Oil deal with US hits Venezuelans' pride

For more than a century, through good times and bad, Venezuelans' identity has been built around the belief that their country's rich oil resources belong to the people, not the government or companies.

That belief, along with the pride of a country shaken by years of crises, suffered a severe blow last week, when acting President Delcy Rodriguez agreed to hand over control of about a fifth of Venezuela's oil reserves - the world's largest - to the United States.

While the deal could eventually bring billions of dollars to an oil industry and economy devastated by years of mismanagement, many Venezuelans see it as a surrender. Some say they are not surprised, believing that gaining control of Venezuela's oil was the ultimate goal from the start when President Donald Trump ordered U.S. forces to arrest then-President Nicolas Maduro earlier this year, after which Rodriguez took power.

"It's not only worrying, it's scandalous, because we, like a drop in the ocean, have no power to influence what's happening," said Lisandro Castro, an architect from Caracas, speaking of his fellow citizens.

"There is really a collective concern in Venezuela right now about what we are witnessing."

Oil permeates all aspects of life

The discovery of oil in northwest Venezuela in the 1920s triggered a powerful oil industry, which transformed the poor agrarian country into an urbanized regional power.

Employees of American energy companies working in the South American country contributed to the popularization of baseball. The companies built fields in oil-producing areas, and the sport became popular among the working class, and then spread to the rest of the country.

Europeans facing hardship after World War II flocked to Venezuela in search of economic opportunity brought by its oil wealth. The Portuguese opened bakeries that still operate today, while the Italians designed buildings that still stand.

As a young democracy, Venezuela received most of its revenue from oil exports, rather than from taxation of citizens and domestic companies, so politicians sought to curry favor with state benefits, said Ronal Rodriguez, a researcher at the Venezuela Observatory at the University of Rosario in Colombia.

Venezuela was one of the founding members of OPEC, and in the 1970s, when it boasted the highest per capita income in the region, the government nationalized the oil industry by establishing the state-owned company Petroleos de Venezuela S.A.

PDVSA, as the company is known, allowed foreign companies to operate only as minority partners in joint ventures. The company's revenues provided subsidized cheap gasoline for citizens, scholarships for studying abroad, free surgeries, and numerous other benefits.

"Every Venezuelan sees oil as something they have a right to," said researcher Rodriguez.

The country was shaped by oil booms and busts

The sharp drop in world oil prices in the 1980s devastated the Venezuelan economy and forced the country to seek help from the International Monetary Fund. The government cut key subsidies, which led to social unrest. Military officer Hugo Chavez then attempted an unsuccessful coup.

After being elected president in 1998, Chávez expanded social programs in the areas of health, housing, and education, thanks to a resurgence in oil prices, which brought PDVSA an estimated $981 billion in revenue between 1999 and 2011. The government distributed housing, refrigerators, and medicine, and many families benefited from well-paying jobs in the public and private sectors.

Encouraged by strong citizen support, Chavez further consolidated control over the state-owned oil company, to the detriment of American oil companies such as Exxon Mobil and ConocoPhillips.

But PDVSA's fortunes deteriorated again when oil prices began to fall. Corruption and mismanagement further reduced profits and threatened production, first under Chavez and then under his handpicked successor, Nicolas Maduro.

By 2013, when Maduro became president after Chávez's death, the country was in a severe economic crisis. Sanctions imposed by the United States over concerns about democracy and human rights further hit the oil industry and economy.

Instead of being a country that attracts immigrants, Venezuela has become a country that people leave. The economic crisis has led, among other things, to severe food shortages, causing millions of people to flee the country.

Although markets and shops are well-stocked today, many citizens find it difficult to afford basic necessities due to high inflation.

Many public sector employees today earn around $160 per month, while the average monthly salary of private sector employees last year was around $237.

"It's better than nothing," said former oil worker Romel Abreu, referring to the roughly one million barrels of oil Venezuela currently produces per day. "If we didn't have that, we'd be finished."

Abreu works as a security guard in Cabimas, in the northwest of the country, at the heart of Venezuela's oil industry. Like many there, he longs for a new oil boom and the jobs it would bring.

The agreement raises doubts among citizens

Venezuelans had hoped that Maduro's arrest in January would end the ruling party's 27-year rule. When that didn't happen - because Trump chose to support Rodriguez over the Venezuelan opposition - citizens at least hoped that the easing of harsh sanctions could bring economic relief.

In February, changes to the law opened the way for private investment in the oil industry, which some saw as a prelude to larger changes.

"Everything that happened on January 3rd was simply part of a strategy to get to where we are today," said the architect Castro of Trump's policy toward Venezuela. "That is, to completely get involved in the country's energy affairs for their own benefit and interest, and not for something that would really benefit us Venezuelans."

Under the agreement, the US is entering into a joint venture with Venezuelan company North American Blue Energy Partners, the second largest private oil company operating in the country, behind Chevron.

Rodriguez is giving the joint venture rights to 17 oil fields for the next 100 years, with proven reserves of 65 billion barrels. Venezuela's total reserves are estimated at about 300 billion barrels.

Because Venezuela's energy infrastructure is in very poor condition, it will take years before new investments lead to a significant increase in oil production, experts say.

Speaking in Caracas on Wednesday, US Energy Secretary Chris Wright said Trump's mission in Venezuela is "to bring peace, freedom, opportunity and prosperity to the people." In an address to the nation, Rodriguez defended the agreement and said she wanted her country to become an "energy powerhouse."

The residents of Kabimas can only hope.

"On the one hand, one has the feeling that one of the greatest oil riches has been surrendered," said Ervin Ajala, an oil company worker, in front of his house.

"But if it's for the good of the country and future generations, then we agree with it, because what good is so much oil if there's no equipment or technology to extract it?"

Prepared by: A. Š.