2024: A New Age For Venezuela-U.S. Relations

is Venezuela,” during a referendum vote in Caracas, Venezuela, on Sunday, Dec. 3, 2023. Photographer: Gaby Oraa/Bloomberg© 2023 Bloomberg Finance LP

The year 2023 will be remembered as a turning point for relations between the U.S. and Venezuela. In a sense, very little has changed on the ground, but the gates have been swung open. “Western Hemisphere relations move from idealism to realpolitik,” said Catherine Osborn on Foreign Policy, a leading Washington D.C. publication.

There have been two key considerations for the change, from the perspective of the U.S. One is Venezuela’s vast natural wealth. Oil and natural gas have gained prominence with Russia’s invasion of Ukraine and OPEC+ efforts to boost prices.

Looking to the long term, the world’s first superpower is also concerned over the South American country’s minerals lottery. The soil contains, among others aluminum, gold, bauxite, uranium, coltan, and iron. Many will be key in energy transition efforts. Biodiversity and freshwater reserves also have a role to play in the long game.

Just as important—if not more—are the thousands of Venezuelan migrants making their way North. The years-long economic and humanitarian crisis has pushed around 7.7 million Venezuelans to move abroad, according to the UNHCR.

At first, most of these migrants found refuge within South America. 1,5 million would be in Peru; 500,000 in Ecuador; 450,000 in Chile; and 2,4 million in Colombia—many had crossed the border in the opposite direction until the last decade.

With conditions in the region also worsening, many prefer to seek opportunities in the U.S. or Europe, where they could claim asylum. It is hard to know how many now live in the U.S., though in September Homeland Security extended Temporary Protected Status (TPS) to 472,000 Venezuelans.

On October 18th, the Biden administration made clear that these were priorities. After months of secret negotiations in Qatar, it lifted sanctions on oil and gas, gold mining, and the Venezuelan state airline, now in charge of repatriation flights—commercial ones are still not allowed. Two days before had come a—public—accord in Barbados between Venezuela’s government and the largest opposition alliance, the Plataforma Unitaria.

Later, the State Department also offered reassurance with explicit licenses for firms that provided services to Chevron, the U.S. oil major operating in Venezuela. They are Halliburton, Schlumberger, Baker Hughes, and Weatherford International. Simultaneously, since 2022 it has been offering comfort letters to European firms to interact with the local authorities without fear of punishment from the Office of Foreign Assets Control (OFAC).

The Barbados Accord was meant to provide democratic guarantees for elections coming in 2024, which were set for the second half of the year. The Venezuelan government then freed five political prisoners, and later opened a process for candidates to challenge their public office ban in the supreme court.

For a while, it seemed as though the Barbados Accord had failed, especially for its critics. Key newspapers such as the Financial Times, The Wall Street Journal, and The Washington Post simultaneously ran editorials against the Biden administration’s pivot, away from President Trump’s regime change efforts. Venezuela’s President Nicolas Maduro, they said, had broken his promises days after the accords.

On December 6th, with tensions over the Essequibo territory as a pretext, the Venezuelan government arrested an opposition member and issued warrants to others in exile. The view that negotiations were failing resonated. Yet, unexpectedly, we witnessed a high-profile prisoner swap which meant a strong willingness to negotiate.

President Maduro released 10 U.S. citizens, multiple political prisoners—including the one arrested on December 6th—and extradited Leonard Francis, a U.S. fugitive. President Biden released Alex Saab, who had been a priority demand from Caracas.

Eyvin Hernandez (7th L), Edgar Jose Marval Moreno (8th L) Jason Saad (9th L), Savoi Wright (10th L) and Jerrel Kenemore (8th R) pose for pictures upon arrival at Joint Base San Antonio Kelly Annex in San Antonio, Texas on December 20, 2023, after being freed amid a prisoner swap deal between the United States and Venezuela. The United States released an ally of Venezuelan President Nicolas Maduro in exchange for 10 American detainees and a fugitive dubbed “Fat Leonard” in a sweeping prisoner swap deal between the rival governments December 20, 2023. US President Joe Biden made the “extremely difficult decision” to free Alex Saab, the onetime confidant of socialist leader Maduro, who is accused by the United States of money laundering for Caracas, US officials said. (Photo by SUZANNE CORDEIRO / AFP) (Photo by SUZANNE CORDEIRO/AFP via Getty Images)AFP via Getty Images

Essequibo dispute on hold

After the Barbados Accords, limited sanctions relief, and the prisoner swap, 2023 ended on a high note. Furthermore, tensions over the disputed Essequibo territory were eased as the presidents of Venezuela and Guyana met in Saint Vincent—with crucial mediation of the Latin American and Caribbean communities, and especially Brazil’s Luis Ignacio “Lula” da Silva.

