Venezuelan neighbors on edge as crisis drags on

Nerves are starting to fray among Venezuela´s immediate neighbors as the odds of a swift political transition in Caracas grow longer.

Especially vulnerable is Colombia, which has the most at stake in the international effort to force President Nicolas Maduro out of power. The country has taken in more than 1.5mn Venezuelan migrants, straining public services particularly in smaller border towns where populations have doubled. Colombian president Ivan Duque is seeking some flexibility in deficit spending to cope with the influx, a senior government official tells Argus.

A lasting political turnaround in Venezuela could be an economic windfall for Colombian companies that would be well-placed to participate in a massive reconstruction effort. A recovery of Venezuela´s battered oil industry would attract Colombian oil companies and workers as well. A long-dormant natural gas pipeline that crosses the border could be rehabilitated to supply Colombia from Venezuela´s ample untapped reserves. Cultural affinity and the Venezuelan opposition´s declared gratitude for Colombia´s steadfast support position the country to play a significant role in Venezuela´s future economic rebound.

But ambitious post-Maduro economic planning is starting to look premature as the Venezuelan leader who is no longer recognized as president by more than 50 countries refuses to step down. A drawn-out conflict, with the potential for US-led military intervention, would mostly impact Colombia by driving up the refugee flight and further destabilizing the lengthy porous border.

The National Liberation Army (ELN) and other Colombian armed groups take refuge in Venezuela and use the country as a platform to export Colombian cocaine, often in league with Venezuela´s national guard, Colombian officials say. Smuggling of fuel, meat and dairy products and illegal gold mining are rampant. Recent deadly attacks on Colombian police in the border department of Arauca are part of what Colombia´s battle-hardened and US-trained military says is a pattern of Venezuelan provocation.

In the Colombian border city of Cucutá, the US and other countries have stockpiled humanitarian aid that Venezuela´s opposition leader Juan Guaidó – who is recognized by Colombia, the US and many other western countries as interim president -- promises will start to enter Venezuela on 23 February. The day before, a big aid concert will be held on the Colombian side of Las Tienditas cross-border bridge. Maduro is planning a rival concert on the Venezuelan side of the bridge at the same time.

Maduro and the leadership of the armed forces that supports him are refusing to let the aid into the country, and have stationed troops and light tanks at the borders.

Islands in the middle

Dutch Caribbean islands with deep economic and financial ties to Venezuela are similarly vulnerable to the nearby turmoil. Venezuela´s state-owned oil company PdV has a logistical network on Aruba, Bonaire and Curacao that is critical to exporting its crude. Venezuela´s overdue debts have repeatedly entangled the islands, where Dutch jurisdiction makes it easy for jilted creditors to levy liens on PdV assets.

In Curacao, a PdV-operated refinery has been mostly off line for a year, and in Aruba, a mothballed refinery that PdV´s US downstream unit Citgo pledged to refurbish is stalled. PdV promises of pipeline gas supply have come up empty. In both cases, many jobs are on the line, and government officials worry about a fifth column in restive labor unions.

The Netherlands, which controls the islands´ foreign policy, agreed to allow Curacao to become another staging ground in the Venezuelan aid campaign. But Curacao is wary, and quietly stipulated that the aid could only be delivered if the Venezuelan government agreed to let it in. No military action can be staged from Curacao and Aruba, even though they form part of a forward operating network with the US air force. The local approach is to remain as neutral as possible, islanders say.

But the crisis is already starting to be felt. In an effort to head off a possible aid flotilla, Venezuela partially closed its maritime and air borders with the islands this week, mainly affecting small watercraft and planes.

As a percentage of their modest populations, the islands have borne a considerable inflow of Venezuelans looking to escape economic misery at home. Longer term, government officials worry privately about disruption to their culturally distinct communities, impacting travel and tourism.

Another aid springboard lies in the remote Brazilian state of Roraima. Troops are gathered on either side of the border. Brazilian president Jair Bolsonaro, who took office just last month, has shifted foreign policy to confront Venezuela, burying the former leftist government´s sympathetic stance.

On Venezuela´s eastern frontier, Guyana is steadily advancing an offshore exploration campaign led by ExxonMobil, which plans to start producing 120,000 b/d in March 2020, ramping up to 750,000 b/d by 2025. The output will come from the Stabroek block, part of Guyanese territory that Venezuela has long claimed as its own. The century-old territorial claim is an issue on which all sides in Venezuela´s bitter conflict agree, so a new government in Caracas would likely attempt to negotiate a compromise.