Despite US pressure on Maduro administration - Chevron cleared to continue oil operations in Venezuela
In the convoluted world of international politics, you sometimes have to take a long, hard, deeply contemplative look to make sense of what, all too often appears at first glance, to be incomprehensible developments.
It is no secret that the United States administration with President Donald Trump at the helm has made it a point of duty to say to the world that one of its foremost foreign policy missions is to remove the Nicholas Maduro administration from office on the grounds that it has, over time, created conditions in Venezuela that have resulted in an unacceptable level of economic and social upheaval. The US has gone as far as imposing sanctions on individuals and groups involved in a food subsidy scheme for the country on the grounds that the scheme is in fact, a ‘front’ for enriching members of the Maduro family.
But then even as Washington continues to turn the screws on Caracas, it never forgets Venezuela’s global strategic circumstance, as being the country possessing the world’s largest known oil reserves. So that while sanctions of one sort or another against the incumbent administration in Caracas is the order of the day, Washington announced a matter of days ago that it had made a significant exception. The Trump administration announced last week that it had renewed the licence being held by the American oil company, Chevron, which will essentially allow it to continue to drill for oil in Venezuela.
Chevron is currently engaged in four separate joint venture pursuits with Venezuela’s state-run oil company Petróleos de Venezuela, S.A., which reportedly produces the equivalent of about 200,000 barrels of oil per day (bpd).
If the position of the Trump administration may appear to bear a startling resemblance to a double standard then you will be able to see it much more for what it is if you contemplate the strategic significance of oil to the US economy and Washington’s obvious concern that it does not lose ‘corn and husk’ so to speak if it cuts ties to Venezuela’s strategically important oil sector. So that while Washington may see Venezuela as on the verge of collapse, it is signalling as of now, that if and when its expected collapse comes, it catches the US ‘in’ rather than ‘out’.
This time around however, Chevron has been afforded a rather more limited licence which has been extended to October 25, 2019. Days ago a Chevron spokesperson was quoted in a section of the media as saying that the company’s operations in Venezuela “continue in compliance with all applicable laws and regulations,”
As of January this year, Washington has become decidedly heavy-handed in its effort to end the Maduro presidency so that at the start of the year, the Trumpimposed sanctions on the national oil company has dealt the Venezuelan economy a blow that has cost it billions of dollars.
An ‘old hand’ in Venezuela, Chevron has been operating in the country for more than a century, its current operations providing employment for around 8,000 persons including contractors and direct suppliers.
Apparently the renewal of the licence is being seen as a win for the pragmatists in the US administration who would appear to have persuaded President Trump that now is not a particularly propitious time for Washington to cut its ties not so much with Venezuela, but with the country’s oil industry. That line of reasoning, as some analysts see it, has to do not only with the strategic importance of oil to the US economy but also to a line of reasoning which suggests that having a US company in Venezuela would be an asset after any removal of Maduro and would help the country’s oil-dependent economy recover more quickly.
It was, media analysts suggest, a matter of the competing opinions of serving Secretary of State and former CIA Director, Mike Pompeo, on the one hand and US National Security Advisor, John Bolton, on the other. The latter, it was reported, was pushing for allowing Chevron’s licence to expire in the hope that it could add to the existing pressure on Maduro. Pompeo’s seemingly more pragmatic position would appear to have won the day.
Four other US oilfield service companies, improve productivity and reverse a decline in external competitiveness, the government needs to address structural impediments particularly an enabling environment for private sector investment,” could just as well apply to Guyana. A recent study suggests that less than a quarter of the companies undertaking investment projects in The Bahamas have been funded by private banks, and access to credit is particularly harder for SMEs, where rejection rates are as high as 85%, higher than Barbados at 35%, Jamaica at 55%, and Suriname at 27%. We were unable to secure a figure for Guyana.
One inevitable result of this phenomenon in The Bahamas (and again much of this also applies in Guyana) is that small businesses must rely heavily on alternative financing including family support and retained earnings. In The Bahamas around half of the mediumsized Halliburton Co, Schlumberger Limited, General Electric’s Baker Hughes and Weatherford International, have all largely halted operations in Venezuela because of the instability there but have had their licences renewed for a further three months.
A US State Department spokesperson has been quoted as saying that “the limited scope of the license is intended to facilitate U.S. oil companies in abiding by their contractual obligations, maintaining their operations assuming they choose to do so, and avoiding economic harm to the United States.” The spokesperson is further quoted as saying that Washington “will continue to take appropriate action against Maduro and those aligned with him.”
As of July, Venezuela’s oil output was just 734,000 bpd, about half of what it averaged in 2018, prior to US sanctions, when production was 1.4 million bpd, according to OPEC figures. and small businesses rely on that type of financial backing. Interestingly, while reports suggest that the six Bahamas-based institutions, including the three Canadian-owned banks, possess a total B$12.2 billion in assets and solid liquidity, the squeeze on lending to small businesses persists. On the whole, credit to the private sector in The Bahamas, particularly loans, has been falling, with a decline of 5.6 % over the last year.
As is the case in Guyana, the commercial banking sector in The Bahamas typically does not prioritize small businesses, favouring mortgages and consumer loans instead.
The nature of the problem in The Bahamas is reflected in the fact that more than 90% of the approximately 17,000 businesses in the country are small and medium-sized enterprises that hire around 47% of all employees. This characteristic also applies in the Guyana business sector.