Wednesday, January 28, 2026

Horowitz: Iran’s Defenses Are Broken, Its Retaliatory Power Isn’t

  • The U.S. is signaling possible military action against Iran, deploying major assets to the Middle East, while Tehran is vulnerable to airstrikes but retains strong retaliatory capabilities.

  • Iran can still strike back asymmetrically, using thousands of short- and medium-range missiles, drones, and cruise missiles to target U.S. bases, ships, and regional allies despite weakened air defenses.

  • Any U.S. strike risks wider regional escalation.

Iran is bracing for a potential attack as the United States deploys key military assets, including an air carrier and additional bombers, to the Middle East.

US President Donald Trump has threatened to strike the Islamic Republic over its bloody crackdown on anti-government protesters. If Trump authorizes military action, Tehran would be virtually powerless to stop an aerial attack, experts say.

But that does not mean Iran cannot retaliate against US military and commercial assets in the region, experts say, citing Tehran's formidable arsenal of advanced ballistic and low-flying cruise missiles as well as combat and suicide drones.


During the 12-day war last June, Israel hit Iran's military infrastructure, including missile-production centers. Israel's attack also weakened the ability of Iran, which has an aging air force, to fend off aerial assaults by targeting its radars and Russian-made S-300 air-defense systems.

Even then, Tehran was still able to fire hundreds of ballistic missiles at Israel. Dozens of missiles, aimed mostly at military sites, penetrated Israel's formidable air defenses.

"In terms of purely defensive capabilities, Iran is practically naked," said Michael Horowitz, an independent defense expert based in Israel.

But Iran "still has a large arsenal of short and medium range missiles that can easily hit US bases in the Middle East, as well as cruise missiles and drones that it would likely use to try and target US ships," added Horowitz.

Potent Ballistic Missiles

In June, Israel struck sites around Tehran, including the Parchin military complex, the Khojir military base, the Shahrud missile site, and a factory in the Shamsabad Industrial Zone.

The strikes were aimed at hindering Iran's production of medium-range ballistic missiles that threaten Israel and are "fairly potent," said Sascha Bruchmann, a military and security affairs analyst at the London-based International Institute for Strategic Studies.

Many of the medium-range ballistic missiles are "liquid-fueled and rely on infrastructure to be loaded, fueled, and launched," said Bruchmann. "The Israelis used this fact to find them and destroy many launchers during the war."

The number of Iranian launchers still operational is unclear.

Iran also possesses short-range ballistic missiles that are "often solid-fueled, much more flexible, and thus more difficult to detect before launch," added Bruchmann, estimating that Tehran has several thousand of the missiles.

He said the short-range missiles "constitute a real threat, especially for the smaller Gulf countries" like Qatar and Bahrain that house US bases and forces.

Beyond its weapons, one of Iran's most potent tools is its ability to disrupt oil traffic in the Persian Gulf, a region that produces around 40 percent of the world's oil, experts say.

About one-fifth of the world's oil supply flows through the Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the open ocean. Iran has previously considered closing the route, a move that would disrupt global oil flows.

"The Islamic republic has long prepared a set of military assets meant to shut down this key maritime route. This would create an economic shock that Iran could exploit," said Horowitz.

U.S. Weighs Military Options

Trump threatened military strikes against Iran as the authorities killed thousands of people in a crackdown on mass protests that erupted in late December. Trump recently backed away, although he has not ruled out an attack.

Trump is weighing up a range of military options, according to US media reports. They include strikes on largely symbolic targets, decapitation strikes targeting Supreme Leader Ayatollah Ali Khamenei and other leaders, or a sustained bombing campaign.

Any US military action against Iran is fraught with risks, experts say, and even a limited strike could provoke retaliation by Tehran and trigger a full-blown conflict that could drag in the entire region.

It is unclear if the end goal of possible US military action in Iran is regime change, to encourage defections in the armed forces and political elite, to impede the ability of the security forces to suppress street protests, or bring a weakened Tehran to the negotiating table.

A US aerial campaign alone, without a ground incursion, would not lead to regime change, experts say. A ground invasion of Iran, the largest and most populous country in the Middle East, is considered a nonstarter by many defense experts.

A protracted US air campaign is considered unlikely, experts say, citing Trump's reported desire for a limited and decisive attack. But even a month-long offensive would not guarantee the fall of the regime.

"A sustained US air campaign could severely degrade Iran's conventional military by ripping up command-and-control, and fixed infrastructure, but it is unlikely by itself to produce the collapse of Iran's security forces, which can disperse, hide, and shift to low-signature internal repression," said Horowitz.

"Airpower can punish and paralyze, but it would need a simultaneous political fracture on the ground, both a resumption in protests and divisions within the Iranian leadership, to really deliver a full collapse of Iran's security forces or regime," he added.

By Frud Bezhan via RF/ERL


Pressure Mounts on Iran as U.S. Warships Enter Region


  • Iranian security forces have killed thousands during a violent suppression of protests sparked by inflation and economic collapse.

