US sanctions on Venezuela’s PDVSA are less consequential than it seems
Baku, Azerbaijan, Jan.29
By Leman Zeynalova – Trend:
Trump administration's new sanctions on Venezuela’s PDVSA that effectively target the Maduro government's oil exports to the US are less consequential than it seems, Gal Luft, the co-director of the Washington-based Institute for the Analysis of Global Security, told Trend.
Venezuela is embroiled in fast-moving political crisis, after an opposition leader stood in the streets of Caracas on Jan.23 and declared himself as the rightful interim president.
A flurry of world powers, including the US, immediately backed Juan Guaido, prompting a furious response from President Nicolas Maduro.
The US has imposed sanctions on Venezuela's state-owned oil firm PDVSA and urged the country's military to accept a peaceful transfer of power.
The expert noted that the demand for Venezuelan oil has fallen by more than 50 percent over the past ten years, reaching under 600,000 barrels a day.
“US domestic producers can easily make up for the loss and provide oil that is not only better but also cheaper. Additionally, expectations for prolonged political turmoil in Venezuela have already been priced into the market,” Luft explained.
He pointed out that the market is more concerned today about slowing global growth than about the situation in Venezuela.
“These concerns outweigh the uncertainty about what has become a tier-3 oil producing country. The same is true for OPEC. The cartel is barely counting Venezuela in its policy calculations and it does not see it as a major factor in determining oil prices. The OPEC+ agreement will remain intact no matter what happens in Caracas,” Luft believes.
He went on to add that for American producers the key issue is the results of the US-China trade spat as this will determine whether or not the Chinese market will be open to US oil in the coming years.
“If an agreement is not reached by the March 1 deadline it will become apparent that the world's number one market for imported oil is closed to the US oil industry. This will force the US to seek alternative markets for its oil, possibly by ratcheting up its Iran sanctions and trying to capture market share in places like Europe and India,” the expert concluded.
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