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Venezuela in no capacity to replace Russian oil

The Ukraine invasion and meeting between President Biden's officials and Nicolas Maduro in Caracas has awoken PDVSA experts. These days, every "Venezuela energy sector expert" talking to the media is making unsustainable remarks about its alleged capacity to fill the gap that sanctions on Russia's energy will create in the market. They talk about "spare capacity... ability to increase production to 600,000 barrels a day rapidly... release of millions of barrels held in the strategic reserve... Venezuela taking Russia's place in U.S. oil imports..." Given what's been transpiring in PDVSA since Hugo Chavez took the reins in 2002, it is impossible to determine what these "experts" are talking about.

Venezuela is in no position to potentially fill void left by Russia. In fact, further sanctions to Putin's regime will diminish Venezuela's share in its traditional markets (China, India, Malaysia), which is precisely where Russian oil will end up should the U.S. and Europe shut the door (ask Trafigura, Glencore, Vitol and Lukoil). There's already talk about a mechanism being set up in India to absorb Russian surplus, and it is unthinkable that China will refuse to increase energy trade with tovarish Putin.

Whether or not U.S. Treasury lifts all sanctions on Venezuela / PDVSA so output could be ramped up (most likely not), increasing said production to mentioned levels will take many years and, crucially, billions of dollars worth of investment. That in a country with a well established reputation of reneging on contracts, nationalisations, expropriations, etc., is unlikely to ever happen.

Venezuela has no strategic reserve. Venezuela has no spare capacity. It's oil industry has been crippled by mismanagement and the largest looting of funds seen this century. Over one trillion dollars worth of income vanished in an endless pit of corruption built by Rafael Ramirez. This has continued under all of his successors at the top of PDVSA.  

The painted scenario isn’t even realistic. It is therefore beyond ignorant to make such claims about Venezuela.


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