Venezuela will have difficulties finding alternative oil markets to the U.S. as the prominent Chinese market can be ruled out as an option, said David Mares, a distinguished professor of political science at the University of California San Diego on Thursday.
China, one of Venezuela's major markets, has engaged in oil for loan agreements with Venezuela, which Mares considers is already at a sufficient level for China to meet its oil needs.
In an exclusive interview with Anadolu Agency, Mares explained that Venezuelan oil exports to the U.S. consist of low-grade and low-value heavy crude, the transport of which would be costlier to further flung markets than the U.S., thus eating into Venezuela's already low-profit margin.
He asserted that Venezuela would be unable to find another cash buyer like the U.S. for the equivalent volumes that the U.S. was purchasing from Venezuela. However, he added that the U.S. could replace Venezuelan imports when necessary.
"Given the small size of the U.S. imports of Venezuelan crude, the slowing of the Chinese economy, and the heavy crude in Canada looking for markets, I don’t expect much impact on the global oil market," Mares said.
As the optimum solution, he suggested that the U.S. permit the Guaido government, the opposition to current President Nicolas Maduro's administration, to have escrow accounts in the U.S. while permitting the state-owned oil and gas company, PDVSA, to deposit its profits into these accounts.
"That money would then be available for use by a post-Maduro government and PDVSA’s business could continue to operate," Mares said.
Since National Assembly leader Juan Guaido declared himself interim president last month, tension has been high in Venezuela, with Maduro warning that countries siding with Guaido are attempting a coup.
The U.S. has sided with Guaido, along with some 19 European countries.
Russia, China and Iran have thrown their support behind Maduro, as has Turkey.
On June 28, the U.S. announced restriction on Venezuela’s PDVSA as it continues to ramp up economic and diplomatic pressure on Maduro.
The sanctions on PDVSA are expected to block $7 billion in assets and result in $11 billion of lost export revenue over the next year, National Security Advisor John Bolton told reporters.
Venezuela leads the world with 303 billion barrels of proved oil reserves, according to BP World Energy Outlook Report 2018.
The country exported around 1.7 million barrels per day (mbpd) of oil in 2017, out of which the U.S. bought 670,000 barrels per day, according to the U.S.' Energy Information Administration.
A major OPEC member, Venezuela's crude output stood at 2.32 mbpd in 2015 and 2.15 mbpd in 2016, according to the organization's data.
That level declined to 1.91 mbpd in 2017, further fell to 1.34 mbpd last year, and plummeted to 1.15 mbpd in December 2018, the data showed.
Who is David Mares?
Professor Mares holds the Institute of the Americas Chair for Inter-American Affairs at University of California San Diego and is also the Baker Institute Scholar for Latin American Energy Studies at the James A. Baker III Institute for Public Policy, Rice University.
Mares was previously Professor of the Centro de Estudios Internacionales at El Colegio de Mexico, and has been a Fulbright Professor at the Universidad de Chile and Visiting Professor at FLACSO-Ecuador.
He is the author or editor of ten books and his publications have appeared in English, Spanish, French, Portuguese, Italian and Chinese in journals such as Comparative Politics, International Organization, International Interactions, Security Studies, Latin American Research Review, Foro Internacional, Estudios Internacionales, and Fuerzas Armadas y Sociedad.
His books include Aspirational Power: Brazil on the Long Road to Global Influence; Latin America and the Illusion of Peace; and Power, Institutions and Leadership in War and Peace.
He has been a visiting scholar at the Brookings Institution, Oxford Institute for Energy Studies and the Weatherhead Center for International Affairs, Harvard University, a fellow at the Japan External Trade Research Organization, a fellow at the Center for Advanced Study in the Behavioral Sciences, Stanford University, and held a Pew Faculty Fellowship in International Affairs.
Professor's research and teaching interests include Latin American energy politics, the political economy of drug policy, defense policy, civil-military relations and the use of photographic imagery in politics.
Mares received his B.A. at Harvard College, and an M.A. and Ph.D. at Harvard University.