assessments

Apr 30, 2019 | 21:33 GMT

6 mins read

Will the Uprising in Venezuela Affect the Country's Oil Production?

A bus burns near La Carlota military base in Caracas, Venezuela, during clashes between opposition protesters and Venezuelan soldiers on April 30, 2019.
(FEDERICO PARRA/AFP/Getty Images)
Highlights
  • A prolonged military uprising against Venezuelan President Nicolas Maduro risks disrupting Venezuela's oil production because dissident forces will see the country's export and production infrastructure as a key pressure point against the government.
  • The ultimate success or failure of the uprising will depend on whether key military units in the cities of Maracay and Caracas turn on the Maduro government. If those units turn on Maduro quickly, action against oil export and production infrastructure will become less likely.
  • Factors such as the distance to oil-producing regions and personnel constraints will limit the uprising's ability to threaten oil infrastructure. If opposition leader Juan Guaido has limited personnel at his disposal, he will focus the regime change efforts on Caracas and other major cities.

The attempted military uprising in Venezuela in support of opposition leader Juan Guaido carries with it significant risks for Venezuelan oil production. The uncertainty over how many military units support Guaido and how far they will go to pressure the government of President Nicolas Maduro will be the main risk in the coming days. Though virtually all known military movements have taken place in the cities of Caracas and Maracay — far away from Venezuela's extensive oil production and export infrastructure — the country's oil production could become a key factor as the uprising develops.

The Big Picture

One of the key questions surrounding the attempted uprising in Venezuela is what it will do the country's oil production. Venezuela exports nearly 1 million barrels per day. Though production is steadily declining, and most of the unrest is occurring far from Venezuela's oil-producing regions, these areas may come into play during a prolonged uprising. Along with the White House's decision to end sanctions waivers for Iran, Venezuela will remain one of the key sources of risk to the global oil supply, and the push for regime change there could drive prices upward.

What's at Risk?

As the uprising that began early on April 30 continued, Guaido's attempt at maintaining momentum behind the opposition's bid for regime change was focused largely in central Caracas and in Maracay, Aragua state. Protesters who came out in support of Guaido's early morning call for an uprising confronted National Guard forces near the La Carlota air force base. In Maracay, dissident forces captured the head of Venezuela's military industrial firm. An unconfirmed report earlier in the day claimed that the chief of the Strategic Operational Command, Gen. Jose Ornella, was backing the uprising, but Ornella later denied the report on Twitter. The Venezuelan Strategic Operational Command is a military entity similar in organization and function to the U.S. Joint Chiefs of Staff. An unconfirmed report claimed that the uprising had been planned for another day but that plans had been accelerated because of Guaido's impending arrest. Key supporters also apparently backed out at the last minute. A report from Argus Media claimed that the head of the National Bolivarian Intelligence Service — the Venezuelan equivalent of the Federal Bureau of Investigation — had ordered his forces to back Guaido.

A line graph showing the decline in Venezuela's oil production.

So far, confrontations between military units and dissidents are taking place well away from Venezuela's oil fields. But Venezuelan oil production and transport infrastructure could become a key factor for units trying to wrest control of the government from Maduro. Even a small number of military personnel rebelling at Puerto Jose in Anzoategui state could potentially seize the country's main export terminal or sabotage it, forcing the Maduro government to expend valuable time and resources to try to regain control. Similarly, dissident forces may consider seizing oil-producing joint ventures in the Orinoco Belt to pressure Maduro.

Such action would risk taking close to a million barrels per day of crude production offline. According to one estimate, Venezuela currently exports around 955,000 bpd. It would also risk damaging key oil production, transport and storage infrastructure — particularly if attempts to seize such assets devolved into violent confrontations. Even a failed attempt to seize oil-producing regions could result in damage or sabotage and extend output disruptions for weeks or months. The distance to the Orinoco Belt and Anzoategui and the limited number of assets at Guaido's disposition are two key factors that could prevent oil-producing regions from coming into play. If Guaido doesn't have enough military units under his control and fails to sway local and regional commanders to join him, then he'll likely have to focus on key cities such as Caracas, Maracay and Maracaibo.

A line graph showing global crude oil supply and demand since the first quarter of 2015.

Military Loyalty

The most significant event of the uprising's first day was the absence of key military units. Despite televised statements by Defense Minister Gen. Vladimir Padrino Lopez describing the Guaido-led uprising as a "terrorist" act, a mechanized infantry unit at Fort Tiuna in Caracas and armored units in Maracay had not come out to crush the uprising. These units are the most important means of military support that Maduro can call on to preserve his government. Their absence from the fray may mean that Maduro thinks he can put down the uprising without their help. Or it could mean that their commanders are undecided about whether to support the Maduro government or Guaido's bid for power.

Maduro may also be exercising excessive caution, since the deployment of regular army troops with heavier weapons rather than relying on the National Guard and other forces risks a bloodbath that could give the United States a reason to consider harsher action against Venezuela, such as quick secondary sanctions or even military intervention. In addition, mobilizing those forces to contain the threat also risks having them turn on Maduro.

The loyalty of these units will be crucial to watch over the next few days, as it will determine the course of the uprising and Venezuela's subsequent path. Their quick entry into the uprising on the opposition's side would make it less likely that dissident forces would try to target Venezuela's oil-producing infrastructure to deliver the Maduro government a death blow.

Aside from the National Guard and armed forces, Maduro can call on paramilitary forces, such as the country's civilian units, known as colectivos, to help quell the uprising. There were signs on April 30 that he was ordering colectivos to attack the protesters grouped near Guaido at La Carlota. It's less likely in the short term that Maduro will call on the country's extensive Bolivarian militia to put down the demonstrations, given that arming and mobilizing it will take too long. Foreign backers of Maduro's government, such as Russia, are likely present in some form in helping the government put down the uprising. Russia provided private military contractors this year to help prop up the Maduro government (most likely in some form of an advisory role), and Cuban military personnel have long served as advisers to the Venezuelan military and central government.

The Venezuelan uprising could lead to a cutoff of virtually all of the country's oil production, but only in limited circumstances — such as if dissident military units target the country's main oil export terminal. If the insurgent forces cannot call on significant support among the population or armed forces, then damaging action against the Orinoco Belt resources or the country's export infrastructure will become much less likely — as Maduro will almost certainly regain control of the situation quickly. But the ultimate loyalty of key military commanders and units remains the crucial question of the day in Venezuela. A major break in their loyalty to Maduro would make the prospect of continued Chavista rule in Venezuela tenuous and would give Guaido the boost he needs to claim control of the country's key cities.

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