The Essequibo territory is controlled by the government in Georgetown, but Caracas claims it as its own. The dispute traces back to the 19th century, between a newly independent Venezuela and the British Empire. In recent years, tensions have arisen over the territorial waters—yet to be formally delimited—which have been found to hold vast offshore oil reserves.

Many observers have argued that the renewed push to reclaim the Essequibo was largely an effort by the Maduro administration to refocus attention. When interviewing an opposition politician, they did not want to delve into the dispute, as it would mean allowing President Maduro to set the agenda and distract from important issues for ordinary people. They did not wish to be named.

With attention—joy and outrage—on the prisoner exchange, it seemed as though we could forget about Guyana. Just after Christmas, the British navy sent the HMS Trent into contested waters to support their former colony. In Venezuela, this was received as a grave provocation.

It is not yet clear what was London’s strategy. Was it meant to trigger an expected reaction from Caracas? Or was it clumsily late, when tensions had already calmed down? The result has been a blessing for President Maduro’s nationalist campaign. Appearing on television in military gear, he announced military exercises on Venezuela’s Atlantic coast, involving the army, air force and navy, with 5,000 personnel.

“The U.S. and the West should not confuse antipathy towards Maduro with antipathy towards our own country” says Antonio Ecarri, the founder of Alianza del Lapiz, a political party, and presidential hopeful for 2024. He speaks of the recent campaign to reclaim the Essequibo led by President Maduro, which has not produced the desired fervor. Many believe that the government inflated turnout numbers on December 3rd’s consultive referendum on the territorial claim.

the claims for territorial waters off the Essequibo, over offshore oil blocks. The red, dotted line is Guyana’s claim, and the yellow projections are Venezuela’s—the darker would be including the Georgetown-controlled Essequibo.Alianza del Lapiz.

“Imagine if a different government, one friendly with the U.S., wins in Venezuela, and takes a tougher stance on the Essequibo. What happens to investments in disputed waters?” asks Ecarri. “In recent decades, Venezuela has been very conciliatory towards Guyana, offering subsidized oil and other forms of aid. The opposition has been against that.”

“We know that they never really cared about the Essequibo in Washington. When Guyana’s government was in the Socialist bloc, the U.S. preferred our position. Under President Eisenhower, there was even a plan to have Venezuela invade Guyana. Now Maduro is the enemy, so they back the other guy.”

Elections coming this year

Towards the end of 2024, we will have elections coinciding in the U.S. and Venezuela. For Jose Chalhoub, an oil and political risk consultant, crude production and prices are key for presidents Biden and Maduro’s reelection bids. “The Biden administration is trying to ramp up oil production in one of its closest traditional allies. Remember that Gulf Coast refiners are built for Venezuela’s heavy crude.”

“It’s still early to say how long this slight return to normalcy and investors to Venezuela will last,” ponders Chalhoub. “It should at least continue until the U.S. presidential race, where there are high chances we will see a Republican administration.”

“For now, we see that Biden clearly wants to keep gasoline prices in check and restock the SPR, with Chevron reexporting Venezuelan heavy crude,” says Chalhboub. “Meanwhile, for Maduro it will be important to have oil prices above $80 per barrel. He sees that other economic conditions are still grim, so fresh funds will be needed ahead of the vote.”

First, it will matter under what conditions the vote is held, and then who wins. We are not yet sure of who will be the main candidates. Maria Corina Machado, the opposition’s favorite since she won a primary vote in October, is in the process of challenging her public office ban.

Luis Vicente Leon, president of Datanalisis, a polling firm, says there are various scenarios to consider. “Even President Maduro could decide not to stand for re-election if his backers prefer to present a fresher candidate. Alternatively, a future context of enmity with the U.S. or conflict with Guyana could be used to postpone elections.”

leader of the Vente Venezuela party Maria Corina Machado speaks during a press conference after being banned from the next elections on July 4, 2023 in Caracas, Venezuela. (Photo by Carlos Becerra/Getty Images)Getty Images

It is likely that Machado will still be barred from running this year. Her tough anti-government stance has made many close to power fear retaliation if she were to win an election. Who would run in her stead is not clear, as she does not have a close second-in-command. Datanalisis found in October that a substitute candidate would be 20 percentage points behind Machado—though they would still be the favorite option.

