I have a relatively unique perspective on Venezuela, compared to my peers. As a child I would go to Venezuela every year (my mother is from Venezuela,) overall, I have probably spent a year of my life in the country, and  Caracas is a city I still have vivid memories of, and still retain extensive links to the country. The resources the country has, means it should be operating in the top table in per capita wealth, on a par with say Norway or Saudi Arabia, yet decades of economic mismanagement have led to its slow decline. With that, the events of the past week are well documented, so the key point is what comes next?

 

• The country remains governed by the same party which stole the 2024 election, and they retain control. The brother of the newly appointed President is head of the internal intelligence services (think KGB) and dissenters are targets.

 

• Oil is obviously the key factor. The challenge facing the current administration in Venezuela, is that the failure to invest has meant that production is falling, and is now under the 1M barrel mark. Equally the estimates given are that with the right investment, this could rise to 3M barrels per day, which would be exclusively distributed as per US diktat.

 

• Venezuelan oil being exported to the USA would be good news for Texas amongst other states. Texas specializes in the refining of oil produced by Venezuela, so this would be a significant boost for the industry there. And with the Venezuelan oil flowing to the US, they could probably absorb the inflationary shock of destroying Iran’s refining capability. All this would mean exports to China would be reduced, and just as importantly, mean there is less ‘cheap oil’ available the Chinese can buy at a discount to global markets.

 

• New democratic elections in Venezuela could happen this year, but will require Governments across Latin America and Europe to lobby Washington that this is a priority outcome, and work together to ensure this happens. For the Americans, as long as a new administration operates a pro US agenda, this is a possibility.

 

• Equally, if Trump is to be taken at his word, that the US wants the Venezuelan Oil, one scenario could be that the Americans look for there to be a referendum in Venezuela, where the legal status of the country changes, and it becomes a protectorate, akin to Puerto Rico. (PR is technically a part of the USA, Washington determines foreign policy, The local Government is responsible for domestic affairs, nationals are US Citizens but without voting rights.) The Chinese will do their best to prevent this, but it is questionable what they can do, other than seek compensation for the investments they have made into the country. The Americans are likely to prefer the protectorate model, as it would give them far more control, especially as it is estimated $100BN now needs to be invested into Venezuelan oil industry alone.

 

• This outcome is not as preposterous as it sounds, when you consider the country has a population of 28m currently, equally there are 7m Venezuelans currently in the USA, who would overnight become US Citizens. Interestingly, the nationalization of Exxon Mobil’s investments ($12BN write off) could even be reversed in this scenario, as part of them re-entering and implementing the necessary upgrades.

 

• The danger is this sets a precedent and means that for Russia and China, their territorial objectives would be justified in accordance with this shift towards spheres of interest. The impact of Taiwan being under Chinese control is not to be understated.

 

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