OIL & BRICS: How the New Regime of Geopolitics will impact Guyana & Venezuela

Dec 23, 2023 Letters

Dear Editor,

In a previous publication, I brought to readers’ attention the geopolitical and wealth considerations that had fueled and driven the Guyana-Venezuela controversy. I now draw your attention to the new regime of influence that has been engulfing the region since the end of the Cold War. Could you imagine Venezuela agreeing so readily to a truce after all its recent agitation? Perhaps there was never a serious intention to invade Guyana. It would be no surprise if the major goal was lifting US sanctions. Nevertheless, it is in everyone’s interest to maintain peace and security in the region, thus, regional and other support led to the Argyle Declaration on December 14.

It is important to point out that, beginning with Chávez, the Venezuelan government took a position against the historical oil dependency and socioeconomic underdevelopment in the presence of foreign companies. It moved towards a policy of nationalization of natural resources. In terms of foreign policy, an anti-imperialist discourse denounced US imperialism while promoting Latin American integration, using oil as one of its foreign relations mechanisms.

Venezuela’s ideological shift saw the nationalization of oil companies. In early 2007, when Exxon cleared the way for oil exploitation in Guyana, it simultaneously had a major setback in Venezuela. It followed on the heels of the nationalization of British Petroleum, Exxon, Chevron, Conoco Philips, Total and Statoil. Together, they produced some 600, 000 barrels a day, equivalent to 25% of Venezuela’s production, in which the companies invested roughly US$17b. Exxon’s defeat in the long legal disputes against the Venezuelan government led to huge financial losses and the move to Guyana where it made huge oil discoveries.

Meanwhile, Venezuela impeded foreign investments in the Essequibo region of Guyana. For example, besides fully occupying Ankoko Island, it blocked the construction of a facility of the Texas-based Bael Aerospace Company in 2000; and in October 2013, a Venezuelan navy ship intercepted an oil exploration vessel owned by the Texas Company Anadarko Petroleum and arrested its crew, which included five Americans. As would be expected, this incident shook relations between Venezuela and Guyana. Following the discovery of oil in the territorial sea off the Guyana coast by the US company ExxonMobil in May 2015, geo-economics and geopolitical variables were again at play involving Venezuela, and the US on opposite sides, and, marginally, China. In June 2015, the Venezuelan Navy declared an ‘integral defence zone’ covering the maritime area in dispute with Guyana.

This period also saw the emergence of the new world powers referred to as BRICS i.e. Brazil, Russia, India, China, and South Africa. Each began to share the US geopolitical and economic pie. Russia and China have been the most dominant so far and now occupy what was the US backyard, or ‘sphere of interest’ under the now obsolete Monroe Doctrine. Brazil took an economic leap forward while Russia gained an economic foothold in Venezuela, Argentina, and other Latin American economies.

Guyana is strategically positioned in the Amazon-Caribbean area, as evidenced in the strategic thinking and military presence of the US. Having been shut out from Venezuela, the US jumped across to Guyana, pledging full support to the country it undermined in the 1960s when it was in bed with Venezuela. The oil discoveries in Guyana have no doubt led to geopolitical and geo-economics impacts regarding the intensification of internal political strife and disputes involving US and Venezuelan interests. More broadly, the Latin American and Caribbean region, and more specifically Guyana, has taken a center stage position in the renewed global power struggle, given the Sino-Russian presence and rivalry with the US, and the growing spread and influence of India and South Africa. For Brazil, Guyana is a gateway through the Panama Canal to the Pacific markets.

The impact of the geopolitical and economic crisis has dragged on in Venezuela since 2014 and is accompanied by increased strategic energy assets and the military presence of external powers allied to the Maduro government, notably China and Russia, and the absence of Brazilian regional leadership and of South American institutions that had played an important role in resolving internal conflicts in countries in the region. Further, financing through the oil-for-loan model of China and Russia resulted in the commitment of about half of Venezuelan oil exports, and the transferring of assets.

These extra-regional states or regional alliances utilizing strategic resources to challenge its supremacy or security run against US interests. From the US perspective, the geostrategic importance of Latin America and the Caribbean is highlighted by its classical geopolitics. The US current military presence is scattered across Central American and Caribbean countries: Cuba, Honduras, Aruba and Curaçao, El Salvador, Colombia, Guyana and Suriname. Therefore, the recent oil discoveries in Guyana are an area where US supremacy cannot be contested.

The oil discoveries in Guyana, the Venezuelan crisis, and the heightened tensions between the countries, have led to a growing feud between powers and companies from outside the region. South America has become a center of tension in the global power dispute led by the US and the Sino-Russian alliance, allying with different internal groups or outside powers, using economic tools or military presence as assets and strategies.

As a result of the growing territorial threat coming from Venezuela, Guyana has tied its defense strategy to ExxonMobil’s economic and US strategic interests. This was evidenced by the actions of the US diplomatic corps, which previously presented a position of greater neutrality. For e.g. the US began to work closely with Guyana to defend Exxon’s contract with the Guyana government while an intense debate was raging because the contract was favorable to Exxon. Thus, the US defense of the economic position of its company in a territory with strategic position and resources and with a government that appears to act favorably to the exploitation by its company, worked against Venezuela’s interests. In turn, Venezuela has strategic location and resources too, but its government acts against the participation of US companies, and on the geopolitical level it positions itself contrary to and allies itself with external rivals of the US that have been resisting US pressures for change of government.

While the Venezuela-Guyana controversy has a history with multidimensional implications, the oil discoveries, coupled with the presence of Exxon and the US in Guyana aggravated Venezuela. Further, while Exxon, the main operator holding 45% of the stakes in the consortium formed for the exploration of the Stabroek block, there is another private US company, Hess Guyana Exploration with 30%, and the state-owned China National Offshore Oil Corporation (CNOOC)/Nexen Petroleum Guyana with 25%.

According to some estimates, future production has the potential to quadruple Guyana’s current GDP, with government annual revenues reaching US$5 billion by the end of the next decade. Other estimates indicate that extraction could yield between US$ 7 billion and US$27 billion in gross revenues per year over the next 30 years.

In light of the potential gains for Guyana, and the increasing presence, economic activities and influence of BRICS in the region, it is foreseeable from the geostrategic importance of the mineral-rich Essequibo region and the US presence in Guyana, that new chapters in the Venezuela-Guyana relations would emerge until a final settlement is reached on the controversy.

Ronald Singh, LLM, MS, International Lawyer

Lecturer, Faculty of Law, The University of the West Indies, Mona

International Lawyer, Latin American, LLM, MS, Ronald Singh

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