Resource sovereignty without institutional competence is an illusion

Sep 15, 2026 Features / Columnists, Peeping Tom

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(Kaieteur News) – In his column, entitled, “Sovereignty in the Age of Oil” Chris Ram, in making the argument that storage, a refinery and even a national oil company could improve energy security without giving Guyana effective control over production, technology, capital, markets or the geopolitical forces surrounding its petroleum, pointed to the case of Venezuela.

He wrote, “We need look no further than Venezuela for the clearest warning. It nationalized its petroleum industry and possesses the world’s largest proven oil reserves, yet the United States showed through raw power and its influence over the critical elements of the petroleum sector, technology, finance, shipping, insurance and markets  that legal ownership does not guarantee the ability to produce and sell oil. Washington did not need to own the wells; power over the systems surrounding them was enough.”

Chris Ram’s argument essentially says that Venezuela owned the oil, Washington controlled everything surrounding the oil, therefore, Washington controlled the oil. This is the sort of simplistic argument that eliminates the troublesome presence of history itself. Venezuela’s problems were not about selling its oil, it was about producing the oil. Once oil is produced, the world does not end at the American border. Venezuelan crude can be sold to China, India, Russia, Turkey or any number of countries.

The fundamental problem Venezuela faced was that it had become increasingly incapable of producing enough oil in the first place. And the origins of its production woes were mainly home-grown.   Venezuela’s petroleum industry did not collapse because Washington suddenly discovered that insurance companies, shipping companies, banks and oil-field service companies existed. It collapsed because of combination of factors.

Venezuela nationalised its petroleum industry in the 1970s, long before Hugo Chávez arrived on the scene. It created PDVSA, one of the most technically capable national oil companies in the developing world. For years the company generated the revenues that financed the Venezuelan state. Legal ownership by the state therefore did not prevent Venezuela from producing millions of barrels of oil for decades.

The more interesting question is therefore not why ownership failed. It is why the productive capacity of a country possessing the world’s largest proven reserves was allowed to deteriorate so dramatically. The 2002–03 oil strike was an extraordinary act of political warfare by Venezuela’s opposition. PDVSA’s operations were brought close to a standstill, and the Chávez government responded by dismissing thousands of employees, including a large number of highly experienced technical personnel. America was also behind this also.

The loss of technical expertise mattered. So did the increasing politicisation of PDVSA and the diversion of oil revenues into social programmes. To be fair to Chavez, however, such investments were necessary given the chronic nature of poverty and inequality in that country, as anyone who has ever visited Caracas knows. Venezuela had an extraordinary opportunity during the Chávez oil boom to diversify its economy and strengthen its petroleum industry. Oil prices were high and government revenues were abundant.

But as Guyana is now discovering, diversification takes considerable time to deliver results, especially for an economy for which oil had long been its lifeblood. The producer classes in Venezuela needed to be weaned off of this dependence, and oriented towards diversification.

However, at the same time, given the gravity of poverty and inequality and Chavez’s own ideological orientation, massive social investments could not have been delayed. Chavez managed to reduce poverty, expand social programmes and redistribute oil wealth on a scale that his predecessors had not contemplated. But the transformation of Venezuela from a petro-state into a diversified productive economy remained largely unfinished.

PDVSA increasingly became the government’s fiscal wallet. Money that might have gone into exploration, maintenance, technology, infrastructure and productive capacity was repeatedly required for the government’s social and political ambitions. This was not an American decision. It was a Venezuelan one. Then came the oil-price collapse. The price of oil fell catastrophically after 2014, exposing the fragility of an economy that had become even more dependent on petroleum. By 2016, the country’s oil production was already falling sharply. By January 2018, production had fallen to about 1.6 million barrels per day. The chronology is devastating to the simple version of Ram’s argument. The major U.S. financial sanctions came in 2017. The principal sanctions against PDVSA came in January 2019. The Venezuelan oil industry was already badly damaged before either event.

The International Monetary Fund likewise identifies the 2015 global oil-price collapse, severe domestic mismanagement, declining investment and loss of human capital among the principal explanations for the production collapse, while recognising the additional damage caused by sanctions.

This is not an argument for absolving Washington. The United States did something remarkably effective and remarkably destructive: it applied pressure to precisely the part of the Venezuelan economy that was already on life support. Financial sanctions restricted access to capital; oil sanctions restricted markets; and the cumulative effect made it harder for PDVSA to obtain the equipment, financing and commercial relationships required to restore production.

The American agenda in Venezuela was aimed at toppling Chavez and  later Maduro. America was complicit in the 2002 coup attempt and in the opposition-led oil strike and lockout later that year that sought to cripple the economy and force Chávez out. But it must also be conceded that Venezuela allowed its own productive machinery to deteriorate long before the American hammer fell.

Chávez was right that Venezuela’s oil wealth had enriched too few Venezuelans. He was right to insist that PDVSA should ultimately answer to the elected government rather than operate as an autonomous state within the state. He was right to redistribute petroleum wealth. But he was wrong to believe that political control and social spending could substitute for technical discipline, capital investment and economic diversification.

The Venezuelan opposition was disastrously wrong to believe that helping to shut down the country’s economic bloodstream was a sensible method of conducting politics. And Washington was wrong to strangle the country’s principal source of foreign exchange. That is why Venezuela is a warning, but not quite the warning Ram wants it to be. The real warning is that resource sovereignty without institutional competence is an illusion. It is also that sovereignty over the oil does not exempt a government from resisting the temptation to spend every barrel today because tomorrow’s barrel appears safely underground.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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• Age of Oil, Guyana Resource, Peeping Tom, sovereignty

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