Once the wealthiest country in South America and a world-renowned oil producer, Venezuela has fallen to depths that now see its oil shunned by countries around the world, which want nothing to do with the embattled Spanish speaking country as United States (US) sanctions hit.
According to a report from Reuters on Sunday, at least 16 tankers carrying 18.1 million barrels of Venezuelan oil are stuck at sea around the globe. Buyers, according to data from Refinitiv Eikon, are avoiding them like the plague to avoid falling afoul of the US and its sanctions.
This oil, according to Reuters, represents almost two months of output at Venezuela’s current production rate. Reuters explained that some of these vessels have been at sea for over six months, and have failed to unload their cargo despite stopping at several ports.
It was explained that due to the expensive nature of carrying oil cargoes, oil is rarely loaded onto a tanker without a buyer being secured. In cases where a buyer cannot be secured, such oil is usually sold at a discount. In the case of these tankers, they are sustaining heavy demurrage charges every day they stay at sea without offloading.
US sanctions against Venezuela come at a time when the neighbouring country is in the throes of domestic troubles. The Venezuelan economy has collapsed under the Nicholas Maduro regime and sanctions imposed by the United States over Maduro’s undemocratic grip on power based on elections widely panned as lacking credibility.
The Venezuelan President has even been charged in the US for narco-terrorism, drug trafficking, money laundering and corruption.
Meanwhile, Guyana has domestic troubles of its own, being without an official declaration by the Guyana Elections Commission (GECOM), three months after elections were held.
The past few months have been marked by court cases and attempts by elements in GECOM to rig the elections in the favor of the incumbent coalition party. Officials in the US and other countries have already warned that Guyana could be sanctioned and isolated on the world stage if the legitimate results are not used to swear in a President.
President David Granger has refused to concede and according to Jose Cardenas, a Washington-based political consultant who has worked with the US State Department, Guyanese should be wary of the threat of sanctions and what it can do to Guyana’s blooming oil industry.
According to Cardenas, who was speaking during a Zoom interview with several local reporters on Saturday, sectoral sanctions can have serious consequences for Guyana and its ability to earn money. It was noted that Guyana currently banks its oil revenues in the US Federal Reserve. According to him, there are implications for this.
“Those possibilities will be driven by events in Georgetown. If those funds sit in a US institution, they can be frozen,” Cardenas said. “I don’t know in-depth enough about the contracts Guyana has signed with Exxon, but I expect it’s always a possibility that the current Government and Exxon can be prohibited from further exploration and moving oil to the international markets.”
Guyana only began producing oil last year, with its first oil revenue-based earnings deposited in the Federal Reserve Bank of New York in March of this year. That money, $11.4 billion, came from Guyana’s initial million-barrel oil lift. An additional sum of $7.3 billion was subsequently deposited, as well as royalty payments. This money is still sitting in the fund, earning interest.
Cardenas pointed out that the US takes threats to democracy in the western hemisphere more seriously than it takes such threats in other parts of the world, since countries in the hemisphere are expected to reflect democratic principles in Governments.
Continuing his hypothesis, Cardenas noted that even if Guyana were to seek allies in countries at odds with the US, this will be a complicated and expensive road to travel.