What Happened?
The Venezuelan government is relinquishing the state-owned control of its oil supply to private foreign-owned companies as of Saturday, Feb. 8. Venezuela has long controlled the largest segment of the world’s crude oil, according to the New York Times.
Operations are being taken over by foreign companies amid Venezuela’s economic turmoil, according to the New York Times.
Giving up control of its oil industries is Venezuela’s attempt at preventing a complete economic downturn. As a country that relies on one export for its income, Venezuela’s lack of internal stability caused an immediate effect.
In Context
The Venezuelan government has historically relied upon its oil industry to operate, according to the New York Times.
Venezuelan legislation states that its government-run oil operation, Petróleos de Venezuela, is required to be the primary shareholder involved in each of the country’s oil projects, according to the New York Times.
In 2019, U.S. President Donald Trump’s administration imposed an oil embargo against Venezuela, according to the Associated Press. Sanctions imposed by Trump have also helped reduce approximately one-third of Venezuela’s oil production.
This embargo halted all transactions between Venezuela and oil purchasers in the U.S., who were once Venezuela’s biggest petroleum customers, according to the Washington Post.
With the embargo, the U.S. has banned all vessels that transport crude oil from Venezuela, according to Reuters.
The U.S. has also warned international companies not to support the Venezuelan government in any way. This warning acts as a global deterrent to many countries who may wish to purchase oil from Venezuela.
“Today, PDVSA doesn’t manage our oil industry, Venezuelans don’t manage it,” former Venezuelan oil executive Rafael Ramírez said, according to the New York Times. “In the middle of the chaos generated by the worst economic crisis suffered by the country in its history, Maduro is taking actions to cede, transfer and hand over oil operations to private capital.”
The Latest
Venezuelan National Guard general and current head of PDVSA Manuel Quevedo has been behind the privatization of Venezuela’s oil industry, according to MSN.
Quevedo has given control of Venezuela’s oil industry largely to a Russian company called Rosneft, Chevron and various European and Chinese companies, according to the New York Times.
The Russian government-controlled company Rosneft is currently managing 70 percent to 80 percent of all of Venezuela’s current oil exports, despite warnings from the U.S., according to the Washington Post.
Russia is not deterred by the possibility of sanctions from the U.S., the Washington Post reported.
Russia has been utilizing third party ships to distribute Venezuelan oil worldwide while working to mask the location in which the crude oil was sourced.
Rosneft, PDVSA, Russia’s Foreign Ministry and Venezuela’s Communications Ministry have not responded to requests for comments regarding the topic.
