Venezuela, Oil & US

BLOG 2/2026 DATED 5TH JANUARY 2026

2026 had just begun and people celebrating the new year were still nostalgic about the year gone by, year end parties, and exchanging New Year wishes, when everyone heard a BOOM in the next day morning newspaper “US attacked Venezuela”. Ukraine-Russia, Palestine- Israil has, too, not died down and the world witnessed no positive move towards peace. Contrary to this, the one who claimed to have stopped many wars began one more. However, instead of discussing the war let us understand what Venezuela is all about?

Factsheet on Venezuela:

Official Name	Bolivarian Republic of Venezuela.
Situated at	Northern coast of South America, few islands in Caribbean Sea.
Population	31.30 Mn
Capital	Caracas
Official language	Spanish
Major religion	Christianity
Total GDP (PPP)	USD 234.34 bn
Per Capita GDP	USD 8790
Currency	VEF (Venezuelan Bolivar) ;  1 USD = 30.24 mn VEF(mind blowing)

History:

It is said that Venezuela is an ancient civilization with habitants that date back to 13000 bc i.e. 15000 years ago. Christopher Columbus discovered the land in 1498 and described its water bodies as “..if the water of which I speak does not proceed from paradise than it is even a greater marvel…” In the 16^th century Spain colonized the entire area and also allowed Germans to venture into this place. Venezuelans however fought back and after several uprisings declared themselves as independent in 1811 under the leadership of Francisco De Miranda. Venezuela witnessed continuous wars, natural disasters, internal disputes for more than a century. The independence declared in 1811 could not establish Venezuela as a really independent country as it continued to have tussle with Britain and other European nations. Due to all this, the country remained poor and underdeveloped among the Latin American countries.

Oil discovery:

During World War I, this poor and distorted nation got huge oil reserves in its waters and that was sufficient to alter the destiny of its people. With the oil excavations, Venezuela began to progress and by 1935 it became one of the richest countries of Latin America. The fortune that came through oil, lasted until 1980s when its economy again started feeling the heat due to southward movement of oil prices and corruption within its own economy. Failed economic policies and over dependency on oil, crumbled the economy by 1990s.

Bolivarian Revolution:

Hugo Chavez was elected the President in 1998, and he introduced many reforms that were termed as Bolivarian Revolution. In 1999, Venezuela was named as Bolivarian Republic of Venezuela, the name that it carries till date. Chavez survived many attempts of coup against him and in fact was actually ousted for a brief period. He finally consolidated his position and continued with reforms. From 2003 to 2010, their economy grew by 95% with a decrease in income inequality and improvement in the Human Development Index. Things looked fine when Venezuela’s economy got another jolt post sub-prime crisis due to fall in oil prices. Chavez, however continued with the Bolivarian Revolution principles of providing social security to its citizens. Venezuela provided one of the finest welfare measures such as free education, medical facilities, food and nutrition etc to its citizens. It also introduced land reforms, electoral reforms and other socio-economic measures for the welfare of its citizens. However, welfare always comes at a cost.

New Regime & relation with US:

Hugo Chavez died in 2013, and the regime was handed over to Nicolus Maduro through a presidential election. Opposition parties termed the election of Maduro as fraud. Venezuela again witnessed troubled days with oil prices going down the hill. Inflation rising to 100%- the world’s highest, economy came under recession, external debts rose sky high and around 8 Mn people migrated from Venezuela. It is reported that due to heavy crackdown by Venezuelan authorities, US under Barak Obama imposed sanctions against Venezuelan officials. Maduro declared an economic emergency in 2016 and that further worsened their relations with the US. Under Trump in 2017, further sanctions were imposed to pressurize the Maduro Government.

Maduro again won the election in 2018 by 68%. US along with Canada, Germany, France, Colubmia, Argentina, Chile and Brazil termed the election as illegal. In 2019 US, EU and, Canada imposed an economic embargo on the nation, putting further pressure on the already strained resources. US and EU also blocked the sale of covid 19 vaccine to Venezuela. Due to blockage, Maduro arranged doctors from Cuba for treatment of their covid affected citizens.

In 2020, US department of Justice indicted Maduro with charges of drug trafficking and corruption. Before 2024 presidential election polls were conducted and they indicated a  wide margin victory for opposition candidate Gonzalez. However, in actual polls again Maduro got a thin victory. Protests broke out across the country as opposition parties did not accept Maduro as the winner.

3^rd Jan 2026 & US action:

On the morning of 3^rd Jan 2026, the US stunned the world, with its forces not only attacking Venezuela but also abducting its president Maduro and taking him outside the country.  On the face of it, US president claims that he wishes to put Maduro on a trial in US for the alleged narcotic activities.

Oil & Venezuela:

The 2 charts will tell the story of oil reserves of Venezuela.

Global Petroleum Reserves:

Country	Reserves (bn barrels)	Global share
Venezuela	304	18%
Saudi Arabia	298	17%
Canada	168	10%
Iran	158	9%
Iraq	145	8%
Russia	80	5%
USA	45	3%
Other countries	535	31%
Total	1733	100%

Source: Money control research (UK energy institute)

Crude Oil & Condensate Production of Venezuela:

Year	Production by Venezuela(000 bbl per day)	World Production	% share
2015	2747	81661	3.40%
2016	2461	81545	3.00%
2021	616	78130	0.80%
2024	914	82788	1.10%

Source: Money control research (Statistical Review of World Energy 2025)

The above 2 charts depict a clear picture that even if Venezuela has highest reserves to the extent of 18%, its production is only 1.10%. Further, the share of production has come down from 3.40% to 1.10%. This shows that the country needs to step up its oil production to save its depleting economy. US probably eyes this aspect of controlling Venezuela’s oil reserves as a potential solution to many of its financial issues.

There are 2 issues that need a bit of thought.

1. Venezuela’s distorted economic conditions.
2. Is the US action justified?

For the economic conditions of Venezuela, there can be various reasons:

1. Over dependency on Oil and not equipping the nation with other sources of revenue.
2. Political turmoil and continuous rift among various political establishments. In other words, failure of the ruling party to create a political consensus.
3. Soft on corruption.
4. Welfare policies even if the economy is not doing well. Welfare policies need not be abandoned but competitiveness and productivity must have its say.
5. Approach of US and other countries. Instead of supporting a country going through economic turmoil the nations all over the world decided economic blockage and sanctions. Even during Covid period, the country was not spared.

For the US action:

We can see a new world order where any mighty nation can attack the other without any provocation or justified reason. In the past as well, we have seen countries attacking other countries without a justified reason. However, US has moved a step ahead by abducting the head of a state. If not resisted and opposed now, it may open the pandora box for other nations to follow suit.

Sillypoint suggestions:

• UN must ensure that the Venezulean President is released immediately and US is cautioned against any such action.
• A UN court must analyse the charges that US court has levied against Venezuela’s authorities.
• To resolve the internal political turmoil a re-election under the supervision of UN can be conducted and a duly elected Government should be established.
• Venezuela should be free to take decisions on their Oil and other resources without any intervention by any country.
• There should not be any economic blockage and the country must be provided financial support to strengthen its economy.

However, to implement the above, UN must have enough power and support and that is possible only if other major countries take the matter seriously.

References:

https://en.wikipedia.org/wiki/Venezuela

https://en.wikipedia.org/wiki/Bolivarian_missions

Money Control report on Toppling of Maduro: What it means for global financial markets by Abhinav Sahu

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