SCOTT DETROW, HOST:
There are a few things we know about the U.S. military seizure of an oil tanker last week. One, it happened off the coast of Venezuela, a country that allegedly relies on illicit tankers to smuggle their crude oil into global supply chains. Two, since then, the U.S. has imposed new sanctions targeting Venezuela on oil tankers and shipping companies. Three, the seizure represents a big escalation of the standoff between the Trump administration and Venezuelan leader Nicolas Maduro. And four, the U.S. has long had an interest in Venezuela's oil industry. But how did we get here? To help us break that down, we have called Francisco Monaldi. He is the director of the Latin American Energy Program at the Baker Institute at Rice University. Thanks for talking to us.
FRANCISCO MONALDI: Thank you for inviting me.
DETROW: In terms of U.S. troops, you know, sliding down ropes from helicopters to seize an oil tanker, have you ever seen anything like this before?
MONALDI: It's something that has not happened in the case of Venezuela. There have been other events related to sanctioned Iranian vessels. But this is unprecedented in that is the first time that the U.S. sort of is signaling a blockade, meaning that the tankers coming out of Venezuela are potentially going to be subject to seizures in the future.
DETROW: Let's rewind way back, zoom way out in terms of the context we're talking about this. Historically, what's the best way to think about why and how much the U.S. has focused in on Venezuela's oil production?
MONALDI: Well, the U.S. companies have been a major player in Venezuela since a century ago when oil production started. There was a brief period when nationalization happened in the oil industry of Venezuela between 1975 and the early '90s in which the oil companies were not there, but then they came back, particularly Exxon, Conoco and Chevron. But then there was a renationalization by Hugo Chavez, and only Chevron remains. But it's a very big player in Venezuela, producing about 25% of Venezuela's exports.
DETROW: And yet Venezuela has one of the biggest oil reserves in the world but is a relatively small producer compared to the oil it has. Is that just because of the way that it was economically isolated post nationalization, or what's going on there?
MONALDI: It's a combination of things. The dominant player still is the national oil company. And the national oil company has been mismanaged, and there has been too much extraction of resources from the oil company to the government and reneging on the deals with international oil companies. And as a result, the production has declined in the last 25 years from around 3.6 million barrels to about a million barrels today. Of course, U.S. sanctions, starting in 2020, did also affect the oil industry.
DETROW: So if the U.S. follows through and continues to crack down on these black-market shipments, how much do you think that affects Venezuela's economy, which as we know, is already in a terrible place?
MONALDI: Well, it could produce first, a decline on the price that Venezuela gets because they will have to offer very significant discounts for anyone to take the risks, in addition, of course, the volumes if a significant number of tankers are not willing to go to Venezuela to load oil. And that could produce a significant decline in revenues and then in GDP, like the one that Venezuela had in 2020 when sanctions were increased and COVID led to a massive decline in production to less than half of what it is today. And that will, of course, have a significant impact in everything related to the economy, including an increasing inflation and, you know, a deteriorating income for Venezuelans.
DETROW: You know, we've been talking about the energy industry specifically here, but just kind of big picture, thinking about the tension between the U.S. and Venezuela right now, this is about alleged drug trafficking. This is about election improprieties and the Maduro government, you know, ignoring widespread viewed as an election loss from international observers. All of those things have been going on for a while now. Why do you think there's such a focus on Venezuela right now coming from the Trump administration?
MONALDI: It seems to me that the policy is being driven by Secretary Marco Rubio, who has for a long time thought that Venezuela and Cuba are nefarious actors against U.S. interests. And the drug issue and the crime issue and the immigration issue sort of have been a way to align his views with others in the administration to really focus on producing a change in government - that, you know, Nicolas Maduro leaves power. And so they want to do it without the need to, you know, put boots on the ground or if possible, just by putting a credible threat on what they might do in Venezuela. And, of course, this oil side seems to be part of that pressure campaign to get Maduro out without having to pay any significant cost on the U.S. side.
DETROW: That is Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute at Rice University. Thanks so much for talking to us.
MONALDI: Thank you. Transcript provided by NPR, Copyright NPR.
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