Introduction
Today’s column addresses the first listed, and perhaps the most pressing of the three existential threats to the materialisation of Guyana’s petroleum sector and its projected Government revenues. I have labelled this threat as “Venezuelan Aggression.” More specifically, however, this threat is located in Venezuela’s ‘claim’ that Guyana’s present oil and gas finds are located in its territorial waters. As I have argued before, the geo-strategic significance of this claim is enormous. And, the basis for this observation is captured in Michael Klare’s statement in his celebrated work, Blood and Oil (2004):
“Conflict over control of oil supplies has been a persistent feature of international
affairs since the beginning of the 20th century. Such conflict varies … ranging from
territorial disputes over the possession of oil-laden border areas … to major inter
state wars over the control of vital oil zones.”
Indeed, the close historical connection between oil, border conflicts, and war has been otherwise widely documented; particularly by specialists and analysts in two fields, namely, international affairs and the political economy of oil.
Venezuelan Aggression
It is not my intent for this column to delve into the historiography of Guyana – Venezuela border relations. Moreover, I lack the required expertise for this task. My starting point is simply that Guyana has publicly recorded several forms of post-independence “Venezuelan aggression.” This record establishes clearly that, geo-strategic considerations are already entrenched in Guyana’s transition from petroleum discovery to its materialisation of a petroleum sector. Thus we find Venezuela has: 1) exercised through its territorial claim, a de facto veto over Guyana’s general development and the location of specific projects; 2) actively discouraged investors in the energy sector (oil and hydropower); 3) challenged Guyana’s sovereignty by claiming as its own about two-thirds of the territory it has held at the time of Independence; and 4) only recently intercepted an oil and gas exploration vessel in Guyana’s Stabroek Block!
Recent flare-up
As regards item 4, in late December 2018, a ship “belonging” to ExxonMobil was intercepted by Venezuela’s navy while doing exploration work in the Stabroek Block. The Government of Guyana (GoG) denounced the interception as an “illegal, aggressive hostile act” and a “flagrant violation of its sovereignty.” Following the GoG’s reporting of the incident, the United States Authorities proclaimed: “We are monitoring reports that the Venezuelan Navy may have interfered with vessels operating on behalf of ExxonMobil. We underscore that Guyana has the sovereign right to explore and exploit resources in its territorial waters and Exclusive Economic Zone.”
News reports from Venezuela notes President Maduro “has vowed to block ExxonMobil Corporation from exploring for oil in contested waters off neighbouring Guyana. The dispute threatens the development of the world’s biggest new deepwater oil play. It has echoes in the past, as in 2007, Venezuela’s then-president, Hugo Chavez, nationalised Exxon’s assets in the country. Exxon moved two vessels away from the disputed region after Venezuela’s navy confronted them last month.” As a counterpoint, the US Government has asserted: “Guyana’s sovereign right to develop those resources, which includes allowing ships to go about their business doing surveys and other seismic activities.” CARICOM has also expressed “grave concern” about the violation of Guyana’s sovereign rights and the threat to its economic development. Since then it has been reported Exxon has declared its drilling operations “have not been affected.” The controversy/ threat, however, continues!
Asymmetry
As I was careful to point out in my earlier column, there is a vast disparity in territorial size, economic size, economic capacity, diplomatic and military capacity between Venezuela and Guyana. Such actions, therefore, have a disproportionately negative impact on Guyana. At the very least, Guyana has to carry additional burdens for “guarding” its sovereignty over its petroleum finds in an extremely asymmetric environment. After all, Venezuela is the fifth largest nation in South America, while Guyana is one of the smallest!
When examining the historical lessons of oil and conflict, it emerges that domestic economic circumstances in the aggressor country [or the one claiming the other’s territory], plays crucial roles in framing outcomes. I expand on this in the next Section.
Venezuela’s Oil and Economic Situation
Traditionally, Venezuela has been a major player in the global oil market. It is a leading member of OPEC. Published data (2016) show Venezuela’s reserves ranging from 22 to 95 billion barrels of oil for “recoverable” and “probable” reserves, the two traditional reserves’ classifications. Venezuela, therefore, ranks among the Top 4 holders of oil reserves on both counts. This compares with the Road Map estimates of Guyana’s potential “finds” of between 13 and 15 billion barrels.
Sadly, despite Venezuela’s much vaunted oil reserves, the country is in the grip of a deep multidimensional crisis embracing both the petroleum sector and its wider economy. Consider the following: Oil accounts for over 95 percent of Venezuela’s export revenue, but so far 2019 estimates indicate less than 1 million barrels per day. This is less than one-third of that produced in 2010. Indeed, Bloomberg projects oil exports could fall to zero!
Although data are lacking for the recent crisis period, key macroeconomic indicators reveal Venezuela’s collapse. Thus the Central Bank’s money supply has been increasing at extraordinary rates. The IMF now projects inflation will reach 10 million percent per annum this year!
Of greater concern, however, the Venezuela crisis appears to have reached a stage where regime-change is being advanced as critical to its resolution. In my judgement, such an unstable environment increases the existential risk to Guyana’s petroleum sector coming on stream. I say this, in the context of reports from Venezuela, which suggests, contrary to the country’s multiple divisions, there is a “common view” as regards its territorial claims on Guyana!
Conclusion
Venezuela’s complex crisis indicates grave concern for its territorial claim against Guyana. Although the matter is with the United Nations, as I write this column, its potential impact on Guyana’s coming oil and gas sector can, potentially override all the analysis of the Road Map. It is therefore, incumbent on readers to be constantly aware of this threat, as the analysis continues.
Next week, I consider the other two existential threats, namely, environmental and domestic political strife and conflict.
