Oil for Elections

Instituted in 2019, US sanctions have had a devastating effect on Venezuela, home to the largest proven oil reserves in the world and once one of Latin America's richest countries. This interview, in which the Biden Administration's top Latin America official explains why a deal was struck to lift many of those sanctions in exchange for the promise of free and fair elections next year, is worth a listen.  He makes it clear the administration knows the deal; to wit, allowing unfettered production and sale of Venezuelan oil on the world market is not a panacea for the country's problems and sanctions may have to be reimposed if free and fair elections are not held. Sanctions did not bring a return to democracy; perhaps this deal will open enough political space for such a transition.

Beyond the question of whether Maduro and his cronies will uphold their end of the deal, it is not clear that Venezuela can actually pump significantly more oil out of the ground to sell it on international markets. Equipment has been left idle for years and many of the engineers who ran the oil and gas industry have fled the country.  Also, the deal does nothing to alleviate other serious challenges of doing business in Venezuela:  endemic corruption; cronyism; and political interference.  Any international firm seeking to reenter the Venezuelan market should undertake intensive due diligence and consider if potential short-term gains are worth long-term headaches.