The United States Department of War has authorized increased military activity against Venezuelan drug traffickers, as well as stationing military aircraft and warships along Venezuela’s coast. U.S. President Donald Trump and Venezuelan Leader Maduro remain in contention against each other, both refusing to relent at the other’s request. Why is Venezuela so important to the U.S.? Is Venezuela seen as a valuable asset around the world – and if that’s the case, why? This article attempts to answer these questions farther than mainstream news is willing to explain.
UNDERSTANDING VENEZUELA
In the 1970s and 80s, Venezuela was considered the wealthiest country in South America. The country was also one of the top 20 richest globally because it possessed the largest oil reserve – and it still does. In 2023, the U.S. Energy Information Administration confirmed that Venezuela housed 17% of the world’s oil, giving it the largest reserve.
The Wilson Center explains that about 25 years ago, this prized resource primarily contributed to the country’s prosperity. Its’ GDP was $122.91 billion and maintained a growth rate of 3.4%. For comparison, Venezuela’s neighbor Colombia had a GDP of $98.2 billion and a 1.7% growth rate around the same timeframe.
However plentiful, Venezuela’s oil stock became the nation’s downfall as it became subject to the “resource curse” as a petrostate.
The Council on Foreign Relations explains that a “petrostate” is where a government’s income is deeply reliant on the export of gas and oil, and its economic and political power is highly concentrated in an elite minority as political institutions significantly weaken by corruption (paraphrased).
Prime examples of similar countries include Chad, Iran, Indonesia, Mexico, Qatar, Saudi Arabia, etc.
Afflicted countries often host a prized resource that attracts foreign capital and business. These countries extract and export this resource to collect income from foreign investment so their government can provide for the suffering populace – in a ‘best-case scenario’ analysis of course. The reality of such business is more grim unfortunately.
The country will concentrate its labor to extract and export the resource, which effectively deprives other sectors, like agriculture, of labor. When these export industries that are extremely intensive on labor begin to lag, this causes unemployment rates to increase as companies must lay-off to offset profit loss; and the country remains highly dependent on the export of the resource that has slowed down.
OIL ACCORDING TO POKER
The Resource Curse dilemma can be understood through the example of poker, oddly enough.
In a game of poker, some players receive a phenomenal hand from the start. This would resemble a country possessing a plentiful resource, like Venezuela and oil. In Venezuela’s case, they became overly confident in the hand they had been dealt and decided to “go all in” to bet everything on this single hand (oil). Other players may decide to strategically diversify their chips into other promising industries like technology or agriculture, but this was not what Venezuela did.
The “tell” of oil is the turbulent market. Oil prices constantly rise and fall. When they rise, oil-possessing countries can make good profit to invest in rehabilitative or productive projects for the society, like building an airport or expanding welfare programs. When prices fall, that country is cornered and their hand is forced to make cuts, and the economy is stretched thin since every chip was put in the oil reserve. National economies in this position became seriously vulnerable to the market’s unpredictable swings which, in real life, are in global energy prices and “capital flight”.
When this happens, people begin to fight over who has control over the single prize/resource and begins to cultivate deeply embedded corruption. Overall, the Resource Curse provides the country or player with a short-term win but fails to supply the country for the long game. The long game is best played by diversifying strategy, adapting to a constantly changing and fluctuating market.
Venezuela decided to play the short game, and soon horribly fell from its prosperous platform in the early 2000s. Since the country grounded its income on oil, becoming heavily oil dependent, two-thirds of the government budget was financed from oil exports. Federal mismanagement and the rise of corruption and violence in the country led to an increase in international sanctions which inhibited exports and foreign extraction. If Venezuela could not export its oil, two-thirds of its federal budget no longer existed.
Production fell and output levels faced the lowest degree in decades, causing significant pains to the Venezuelan economy. In 2014, oil prices were at about $100 per barrel but fell in 2016 to only $30 per barrel. From 2014 to 2021, the country’s GDP fell by 70% and the growth rate retracted to -30%. As an economic consequence, Venezuela then took the blow of 300,000% hyperinflation. The national debt also spiked into the billions as hyperinflation took root.
On the point of international sanctions, the U.S. led a stark global opposition against the President of Venezuela Maduro and his administration. Especially in 2019, many world leaders condemned Venezuela’s election for being rigged and falsely giving Maduro another term in office. Since these sanctions made the development and output of oil significantly more difficult, Maduro struck alliances with Cuba, Russia, Iran, and China. Venezuela lacked qualified personnel to facilitate output, and lacked direct foreign investment. These alliances helped solve these problems.
