Raphael John-Lall
The latest round of sanctions will cost Venezuela billions of dollars in revenue and could result in a new flow of illegal migrants, which could cause serious economic and social problems in T&T and other neighbouring countries.
On March 4, Colombian President Gustavo Petro lamented the decision of the President of the United States, Donald Trump, to eliminate License 41, which allowed US oil and gas company Chevron to operate in Venezuelan territory.
“Venezuela is returning to poverty and the more poverty there is in the Southern countries, the more migration to the Northern countries. I think the causes of migration have not been understood,” the Colombian President said through his X account.
While millions of Venezuelans now live in Colombia and in other countries regionally, thousands more live and work in T&T as a result of Venezuela’s economic collapse over the last decade.
Although Venezuela’s economy has seen a rebound in the last two years, some experts believe that the dark days of Venezuela’s economic contraction could return with heavy migration flows to other countries, including T&T, given the latest round of sanctions.
Ecoanalítica, a Caracas-based consultancy, estimates Chevron’s licence yielded up to US$4.5 billion in revenue for Venezuela’s Government last year, and that without it, Venezuela’s projected growth this year would fall from 3.2 per cent to 2 per cent.
According to Bloomberg, Chevron, the only US oil producer left in Venezuela, is currently pumping about 240,000 barrels a day, or nearly 23 per cent of the country’s overall production, representing around US$6 billion in revenue. That level of output is similar to what the company produced in 2018, before Trump first hit Venezuela with sanctions.
Venezuelan economist Francisco Rodríguez who now teaches economics at the University of Denver in the United States, on his X account projected that the cancelling of Chevron’s licence will lead to the Venezuelan economy contracting by 9.6 per cent in five years, increasing poverty and the migratory flows.
“Sanctions have real humanitarian consequences. If the goal is to stabilise the region and reduce migration, this policy moves in the opposite direction,” he said on X.
Last Tuesday in a report on the possible impact of Chevron leaving Venezuela, the Wall Street Journal stated that Venezuela’s national oil company, Petróleos de Venezuela, known as PDVSA, is already working to take over the operations after foreign companies pull out.
“Oil exports account for nearly all of the Maduro government’s revenue, but it will be difficult for PDVSA to sustain production, partly because Venezuela’s heavy crude requires blending with imported diluents to make it flow. Chevron has been supplying most of that feedstock. Plans are under way to bring in alternative supply from Algeria, an industry source said.”
That Wall Street Journal article also referred to an interview done with Rodríguez who said many more Venezuelans could now leave as the local economy absorbs the blow of Chevron’s imminent withdrawal.
Other foreign oil and gas companies are already saying that they refuse to do business in Venezuela because of the latest U.S. sanctions.
Colombian oil company Ecopetrol has ruled out any possibility of doing energy business with Venezuela as long as Venezuela is under sanctions.
“We will refrain from looking into business with Venezuela,” said its CEO Ricardo Roa, during an interview, while emphasising that Ecopetrol will not undertake any type of business with Caracas while there are restrictions by the Office of Foreign Assets Control of the United States (OFAC).
Economic impact
Social researcher Daurius Figueira, who has authored several books on T&T’s energy relationship with Venezuela, told the Business Guardian that Trump was forced to make the decision to withdraw the Chevron licences because of internal US politics.
“Trump 2.0 has revealed that the assault on Chevron in Venezuela arose from firstly, Maduro’s failure to honour the deal he made with Trump’s delegate who visited Venezuela.
“Secondly, the slim majority of just two Republican votes in the U.S. House of Representatives to pass his budget was exploited by three Republican Cuban emigres from Florida who threatened to vote against his budget if he did not cancel all Biden licenses, which includes Dragon gas and Manakin-Cocuina cross border gas fields to disable the energy trade with Venezuela. Trump is indebted to big USA oil especially the Texan oil patch, hence three Cubans linked to Rubio are attacking Trump and US big oil interests in Venezuela.”
He then explained how this will fuel illegal migration to neighbouring countries like T&T as he argued that these migrants will no longer be looking at the United States as an option.
“Without Chevron, Venezuela’s oil production falters, the revenue base takes a dire hit, the Bolivar, which is the Venezuelan currency, weakens and the dislocation intensifies. There will be no mass migration to the USA this time as it is now US$12,000 for the services of a coyote from Mexico into the US per person in cash up front.
“Those who cannot pay will be cleaned up as Mexico is paying a grave price for allowing their border to be porous with America and the coyotes have got the message. The flow from Venezuela to T&T and the rest of the Caribbean has already accelerated, where we will soon reach the point of saturation with grave, deep-seated social dislocation where there will be increased calls for the El Salvador President Bukele solution applied. “
Figueira also pointed out that the potential negative social impacts, which accompany human trafficking and illegal migration.
“This illicit migration will intensify the war between transnational organised crime business models as those illegally entering T&T will bring with them the conflicts raging in Colombia, Ecuador, Peru and Venezuela. Learn from Haiti today which is a conflict involving the two business models at war in the island of Hispaniola and now Puerto Rico. The Caribbean will then become jump off points for human smuggling to Europe and the USA especially as Trump 2.0 shuts down Mexico and the US border with Mexico. The jamming has now started.”
Economist Dr Anthony Gonzales told the Business Guardian that less revenue for Venezuela means that Venezuelans will look for economic opportunities in other countries.
“Yes, new sanctions would reduce investment, both local and foreign, in Venezuela and that would cause both income and employment to decline. As a result, more Venezuelans will seek opportunities abroad. I would expect that some more would come to this country.”