Thousands in Venezuela took to the streets to protest President Nicolas Maduro yesterday. Coverage of the events has focused on the demonstrations and the responses of the opposition and foreign governments, but few have considered the long-term impact of Venezuela’s downward spiral.
First, however, we need to take stock of what’s happened in the country so far.
As of now, Maduro remains in power. Opposition leader Juan Guaido swore himself in as president during yesterday’s marches, and the U.S., along with at least 13 other countries, recognized him as Venezuela’s interim leader. Maduro responded by cutting diplomatic ties with the U.S. and giving its diplomats 72 hours to leave the country. Venezuela’s Supreme Court, meanwhile, issued a warrant for Guaido’s arrest. The military remained silent throughout most of the day, suggesting internal discord. Then in the early evening, the defense minister and other generals said the country’s Constitution must be protected, and they recognized Maduro as president. Some media outlets have reported that U.S. President Donald Trump’s administration is prepared to apply sanctions on state-owned oil firm Petroleos de Venezuela, or PDVSA, and to put Venezuela on the state sponsors of terrorism list. Some even speculated that military action may be possible. Guaido has announced plans for another march in February to demand more humanitarian aid to the country, suggesting the opposition plans to continue campaigning for Maduro’s ouster even after the opposition leader declared himself president.
Whether the response from foreign governments registers with the Venezuelan administration depends on how they convey that they no longer recognize Maduro as president. Without follow-up actions, Washington’s moves may not mean much, though it could apply more pressure by leaving U.S. diplomats in Caracas, in defiance of Maduro’s orders. The talk of imposing sanctions or adding Venezuela to the terrorist list shows that Washington doesn’t really see Guaido as the country’s leader, or else it wouldn’t need to make such threats. The opposition, after all, will have limited power so long as the military refuses to join its cause, and it has yet to demonstrate that it can carry out government functions.
As for the impact on the oil industry, short-term fluctuations in price and supply are possible, but oil markets and producers have learned to expect volatility from Venezuela after years of crisis. Oil exports from the country have dropped by half over the past two years, to just under 1 million barrels per day. More important, Venezuela has already promised much of the oil it produces to countries such as China and Russia to help pay down its staggering debt. The latest upheaval, then, won’t have much effect on the global oil market.
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