Venezuela's Economic Hopes Hinge on US Oil Deal Amid Ongoing Uncertainty

A surprise announcement by President Trump to take millions of barrels of Venezuelan crude could be a turning point for the battered South American nation's economy. Economists say restoring trade links with the US could generate much-needed cash for a country heavily reliant on food and basic goods imports. The deal involves Venezuela turning over 30-50 million barrels of oil to the US, which will be sold at market price. Trump has promised to control the proceeds personally to ensure they benefit both the Venezuelan people and the US. Venezuela has over 30 million barrels of backlogged crude supplies in storage, unable to sell them due to a partial US embargo. Selling this oil at market prices could help revive an economy that has declined drastically over the past decade. Alejandro Grisanti, president of Caracas-based Ecoanalitica, believes that if the US and Venezuela can maintain a fragile detente, Venezuela can shift from negative to positive growth. The price of Venezuelan government bonds has soared, indicating investors' confidence in the country's potential return to the global financial system. However, much depends on a tenuous political detente between the Venezuelan government and Trump, who has ordered the arrest of strongman Nicolás Maduro. If the US doesn't follow through on its plans, it could be catastrophic for Venezuela, projected to run 700% inflation this year. Economists warn that U.S. plans to stabilize the Venezuelan economy are unlikely to succeed without democratic institutions and elections. Ricardo Hausmann, a Venezuelan economist at Harvard Kennedy School, says that without confidence in the legal system, companies will not invest billions of dollars in the oil industry. The US has announced a three-pronged plan for Venezuela, including ensuring access to foreign energy companies, restoring political rights, and releasing political prisoners. Secretary of State Marco Rubio believes this is a positive step forward, while U.S. Energy Secretary Chris Wright says the US will sell the oil on the market and deposit the proceeds into US-controlled accounts. Venezuela's oil industry has the potential to increase production above 3 million barrels a day with repairs and investments, but this requires political stability. Clayton Seigle at the Center for Strategic and International Studies says that dozens of rigs and upgraders, as well as major power grid improvements, are needed to achieve this goal. For now, Venezuelans are bracing for potential shortages of US dollars in the economy, with one US dollar fetching over 800 bolivars on the crypto exchange Binance. Rodriguez, Venezuela's acting president, has overseen economic liberalization and scaled back price and capital controls, leading to a subtle stabilization of the economy. However, three in five Venezuelans struggle to afford enough food, and mere 19% of adults are employed full time.