Key Takeaways:
Venezuela faces increased political instability and violent protests following a contested presidential election, with international bodies condemning the lack of electoral integrity and Maduro's claim of victory despite opposition majority in polls.
The U.S. and other countries are likely to impose further sanctions and diplomatic pressure on Venezuela, exacerbating tensions, particularly between the U.S. and Maduro's government.
Leading oil companies like PDVSA, Chevron, and Repsol face potential operational disruptions, regulatory changes, and legal challenges due to the ongoing political turmoil and potential new sanctions.
If the opposition gains power, there is a strong likelihood of reintegrating Venezuela into the global market, attracting foreign investment, and lifting international sanctions, which could lead to a more transparent business environment.
Events Brief
On the 28th of July, Venezuela underwent a Presidential election. Incumbent President Maduro, running for a third term, faced opposition politician Edmundo González Urrutia, after his predecessor María Corina Machado was barred from participating due to alleged political crimes. International bodies and human rights organizations have criticized this decision as an attempt to weaken the opposition and a violation of political rights, along with acts of violence. President Maduro conversely stated that the opposition, along with Colombian crime organizations collaborated in an attempt to rig the election by creating a power outage. President Maduro has claimed victory, though the polls had pointed to a 70% majority for the Opposition. On August 1st, Anthony Blinken, U.S. Secretary of State, officially recognized Edmundo González Urrutia as the rightful winner.
Venezuelan citizens have been protesting in the capital Caracas, as well as the Columbian capital Bogotá, for days since the election. Mass protests against human rights issues have become increasingly violent against the state, as Maduro claims victory, while his posters are burnt in the street. Vedant Patel, Principal Deputy Spokesperson for the United States Department of State, stated that “Venezuela’s 2024 presidential election did not meet international standards of electoral integrity and cannot be considered democratic”.
The Defense Minister Vladimir Padrino López has vowed loyalty to President Maduro and will suppress the opposition if protests continue. Venezuela has severed ties with Peru as a diplomatic response to Foreign Minister Javier Gonzalez-Olaochea’s public support for Edmundo Gonzalez. Furthermore, Peru has ordered Venezuelan diplomats to leave the country within 72 hours, after the “contested vote”. Peru has one of the largest communities of Venezuelan migrants who have recently fled due to political instability.
Effects of Maduro’s ‘Chavismo’ on Civil and Political Rights
The anti-democratic practice of not releasing the polling data raises fears of increasingly authoritarian practices in Venezuela. These tendencies have been developing since his election in 2013 following Chavez’ death and are likely to intensify. Populist leaders in Latin America have recently garnered significant support by addressing issues such as corruption, inequality, and insecurity. This trend suggests that democratic institutions may continue to face restrictions, potentially undermining national transparency.
Effects on Venezuela’s Oil Exports
Venezuela is a key player in the global oil market, having nationalized its oil industry under Petróleos de Venezuela, S.A. (PDVSA) in 1979. Since then, it has emerged as the fifth-largest oil exporter in the world. The situation's geopolitical implications are significant, with the United States likely to continue imposing sanctions on Venezuelan oil if President Maduro's government fails to uphold democratic norms and the rule of law.
Companies like PDVSA, Chevron, Repsol, Total, and ROSNEFT have substantial stakes in Venezuela's oil sector, making the outcome of this election incredibly relevant to investments. The opposition to Maduro has advocated for significant changes in the country’s oil and energy policies, looking to address issues of corruption and international isolation. If the opposition can gain control of Venezuela amidst the political turmoil, reintegration into the global market is likely to be a priority, alongside the lifting of international sanctions, as well as restoring democracy and the rule of law. Such measures would open Venezuela to foreign investment and globalization, with a more transparent environment for business.
Looking Forward:
KSG assesses that the political instability is likely to increase if Maduro continues to refuse the release of data from the election.
KSG anticipates that further oil sanctions and diplomatic pressure are highly likely to be implemented against Venezuela, with relations between the U.S. and Venezuela further deteriorating as Maduro’s government exercises increasingly authoritarian tendencies.
KSG assesses that operational disruptions, sudden regulatory changes, and legal challenges could be on the horizon for the leading oil companies in Venezuela such as PDVSA, Repsol and Chevron.
KSG anticipates that if the Venezuelan opposition come to power, they will highly likely seek to attract foreign investment and reintegrate Venezuela into the global market.
Wargaming the outcome of Venezuela's recent election and the current unrest is difficult to do, given the myriad of factors and possible eventualities, especially as international leaders await the verification of electoral results. The continuation of Maduro's rule is likely to continue facing significant backlash, including international diplomatic pressure and national unrest. The likelihood of a coup will depend on several factors, including the strength of opposition movements, the loyalty of the military, and international influences.
By Alexandra Cammack, Latin America Analyst