Do not expect an immediate economic recovery, including lower gas prices after the capture of Nicolás Maduro, at least not for the foreseeable future. Anyway, gas prices are already falling. And, we’ll also have to wait on better job numbers, too, at least for a while.
The recent nighttime assault on key targets in Venezuela by U.S. forces took nearly everyone by surprise. It should not have, but when the country woke up on January 3rd, Venezuelan President Nicolas Maduro and his wife Cilia Flores were being whisked out of their country to a new home in a Brooklyn federal prison.
Capturing Maduro is the culmination of months of American military strikes on suspected drug boats off Venezuela’s coast and the placement of a large portion of the U.S. fleet in the same region. It was a military success and trumpeted that way by the President. But it may not translate in the same way politically and economically.
The attack on the presidential palace, said historian David Yee, was long brewing going back to the Hugo Chavez presidency. “That same ruling party continues to run the Venezuelan state,” said the Metropolitan State University Denver history professor. President Trump only changed its leadership.
The attack, said Yee, was “an escalation,” but not a surprise. “The main reason for any confusion is the Trump administration kept both Congress and the public in the dark.”
The Metropolitan State University Denver Venezuela historian said the only comparison to the cloak of darkness strike and capture of Maduro and his wife is the 1989 assault on Panama in which un-elected Panamanian President Manuel Noriega was captured by U.S. forces and returned to the United States to stand trial.
‘Operation Resolved’ began and ended in just hours. There were no U.S. military losses. The Department of Defense reported more than 80 Venezuelan and Cuban casualties. The economic and political elements are still to be determined.
The President told Fox News that the economic payoff will be huge, the reward coming in Venezuelan oil. “We took it from them,” he said to Fox Host Sean Hannity. While he envisions rebuilding the country’s refineries and profiting off the country’s vast untapped crude, an estimated 300 billion barrels, big oil isn’t nearly as optimistic.
Taking the oil refineries may be the easy part, perhaps the only easy part. Getting them up to full capacity after years of disrepair and neglect, say a number of oil executives who met last Friday with Trump, will be a test of time, will and money.
At a White House meeting with the President, one oil executive guessed it would take $100 billion to get Venezuela’s oil industry up to standard and that’s before any significant crude is extracted. But another, Exxon CEO Darren Woods, said Venezuela is “uninvestable,” citing building new refinery infrastructure, legal barriers, and “investment protections.”
Currently, Chevron is the only big American brand pumping out of Venezuela. Exxon and Conoco Phillips both left in the mid-2000’s when they would not accept new financial terms from then Venezuelan President Hugo Chavez. The companies say Venezuela owes them as much as $20 billion after their departure.
Despite Trump’s assurances that “You’re going to make a lot of money,” and that “we’re in charge,” companies are still uncertain that Venezuela won’t do again what it’s done in the past. After all, Maduro’s number two, Delcy Rodriguez was allowed to remain in charge of the government.
Most timetables for having a fully up-and-running Venezuelan oil industry are not of the one or two year variety. Oil industry experts say ten to fifteen years are more realistic. That only inspires questions about any U.S. role. But Trump has already said he’s prepared to “run the country until such a time we do a safe, proper and judicious transition, also adding, “we’re not afraid of boots on the ground,” a reference to a longer term U.S. military presence.
While Venezuelan crude can make the trip from refinery to Houston or New Orleans refineries in five days, it’s not the kind of product that will necessarily lower gasoline prices Trump is regularly promising.
Venezuela’s crude, often called ‘extra-heavy’ oil, is thicker, higher in sulfur and carbon content, harder to extract and more expensive to refine. Adding to that conundrum, there is now a worldwide oil glut.
Industry experts wonder if having access to the world’s largest reserves translates into a money making undertaking by big oil. Oil prices now range from $58-$63 per barrel, down from triple digits when supplies are down.
Trump’s orders to stage the military strike on Venezuela, said Professor Yee, “has empowered and emboldened Trump.” In addressing his reason, Trump has referred to the Monroe Doctrine as explanation for the Venezuela attack.
The Monroe Doctrine, named for President James Monroe, dates back to 1823 and was an American foreign policy warning to European powers to stay out of the hemisphere where they might be considering new colonies.
Trump, he said, now feels “empowered and emboldened” and with encouragement from Secretary of State Marco Rubio, may now target Cuba and Panama. Greenland, Yee said, may also be future targets.
The cost of the step-by-step buildup to the attack has been estimated as high as $150 million. But that may be just a starting point, especially if there is a Venezuelan backlash and a rush to escape.
Since Maduro has run the country, as much as 25 percent of the population has left the country causing neighboring Columbia to beef up troop presence at its border. “Future events in Venezuela over the next months could greatly impact immigration,” Yee said.
The closest action that comes to mind is the U.S. invasion of Panama to capture General Manuel Noriega in 1989. One additional point not in the media is the impact this will have on migration. Venezuela was the source of massive migration waves to Colombia, Ecuador, and the United States. The sanctions the U.S. placed on Venezuela was a root cause of Venezuelan immigration in the past several years. Denver has witnessed the arrival of new migrants from Venezuela.
