In Caracas, they say that the oilmen are back in town, and why not? Venezuela has the world’s largest proven oil reserves. It’s some nasty, thick crude lousy with sulfur, but it can be refined in a few places like China and the US. On 18 October, the US Treasury department removed its restrictions on the country’s oil – for now. This will bring in less foreign investment that Caracas hopes, and do less for global prices and supply than the US is betting.
First is that the sanctions were fairly easy to work-around with a network of middle-men and factors in Mexico and the Middle East generally sending the crude to China, who paid 50 cents on the dollar for the stuff. Then there is the fact that Petróleos de Venezuela SA, the state oil company has, at best, been badly maintained and, at worst, been stripped by government officials like an abandoned car. That’s going to require a lot of foreign investment in a country with a ruling class known for stealing it.
Giving Venezuela half a chance to change government is the reason the sanctions were lifted in the first place – which are only for a trial period of six months. Nicolás Maduro, the former bus driver who has ruled the country since 2013 when Hugo Chavez (the previous crackpot dictator), agreed to fair(ish) elections next year in return for sanctions relief. It was one thing to agree when there was no opposition to threaten him. In a primary María Corina Machado won a shocking 92% as an opposition candidate with a turnout that shocked even the opposition parties. With a real challenger in place, Maduro will likely see how long he can milk free market access before simply sliding back to the black market.