“An election without the opposition’s most popular candidates could be full of surprises,” says Leon, in an interview over breakfast. “Benjamin Rausseo, a popular comedian, was polling at 14% in October, without being officially in the race. There are other candidates outside the institutional opposition, such as Antonio Ecarri. He did quite well in Caracas’ 2021 mayoral race in part for this reason.”

“In a limited vote, opposition voters could always turn up in large numbers to back even a less known or unpopular name as long as they are not the government’s candidate—something that happened in some regional elections, as in the last race for the state of Barinas.”

A new understanding inside Venezuela

We could say that Venezuela’s unprecedented economic collapse is due to falling oil prices, poor policy and heavy sanctions—yes, there are other factors as well. The symptoms were visible to all; they included hyperinflation, widespread violent crime, shortages of essential goods, and run-down public services.

The first thing that the Maduro administration could change was policy, and they have chosen the path of economic liberalization, even if using other names. President Maduro had been a trade unionist and socialist, educated as a cadre in Cuba. Nonetheless, the government’s economic policy has adapted to new circumstances. Venezuelan businessmen and foreign capital are becoming welcome friends, as they too have learned to tolerate socialist-speaking politicians.

“We can see a clear change in economic policy since 2019,” says Horacio Velutini, from his top-floor office, drawing a timeline on his whiteboard. He is the director of the Council for Investment Promotion (CONAPRI) and the Caracas Stock Exchange. He explains that for virtually a century, Venezuela has been a state-rentier economy.

“The government allowed private banks to set currency exchange rates, after 15 years of tight control. This came alongside relaxing price controls and adjusting fuel subsidies. There has been encouragement for the private sector, and citizen security has been improving—which was a national trauma for us. A new fiscal and monetary discipline has made tangible results with inflation.”

There is also a new closeness with Europe. Few now reminisce of Venezuela’s historic closeness to the U.S. Unlike neighboring Colombia and Brazil, Venezuelans are avid baseball fans, and their vocabulary is full of Anglicisms. Going a step above, the upper class likes to speak in its deferential Spanglish. You can find white-picket-fence neighborhoods in Maracaibo or Puerto Ordaz, built for the oil and mining expatriates to feel at home.

Anti-imperialist governments and Washington D.C.’s regime change approach broke much of this relationship. Across the pond, nonetheless, Europe was more restrained in its animosity towards Hugo Chavez and Nicolas Maduro, opening a new door for both sides.

The upper class that remained in Caracas now finds safe refuge visiting Madrid. In the Country Club, Altamira Tennis Club, or an instagrammable restaurant in Las Mercedes, all can comment on their latest trip, and how much they admire the Spanish capital. Meanwhile, European and especially Spanish investments have also seized much of the open space left by the U.S., particularly if we look at the energy sector.

Exploration and Production (E&P) at Repsol SA, left, and Pedro Rafael Tellechea, Venezuela’s oil minister and president of Petroleos de Venezuela SA (PDVSA), during a news conference in Caracas, Venezuela, on Monday, Dec. 18, 2023. Venezuela and Spain’s Repsol SA signed a new contract for a jointly-run oil venture as the Andean nation seeks to ramp up production after the US eased sanctions. Photographer: Carlos Becerra/Bloomberg© 2023 Bloomberg Finance LP

Since Russia’s invasion of Ukraine in 2022, Europe has laid its eyes on Venezuela’s natural gas reserves, which had been virtually unexploited. They are the eighth largest in the world, and amount to 80% of Latin America’s deposits, according to the U.S. Energy Information Administration (EIA).

Needless to say, crude is just as important. In the oil and gas sector, we have seen deals involving Repsol, Eni, Maurel et Prom, and Shell; all expect to expand in the coming years. Others such as TotalEnergies and BP could enter the scene in 2024 or 2025, according to sources in the local energy industry.

In other sectors, Spanish corporations including BBVA, Telefonica, Iberia,…

This article was originally published by a www.forbes.com . Read the Original article here. .