Desperate for oil, Joe Biden throws Venezuela’s Nicolas Maduro a lifeline

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A few years ago, Canada was at the forefront of Western efforts to oust Venezuelan dictator Nicolas Maduro, whose corruption, economic mismanagement and repression of political opponents had driven his country into the ditch and its long-suffering citizens to despair.

As foreign affairs minister between 2017 and 2019, Chrystia Freeland championed a Lima Group initiative to recognize opposition leader Juan Guaido as Venezuela’s interim president amid Mr. Maduro’s moves to neuter the country’s elected assembly thanks to backing from the military.

Western countries, including Canada, followed by slapping additional sanctions on Mr. Maduro and his cronies. In 2020, the United States indicted Mr. Maduro on narcoterrorism charges, accusing him of collaborating with Colombia-based rebels in cocaine trafficking. The Venezuelan leader, who had succeeded fellow Bolivarian socialist and mentor Hugo Chavez as president in 2013 after a disputed election result, finally seemed to be on his way out.

By then, the damage inflicted on Venezuela during the previous two decades had become well-documented. Once Latin America’s richest country, producing more than 3.4 million barrels of oil a day in 1998, Venezuela’s economy had become a basket case. Its state-owned oil company had been run into the ground through a mixture of corruption and incompetence, and production was down to 700,000 barrels a day. Despite Mr. Maduro’s socialist rhetoric – which earned him hero status among Western apologists, such as former British Labour leader Jeremy Corbyn – most Venezuelans had descended into abject poverty. Millions had fled the country.

Alas, Mr. Maduro held on to power thanks to the West’s short attention span and continued financial support from China and Russia. Ms. Freeland moved on to different portfolios and none of her successors at Global Affairs took up the Venezuelan cause with anything resembling her drive and purpose. After Russia invaded Ukraine in February, the U.S. State Department abandoned all pretenses of seeking to oust Mr. Maduro as President Joe Biden began cozying up to the leaders of petrostates around the world to boost oil output amid soaring gasoline prices.

Thus began behind-the-scenes negotiations between the Biden administration and Mr. Maduro’s government, leading to the Nov. 26 announcement that U.S. oil giant Chevron Corp. will be allowed to resume oil production in Venezuela through a joint venture with state-owned Petroleos de Venezuela (PDVSA). Chevron said it will begin shipping Venezuelan oil to the United States by the end of December.

The amount of Venezuelan crude that initially enters the U.S. market will not be enough to affect gas prices. But the Biden administration’s stealth rehabilitation of Mr. Maduro’s government suggests the Chevron deal may only be the first of many more such announcements.

Indeed, it is unlikely the Biden administration would be undertaking a wholesale reversal of U.S. policy for a few thousand additional barrels a day of oil. Rather, it is likely laying the groundwork for hundreds of thousands of extra barrels of Venezuelan crude for years, if not decades, to come.

It would take several years and tens of billions of dollars of Western investment to restore Venezuela’s oil industry to its former productive state. But other Western oil companies are also seeking relief from U.S. sanctions to reactivate their joint ventures with PDVSA. How could they resist? Venezuela has the world’s largest proven oil reserves and comparatively lax environmental standards.

Domestic politics in the United States have all but made it impossible for a Democrat such as Mr. Biden to be seen as encouraging new fossil fuel projects in North America, which explains why he has spent this year looking abroad for new supplies of oil. It should not be lost on Canadians that the U.S. President, who cancelled a permit for the Keystone XL pipeline on his first day in office, has been willing to court dictators such as Mr. Maduro and Saudi Arabian Crown Prince Mohammed bin Salman to do so.

Mr. Biden’s outreach to the Maduro government is particularly galling for Canada’s oilpatch, which produces a heavy crude similar to Venezuelan oil. Some of the U.S. Gulf of Mexico refineries that are the destination for much of Canada’s oil production were initially configured to process Venezuelan crude. They could soon be buying Venezuelan oil again, possibly to the detriment of Canadian producers.

The Biden administration insists that the Chevron licence comes with strings. It says it could scrap the deal if Mr. Maduro reneges on a commitment to allow the United Nations to administer US$3-billion in humanitarian aid and negotiate with Venezuela’s opposition parties to ensure free and fair elections in 2024.

No one should be under the illusion that the Biden administration is going to hold Mr. Maduro’s feet to the fire. The Chevron deal has nothing to do with restoring democracy in Venezuela. It is about oil, period.