tough sanctions on Venezuela, the country with the largest oil reserves in the world. Any trade with Venezuela in dollars is forbidden to this day.
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Maduro’s appearance shows that the West is again ready to negotiate with the autocrat who has been in power for the past nine years. The country’s oil wealth is too tempting after Russia’s war of aggression against Ukraine led to a global energy crisis.
Shortly after the start of the war in Ukraine, the first delegations from Washington arrived in Caracas to start negotiations. Basically, Washington is about getting concessions from Maduro that he will hold clean elections. In return, the US is offering a gradual lifting of the sanctions.
>> Read here: Is China Winning Over Latin America?
Ultimately, the United States, together with the American oil industry, want to rebuild Venezuela as a reliable oil supplier – as has been the case for fifty years.
A first breakthrough: Brokered by Norway, government and opposition delegations at a meeting in Mexico decided that not only the US oil company Chevron, but also the North American service companies of the oil industry – Halliburton, Schlumberger, Baker Hughes and Weatherford – allowed to repair oil facilities in Venezuela again.
Chevron is even allowed to export oil to the US. This is intended to pay off Venezuela’s accumulated debt to the Californian company. No taxes or duties may be paid to the state oil company or the state of Venezuela on production.
It seems that the US oil companies, as pioneers, want to turn Venezuela back into a production location, says Mischa Groh, executive director of the German Chamber of Commerce (AHK) in Colombia and Venezuela. In the Caribbean country, production has dropped from 3.5 million barrels a day to around 600,000 barrels (159 liters each). According to estimates by Venezuelan oil experts, annual investments of 25 billion dollars are needed over almost a decade before Venezuela could once again become a major oil exporter.
Venezuela could also become interesting again for German companies
Groh sees the recent rapprochement positively: “Due to the geopolitical reorganization caused by the Ukraine conflict and the resulting energy crisis, Venezuela could also become interesting again for German companies,” he says. Overall, the demand for goods and services in Venezuela is increasing.
“Some of the local German companies are already seeing strong growth in local production, services, and sales and distribution,” Groh observes. Business opportunities exist in the energy, telecommunications, agro-industry and tourism sectors. “However, there are still many challenges and uncertainties for the companies,” warns Groh. “Due to the sanctions, the delivery business remains limited to products in the pharmaceutical and food sectors.”
The South American country has let its infrastructure go to waste.
(Photo: Reuters)
But it is currently completely open whether Venezuela will experience a renaissance as the major oil producer in the West. What matters is whether Maduro is willing to hold fair and free elections. Maduro has never been willing to make concessions. He relies entirely on the military and repression to stay in power. The scheduled elections are in 2024, but the government is now considering bringing the date forward to take advantage of the fact that the opposition is very divided.
But the isolation has put a huge strain on oil production due to a lack of investment. Venezuela was only able to sell its increasingly poor oil production at high discounts to risk-taking buyers in the Far East.
The country long avoided US sanctions with the help of Russian banks, which acted as intermediaries for resales to India. However, since Russian banks have been sanctioned, the flow of money to Venezuela has been blocked.
According to estimates, between 25 and 40 percent of the population in Venezuela are dependent on social assistance because they are suffering from hunger. In the past ten years, the gross domestic product has shrunk by around 80 percent. Seven million people have left the country – a quarter of the population.
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Maduro is short of money, says Groh. The state has no more money. Pensions and civil servants’ salaries would only be paid in installments. At the same time, inflation is rising again. After the hyperinflation of four years ago, the inflation rate has fallen to 173 percent. But now inflation is picking up again.
So it seems possible that Maduro could be tempted to rely on his popularity and the fragmented opposition and still allow reasonably clean elections: Independent polling institutes estimate that around 20 percent of the population supports Maduro. The opposition has more than a dozen candidates who could stand for election. Neither is the clear favourite.
The political tailwind that is now blowing from Latin America is also helpful for Maduro. Not only the global context has changed, says Risa Grais-Targow, Latin America specialist at the Eurasia Group. “The entire region is now left.”
Above all, the presidents in Colombia (Gustavo Petro) and Brazil (Luiz Inácio Lula da Silva) could, as has already happened in the past, persuade Venezuela to cooperate in the region again. Grais-Targow says that the USA’s previous confrontational policy towards Venezuela no longer has a majority in Latin America.
More: South America shows how dangerous the specter of inflation is in the long term