Oil Siege

Washington’s oil squeeze of Venezuela risks collective punishment without significant political gain.

US President Donald Trump’s declaration of a “total and complete blockade” of Venezuelan oil shipments marks a sharp escalation in America’s long-running campaign against Nicolás Maduro. Framed as an enforcement action against sanctioned tankers and ‘ghost ships,’ the move in effect threatens the single remaining artery of Venezuela’s economy. Oil, besides being Venezuela’s principal export, is the state’s last functioning source of cash, patronage and political survival. Choking it further may deepen the country’s misery but it is far from clear that it will loosen Maduro’s grip on power.

Venezuela has been living under American oil sanctions for six years. In that time, Caracas has perfected the art of evasion. Crude has been sold quietly at heavy discounts, mostly to China, via a shadow fleet of ageing tankers, frequent ship-to-ship transfers and creative paperwork. The proceeds have been meagre, but sufficient to keep the lights on in the presidential palace. Trump’s blockade aims to disrupt this system by raising the risks and costs of moving Venezuelan oil at all.

The economic consequences could be severe. Venezuela produces roughly one million barrels a day - just 2 percent of global output but almost all of its export earnings. Analysts warn that exports could fall by as much as half if sanctioned tankers are seized regularly or deterred from docking. Storage capacity is limited. If oil cannot be shipped, production will have to be shut in, potentially slashing output by hundreds of thousands of barrels a day. For a country already hollowed out by hyperinflation, mass emigration and institutional decay, the shock would be brutal.

This would not be Venezuela’s first oil collapse. Production once exceeded three million barrels a day in the early 2000s. Years of corruption, underinvestment and political purges at PDVSA, the state oil company, drove output to a nadir of 350,000 barrels a day by 2020. A modest recovery followed, helped by sanctions-busting exports and a limited easing of American restrictions. The blockade now threatens to reverse even that fragile rebound.

The pain will be felt unevenly. Chevron, operating under a special American licence, continues to ship oil to the United States and accounts for about a tenth of Venezuela’s production. But even this arrangement starves Caracas of cash: Chevron pays taxes and royalties in crude, not dollars. The real blow will fall on exports to Asia, particularly China, which takes around 80 percent of Venezuelan crude. Discounted barrels will grow cheaper still, if buyers are willing to risk them at all. Billions of dollars in annual revenue could vanish.

Trump has accused Maduro of using oil income to fund ‘drug terrorism’ and criminality, and casts America’s growing naval presence in the Caribbean as an extension of its war on narcotics. Yet the optics are awkward. Since September, American forces have seized dozens of vessels and killed at least 95 people, including fishermen. For Caracas, the blockade fits neatly into a familiar narrative of imperial aggression and resource theft.

The deeper problem is strategic. Sanctions have undeniably impoverished Venezuela. They have not, however, produced political change. Maduro has survived by shrinking the economy, dollarising informally, tolerating pockets of private enterprise and relying on loyal security forces. As the state’s revenues fall, the burden shifts to ordinary Venezuelans, not the ruling elite. A sharper oil squeeze may accelerate emigration, not democratisation.

Any sudden loss of Venezuelan barrels nudges oil prices upward, as markets already hinted after the blockade was announced. China, meanwhile, will weigh how much it is willing to antagonise Washington to secure discounted crude.

A blockade that halves Venezuela’s exports will not dislodge its authoritarian ruler. It will merely crush an economy already on life support, pushing ordinary Venezuelans deeper into penury while the political elite insulates itself, as it always has. Oil has long been Venezuela’s curse as well as its blessing. By turning it into a chokehold, Washington may deepen the tragedy without resolving it. Siege economics can break states but they rarely reform them.