The Venezuelan people are bracing for chaos as both the incumbent President Nicolás Maduro and President-elect Edmundo González Urrutia prepare to be sworn in at the country’s Jan. 10 inauguration, the outcome of which could prove to be a pivot point for US oil sanctions policy.
In the days leading up to the inauguration, the military presence in Caracas grew and the atmosphere became increasingly tense.
Maduro arrested opposition leader María Corina Machado following a protest Jan. 9, although she was later released, according to press reports.
A group of nine former presidents from Latin American and Spain are reportedly planning on accompanying González to Venezuela to help him assume office.
There are a range of scenarios that could play out in the coming days. Maduro could stay power, crush any uprising, and prevent González from entering the country from exile. At the other end of the spectrum, there is also a small chance the military could hand over power to González, or Machado could inspire mass protests to overthrow the government.
But the most likely scenario, according to many analysts, is that Maduro will cling to power and the US will prioritize other international issues as US President Joe Biden hands over power to US President-elect Donald Trump Jan. 20.
“The odds of Maduro stepping down are definitely not zero. But it would take a concerted effort from the US to achieve that,” Fernando Ferreira, director of geopolitical risk service at Rapidan Energy Group, said. “It’s not something Biden can do on the way out, and it probably won’t be a priority for Trump,” he said.
Still, the inauguration could provide a turning point for the US to change its oil sanctions policy and scale back some or all of the licenses it has issued for companies to operation in Venezuela.
S&P Global Commodity Insights analysts expect Trump to cancel all licenses except for the Chevron license. “We have 2024 production averaging 806,000 b/d, staying flat at 806,000 b/d in 2025, and declining to 784,000 b/d in 2026,” under this scenario, said Nick Blanco, a senior research analyst at Commodity Insights.
If Maduro is sworn in again on Jan. 10, there may be a desire to punish Maduro, Ferreira said. “We will see how that affects the Chevron license, whether there will be new restrictions around that,” he said.
Any change to the Chevron license could alter the investment appetite in Venezuela, Ferreira said. Companies with operations on the ground are taking a wait-and-see approach to see what happens around January 10 or what happens when Trump comes in, he said.
A lot of companies are taking a more cautious approach there,” Ferreira said.
Options to pressure Maduro
If the Trump team is serious about democratizing Venezuela, sanctions alone are not going to do it, Ferreira said. The US would need a whole of government approach, which may include offering very large rewards for the capture and arrest of Venezuelan officials, he said.
It would help if the US revoked the oil licenses, said Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies. “You’ve got to at least try to provide some additional pressure to try to get people on the inside thinking about whether they will exit in a certain way,” he said.
But Berg also said oil sanctions would not be enough to push Maduro out. An effective strategy also should go after illegal gold mining and illegal drug trafficking because they provide so much revenue to the regime, Berg said.
These are international networks and there is no transparency into how much money Maduro is making from them, Berg said.
“In my opinion, if you don’t deny the regime the ability to expand those networks and build a truly global criminal network that brings them a lot of money, you can’t get after this problem of regime survival,” Berg said.
But investigating a global criminal network with state support takes a lot of time and resources, and it is unclear whether any administration is going to put that level of resources into Venezuela policy, Berg said.
Opposition pins hopes on González
González is planning to return to Venezuela to be sworn in Jan. 10 and is now trekking the globe to garner support for that goal.
After meeting with González Jan. 6, Biden said he would be following the planned Jan. 9 protests in Venezuela and he underscored the US commitment to continue to hold Maduro and his representatives responsible for their anti-democratic actions, according to a White House statement.
González also met with US lawmakers Jan. 6, including Representative Mike Waltz, Republican-Florida, the incoming White House National Security Advisor for the Trump administration.
Despite meeting with González, Biden so far has failed to signal any policy shifts, said Rachel Ziemba, a senior advisor for consultancy Horizon Engage.
“This means that the status quo will continue, and decisions left to the future,” she said. Republicans in Congress have also made strong statements in support of González but have said little about how the US should make sure he is president, she said.
If González does take power in a way deemed legitimate by the US, relations between Washington and Caracas are expected to normalize, which would lead to an end of sanctions, Blanco said.
This would clear the way for international investment, but a real production resurgence would take some time to gain momentum, as power, oil and shipping infrastructure is repaired, Blanco said.
If González takes power on Jan. 10, there would only be minor improvements to supply in the short-term, Blanco said.
“The real impact would come in the medium term as infrastructure repairs and upstream investment bear fruit,” he said.
The only way to reconstruct the Venezuelan economy, infrastructure and services of the country is through an investment of more than $50 billion, coming from private capital, said Jesús Seguías, president of polling firm Datincorp.
“And no businessman, either Venezuelan or foreign, is going to invest significantly in a country that is on fire on all four sides,” Seguías said. “Therefore, the solution to the crisis must necessarily be peaceful, orderly and effective, that is, through agreements between the government and the opposition,” he said.
Source: Platts