So, Maduro placed his chips into PDSVA – the country’s state-owned oil and gas company. This made it the primary source of profit for federal revenue and funding for social programs. This state control effectively caused profit reinvestment to plummet (depriving social programs of funding) although the above alliances helped increase production by working around international sanctions.
This sort of state control is characteristic of authoritarianism which has led to vast political corruption at the expense of the Venezuelan people.
CORRUPT POLITICS
Freedom House classifies Venezuela as “not free” under the leadership of Maduro. The country has historically instituted centralized power and government overreach by expropriating/seizing private property, suppressing political opposition, and instituting concentrated executive control over the political, social and economic life of Venezuelans.
Maduro has relied on military force to carry out his campaign initiatives. The U.S. has charged Maduro with illicit goldmining, and most severely drug trafficking and exhortation from Venezuela to the U.S. and other countries.
This has remained the primary reason for increased U.S. military activity and presence in the Pacific and along the Venezuelan coast. The most recent formal U.S. initiative employed as a response to Maduro is Operation Southern Spear. It’s important to keep an eye on this activity, but this analysis is focused on understanding the situational backstory.
HUMANITARIAN SITUATION
The reality of the situation in Venezuela is that the people are drastically suffering at the hands of Maduro and his administration.
In the early 2000s, Maduro’s predecessor had removed nearly all private enterprises and replaced technical expertise in the country’s industries with political supporters who lacked the skill to effectively operate in those roles. This is where foreign investment in the country’s industries stopped on behalf of state price controls and mismanagement.
Maduro took the political landscape that had been set before him and deepened the pitfalls.
The U.S. State Dept. has reported that 9.3 million Venezuelans suffer from food insecurity, 7 million are in need of humanitarian assistance, and about 59% of all households lack the necessary income for food and other essentials.
Since 2014, over 6.8 million people have fled from Venezuela. Colombia has taken in the highest concentration of refugees – about 2.8 million. Others are scattered across Latin America and the Caribbean.
The U.S. and other international bodies have sought to improve conditions by instituting a federal transition into democratic governance which, of course, has not largely succeeded. The initiative has been called the Democratic Transition Framework. In other ways of response, the U.S. has imposed increased sanctions on Maduro and initiated the Kingpin Act – an act to block the assets of international drug traffickers and increasing the severity of violation penalties.
SO WHAT?
The point is, regardless of political and humanitarian injustice within Venezuela, the country remains a capital asset for oil and every world superpower knows it. Powers like China and Iran have invested deeply into Venezuela’s reserve, failing to condemn said violence and injustice.
This is the filthy reality of the state of play in the game of international business. Suffering, political corruption, humanitarian crises – these things are considered collateral to foreign powers motivated by profit and whatever will put them on top. This is beyond the necessary economic competition required to stimulate a global economy or rather, globalization as a whole. This is about power dynamics and the pursuit for unilateral profit, consequences be damned.
For the U.S., it’s harder to play according to the rules of unbridled hegemony because of the Constitution and internationally democratic standards we hold fast to. The fact that we value and prioritize the principles of life, liberty, and property sets us apart from other world powers in situations like this.
We are still necessary partakers in the oil business, so it would be foolish and illogical to pull out. What the U.S. government has decided to do is keep our hand in oil out of practical necessity like every other country, while increase aggressive responses to criminal activity as it threatens the vitality of our country and violates our democratic principles.
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Katelyn Sims is a senior at Howard Payne University, pursuing a Bachelor of Arts degree in social science with emphasis in American political studies, global studies and jurisprudence. She is also a student in the university’s Guy D. Newman Honors Academy, as well as a prominent member of the Student Speaker Bureau speech and debate team. Following graduation, Katelyn will pursue a career in the field of U.S. foreign policy.
Katelyn has worked as a news writer and marketing coordinator with Brownwood News since 2023. Her column The Truth Will Set You Free is intended for all people from all walks of life. Katelyn aspires to inform readers of major U.S. political and legislative activity with an unbiased analysis that engages with political ideologies on all sides of the aisle. She believes the public ought to exercise their free will to cultivate personalized opinions on controversial issues without the influence of mainstream media.
