This article first appeared in AmericanConsequences.com.
The plane was straight out of the kids’ movie Madagascar: Escape 2 Africa… open windows, rickety seats… Only the duct tape was missing.
As we sped down the runway, I remember thinking, “This better be worth it.”
It was 2006, and I was a journalist covering a meeting of the OPEC oil cartel in Caracas… I had been invited by Hugo Chávez’s administration to visit the Orinoco region of Venezuela and its newly discovered oil reserves.
Welcome to Orinoco
After a short flight from Caracas, I touched down in a region that’s now home to the world’s largest oil reserves… more than 300 billion barrels in the ground. That’s almost 50 billion more barrels than the proven reserves of Saudi Arabia… almost four times the 80 billion barrels of Russian reserves, and nearly nine times the estimated 35 billion barrels in the U.S.
Orinoco’s oil is heavy, thick tar… If you filled a coffee cup with it and then turned the mug upside down, nothing would come out. (I know… I’ve tried it.)
The oil is thick yet refinable… thanks to American technology.
That’s why Orinoco’s vast reserves represent a great opportunity to secure an immediate oil source… and to improve energy policies and geopolitical stability in the Western hemisphere.
But, first, we need to assess…
The Chavista Conundrum
The U.S. and Venezuela have had a rocky relationship since Chávez’s initial rise to power in 1999.
I had just started working at the Emerging Markets desk trading sovereign debt at Goldman Sachs in New York. We were hopeful Venezuela might become a stronger trading partner (which would have helped its bond prices) despite Chávez’s anti-capitalist rhetoric.
We even sent a team down to meet with Chávez and the new administration… but Chávez blew us off (kind of like he blew everyone off). He had little interest in “gringos” helping Venezuela refine its oil or grow its economy.
Fast-forward to my 2006 trip to Orinoco… Once again, investors were hopeful – especially given the country’s newly discovered oil reserves.
Although Venezuela was oil-rich, the administration’s cronyism and lack of investment meant the country couldn’t produce enough oil for export. Chávez further eroded potential growth by kicking out U.S. and European companies’ oil operations. (ConocoPhillips, I’m told, is still owed $10 billion.)
When Chávez passed away in March 2013, his deputy, Nicolás Maduro, took over and relations with the U.S. continued to sour.
Maduro remained in power… and thus, Venezuela and the U.S. are right back where they started 16 years ago.
Venezuela still has all the raw ingredients for success… an educated population with cultural links to America… and, of course, tons of oil.
But for this success to be realized, we must first work on thawing U.S.-Venezuela relations… Our national security depends on it.
Read the rest of Trish Regan’s article by CLICKING HERE.