Whoever controls the purse strings of Venezuela´s state-run oil industry will likely prevail in the high-stakes battle over the presidency of the Opec country.
A crackdown on protesters and defiance by the military´s top brass are seen by exuberant opponents of Nicolas Maduro as the last gasp of a dictator. Cooler heads see the unfolding crisis as a portent of prolonged chaos in another Opec country. One way to determine how the fast-moving developments will shake out is to follow the oil money.
The day after opposition leader Juan Guaidó swore an oath before throngs of supporters to become Venezuela´s acting president, the world is divided over Maduro´s fate. The US, Canada, some European countries and most of Latin America now explicitly recognize Guaidó´s executive authority. Russia, China, Turkey, Cuba and Bolivia do not. In more subtle terms, neither do Mexico, Uruguay and several Caribbean islands with oil and gas ties to Caracas.
In effect, Venezuela has parallel governments. Backed by the US, Guaidó and his pseudo-cabinet will now seek to set up financial structures to capture the revenue generated by national oil company PdV´s 500,000 b/d of crude sales in the US, the largest market for Venezuelan crude.
Oil company executives consulted by Argus say such an approach would only push Venezuela to shift more sales to China, India and Russia, leaving US refiners with even less of the heavy sour crude that is already limited by Canadian production caps. And if the US seeks to cut off the flow of naphtha and gasoline to PdV, the Venezuelan company will just buy them somewhere else.
Another financial avenue open to the Guaidó side is to try to establish itself as the legitimate counterparty to companies that are engaged in debt-related disputes, most notably in the battle for PdV´s US refining arm Citgo that is in the sights of multiple creditors, with an eye toward a comprehensive debt restructuring. And inside Venezuela, PdV´s foreign partners may come under pressure to redirect taxes and royalties away from the Maduro camp.
The complex campaign to re-channel revenue seems likely to be overwhelmed by events on the ground. Venezuela´s generals who control much of the economy have declared their allegiance to Maduro, and Moscow has come out in full support of its Venezuelan client. Clashes have led to at least 26 deaths since January 22.
The next sign of where this standoff is heading is how the splintered military responds to a refusal by the US to vacate its embassy in Caracas. Any US-led military intervention would play into the hands of Maduro, who accuses the US of orchestrating a coup.
For now PdV and its partners are carrying on with their oil business, dogged by all of the structural problems they have struggled with for two decades. This will be the troubled inheritance for whoever ends up sitting in the presidential palace.