What major political upheaval in Venezuela will mean for the oil-rich nation's energy sector

Demonstrators march in support of Venezuelan opposition leader Maria Corina Machado in Panama City. AFP

The only member of the South American football confederation never to have appeared at the World Cup is Venezuela. So Venezuelans may not be following closely Fifa’s award of its inaugural peace prize to US President Donald Trump.

Instead, residents of the oil-drenched nation are intently watching the build-up of the American military along their coast, and wondering what comes next.

The US has accumulated a considerable armada in the western Caribbean: the USS Gerald R Ford aircraft carrier, other warships, amphibious assault vessels, warplanes and 16,000 troops and sailors, as well as new construction at a mothballed naval base in Puerto Rico. On November 29, the US declared Venezuelan airspace “closed”.

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Any military action against Venezuela, a nation of more than 28.5 million people, will not be a simple exercise in gunboat diplomacy like the invasions of tiny Grenada in 1983 and Panama in 1989. When the US invaded Iraq in 2003, the population was a little smaller than Venezuela’s today. The invasion force for Iraq, which was able to assemble securely on-land, numbered 160,000. The subsequent chaos and the US failure to achieve its objectives beyond the overthrow of Saddam Hussein, are well known.

Venezuela's President Nicolas Maduro greets supporters in Caracas. Getty Images

Possibly, the White House believes it can simply scare Venezuela’s President Nicolas Maduro into stepping down. Mr Trump spoke to Mr Maduro on November 21 and reportedly gave him an ultimatum to leave. The US President may hope that opposition leader Maria Corina Machado, awarded the Nobel Peace Prize in October, can take over. Or, he may simply be seeking some headline concessions before moving on to another confrontation.

Given the disparate impulses from key players in the White House and its supporters in Congress, it is hard to find a single goal for the threats against Venezuela’s leadership. There are five obvious reasons for the US to pick a fight: drugs, migration, anti-socialism, demonstrating regional political dominance – and oil.

Despite the rhetoric, Venezuela is not a significant exporter of drugs to the US. Military action is likely to worsen any problem of migration and refugees, not solve it. More than seven million Venezuelans have fled the country due to its economic and safety woes, but they form only a small part of the Hispanic population in the US.

Until the recent anti-immigration crackdown, Venezuelan Americans generally voted Republican. Secretary of State Marco Rubio, a second-generation Cuban American, shares that community’s antipathy to allies of former Cuban leader Fidel Castro, who included Hugo Chavez, the architect of Venezuela’s “Bolivarian Revolution”, and his successor Mr Maduro.

Though not mentioned overtly, Venezuela is clearly a goal of the just-released US national security strategy. The “Trump Corollary” it contains is to prevent “hostile foreign incursion or ownership of key assets” in the Western Hemisphere.

A protester in San Francisco shows opposition to American military operations against Venezuela. Reuters

Russia has been the main supporter of Mr Maduro’s regime in recent years. Moscow’s state oil giant Rosneft is an important investor in the extra-heavy oil of the inland Orinoco Belt, as is China National Petroleum Corporation. Meanwhile, US company Chevron accounts for about a quarter of Venezuelan output, and just about clings on, receiving intermittent US sanctions waivers to continue operations.

Most of Venezuela’s 750,000 barrels per day of oil exports go to China. Iran also talks of co-operation with Caracas and has sent light oil to blend with Venezuela’s heavy crude, but otherwise can do little to help. Still, such allies make it easy to paint Venezuela as a foothold for US adversaries in the Americas.

Mr Maduro is in no doubt of the motive behind American operations. He wrote to Opec that, “Venezuela formally denounces … the intention of the government of the United States of America to seize Venezuela’s vast oil reserves, the largest on the planet”.

Ms Machado has spoken of a “more than $1.7 trillion” business opportunity from rebuilding the Venezuelan economy. She has sought help from factions within Mr Trump’s administration, and advocated privatising state oil corporation PDVSA.

Venezuelan state oil company PDVSA's El Palito refinery, in Puerto Cabello. Reuters

A Republican representative from Florida, Maria Salazar, expressed this motivation most directly from the US side. She told Fox News that “we need to go in” and it would be a “field day” for US oil companies, with “more than a trillion dollars in economic activity”. Those companies could “fix all the oil pipe – the whole oil rigs and everything that has to do with the Venezuelan petroleum companies”, she added.

Indeed, Venezuela has notionally 303 billion barrels of crude. But most of this is the extra-heavy gunk of the Orinoco, costly to produce, carbon-intensive and high in undesirable sulphur.

As recently as 2015, the country exported two million bpd. Nationalisation, loss of skilled staff, sabotage and theft, inadequate maintenance and investment and, most recently, US sanctions, have wrecked what was Latin America’s strongest petroleum industry. It now provides less than 1 per cent of global production.

Even under ideal conditions, it would be hard to rebuild. In the probably turbulent aftermath of a violent overthrowing of Mr Maduro and his allies, Venezuelan oil production would probably be seriously disrupted. That would not have a huge impact on the global market, but it would counter Mr Trump’s objective of keeping petrol prices low to help control inflation.

Venezuela certainly needs new leadership. From the richest nation in South America in the 1970s, it has degenerated to one of the poorest. Its energy and mineral resources would be an important component of reconstruction, alongside the return of some of its well-educated and entrepreneurial diaspora.

However, the history of military interventions, invasions and coups in Latin America and in other oil-producing countries is grim. Individual companies might be winners, but Venezuela’s oil is not the trophy the crude numbers seem to show.