As the price of oil tumbles to an 18-year low of around $20 a barrel, preserving the U.S. oil industry around the world seems like a pretty good idea. After all, preserving all aspects of the U.S. economy fits the whole “Keep America Great” idea, right?
The oil industry supports some 10.3 billion jobs in the U.S. and makes up nearly 8 percent of the national GDP, not to mention that it stimulates local economies with the hundreds of billions of dollars it invests every year. So it would be in the administration’s best interest to make sure it’s operating at full capacity.
The deadline for the U.S. Treasury Department to decide whether or not it will renew General License 8E, a measure that temporarily allows for U.S. oil companies and their supporting partners to operate in Venezuela, is coming up on April 22. These U.S. companies have already been operating in Venezuela at a limited basis.
Now, more than ever, the Trump administration should renew their license so these companies can safeguard their assets and top-of-the-line infrastructure in a country that’s strategic for our national security.
If these companies are forced to leave, the Russians or Chinese will plant their flag on American assets and top-of-the-line infrastructure. Maduro has already made Putin Venezuela’s oil baron, allowing the Russians to control its oil exports. Today, the most productive joint-venture oil operation in Venezuela is an unknown company controlled by two former Soviet government employees.
*** UPDATE – Florida Senator Rick Scott (R), who has suggested that military action should be considered to deal with Maduro, believes that the U.S. needs to “continue to do everything possible to cut off power to Maduro.”
Scott’s Senate office responded to our request for comment for this story, stating that the Trump administration needed to sanction “every oil company (Russian and Chinese) working to benefit the Maduro regime” and that the Senator Scott’s focus continued to the “getting Maduro out of power and bringing freedom to the people of Venezuela.”
And let’s not forget oil giant Rosneft, which in the beginning of the year exported 80% of Venezuela’s total oil, helping the regime violate U.S. sanctions. When the U.S. slapped sanctions on Rosneft, it hastily transferred all its assets to an unnamed company owned by the Kremlin. Russia is not leaving Venezuela, it’s not leaving its oil industry and it’s certainly continuing to support Maduro.
But don’t take our word for it, just read what Sergei Melik-Bagdasarov, who was appointed Russia’s ambassador to Venezuela a day before the sanctions against Rosneft Trading were announced, stated on Twitter
“Don’t worry! This is about the transfer of Rosneft’s assets in Venezuela to Russia’s government directly. We will remain together going forward,” he wrote on Twitter on March 28.
To confirm Russia’s play to skirt around the U.S. sanctions against his regime, Maduro himself tweeted on the very same day that he had communicated with Baron Putin, and was assured the support “in all areas” of their relationship. Maduro made himself very clear.
— Nicolás Maduro (@maduro_en) March 30, 2020
Oh, but let’s not forget about Putin’s Chinese comrades, who helped introduce the deadly COVID-19 virus to the world and worked with the World Health Organization to cover-up their missteps and underreporting of the pandemic. China has invested over $65 billion in Venezuela and recently reaffirmed its support for the regime, while criticizing the U.S. for slapping sanctions on Venezuela.
The reality is that oil is now an almost irrelevant revenue stream for Venezuela. That’s why making American companies leave would not have any effect on Maduro’s coffers or on production levels. Venezuela’s once soaring oil industry has been decimated by years of corruption, incompetence and divestment. Now, as a result of the oil price war started by Russia’s Vladimir Putin and with plummeting demand due to the COVID-19 pandemic, Venezuela’s crude oil has become unprofitable to extract. Analyst firm Ecoanalitica expects Venezuela’s economy to shrink 25% this year.
And speaking about the economy. Pulling the plug on U.S. oil in Venezuela will only embolden China and Russia, and cause the 60+ existing U.S. oil companies and its affiliates to lose hundreds of millions of dollars in revenue.
One of these companies, Baker Hughes, has already announced that it would pursue a restructuring plan that would cost $1.8 billion because of the plummeting oil prices.
The Trump administration has done a great job in going after the real sources of Maduro’s revenue, drug trafficking and contraband, exerting “maximum pressure” where it really hurts. Maduro is facing an uphill battle. With an economy in ruins and a crumbling health system, he can’t effectively contain the pandemic. With no means to import or produce gasoline, the country is at a standstill. Venezuelans are desperate. Tempers flare. Maduro’s popularity is at its lowest point, and the U.S. Justice Department has a $15-million bounty on his head.
It seems Maduro’s days in office are numbered. Keeping a U.S. presence in Venezuela is vitally important to keep Putin from completely hijacking the oil industry before a new democratic government can take hold. And before Venezuela, a strategic beachhead for adversary regimes, becomes more entrenched in drug trafficking, contraband and narco terrorism.