  • The U.S. has deployed a carrier strike group to the region while keeping military options against Iran on the table.

  • Iran’s currency has hit a record low amid sanctions, internet blackouts, and mounting international scrutiny.

A US aircraft carrier group arrived in the Middle East on January 27 as tensions mount over a possible strike against Iran after a brutal crackdown on protests that rights groups say killed thousands of people.

Amid the turmoil, the Iranian currency, the rial, fell to a record low against the dollar, trading at 1.5 million on January 27.

US President Donald Trump has said he "hopes" military action against Tehran won't be needed, but he has also sent an "armada" to the region while refusing to take the option of air strikes off of the table in response to the crackdown on mainly peaceful protesters who took to the streets in recent weeks to demand action to stop spiraling inflation and a sagging currency.


The US-based rights organization HRANA, whose figures RFE/RL has been regularly citing since the violent crackdown began in Iran earlier this month, says its confirmed death toll, including security forces, is now 6,126, while the number of fatalities still under investigation is 17,091.

Some estimates by officials quoted off the record by various media outlets run several times higher.

US President Trump told Axios in an interview on January 26 that the situation with Iran is "in flux" because he sent a "big armada" to the region, with a strike group led by the USS Abraham Lincoln now in Middle Eastern waters, according to US Central Command.

But, Trump added, he thinks Tehran genuinely wants to cut a deal.

"They want to make a deal. I know so. They called on numerous occasions. They want to talk," he was quoted as saying.

The protests began on December 28 in markets in the capital, Tehran, among shopkeepers angry over dismal economic conditions. The unrest quickly spread across the country and turned into demonstrations against authorities for deteriorating living standards and the suppression of freedoms.

The rial's drop against the dollar comes with the annual inflation rate at 44.6 percent, including an almost 90 percent year-on-year rise in food prices. Iran's economy has struggled for years under the pressure of international sanctions and the effects of the 12-day war with Israel last June.

Eyewitness accounts and verified reports from rights groups appear to show the violent crackdown peaked on January 8 and January 9, when security forces opened fire with live ammunition on demonstrators.

Amid a weeks-long Internet blackout, information about the extent of the violent suppression of the protests continues to trickle out.

Watchdog NetBlocks said in a daily report on January 26 that the blackout continues, though there were reports of some limited access to the Internet.

NetBlocks said that such gaps "are being tightened to limit circumvention while whitelisted regime accounts promote the Islamic Republic's narrative."

A spokesman for the Iranian government said on January 27 that the Internet was cut off "to preserve human lives," though they didn't explain what they meant by the comments.

Nonetheless, new images of the suppression continue to pop up online as Iranians try to show how vicious the crackdown was.

The Vahid Online channel published new images showing government forces directly firing at protesters in the city of Amol on the evening of January 9, contradicting claims by authorities that killings were carried out by "terrorists" and not state security agents.

In the images, officers in uniform armed with Kalashnikov rifles are seen aiming into the streets and firing.

By RFE/RL

Chevron Eyes Lukoil’s Iraqi Oilfield—but Only on Better Terms

  • Iraq took control of the giant West Qurna 2 oilfield after U.S. sanctions forced Lukoil to exit.

  • Baghdad is in talks with Chevron to take over operatorship, but negotiations are stalled as the U.S. major seeks higher returns than those offered under the field’s existing technical service contract.

  • Iraq’s recent shift toward profit-sharing contracts signals improved terms, yet legacy fields like West Qurna 2 remain a test case for whether Baghdad can attract Big Oil.

Following the U.S. sanctions on Russia’s Lukoil, which operated one of Iraq’s largest oilfields, Baghdad temporarily took control over the West Qurna 2 project, which accounts for 10% of all Iraqi oil production and 0.5% of global crude supply.

Lukoil had a 75% equity stake in West Qurna 2, which produces more than 400,000 barrels per day (bpd) of crude oil. The U.S. sanctions made it impossible for Lukoil to continue operating the huge field.

Following the U.S. sanctions on Lukoil and Rosneft, “as a result of Russia’s lack of serious commitment to a peace process to end the war in Ukraine,” Lukoil announced it would sell all of its international assets, initiating a formal process to receive bids from potential buyers


After temporarily giving the West Qurna 2 operatorship to state-run Basra Oil Company, the Iraqi government wants to award the contract to another major oil company and is in talks with Chevron on a potential deal.

The U.S. supermajor, however, seeks higher returns from the project in the negotiations, which have been dragging on for weeks, Reuters reports, citing sources with knowledge of the matter.

Chevron wants to expand its operations in OPEC’s second-largest and the world’s seventh-biggest producer, but, apparently, not at any cost.

The U.S. major last year signed a deal to return to Iraq and develop the Nasiriyah Project, including four exploration blocks, as well as the Balad oilfield and other producing fields and additional exploration areas in the country.

Related: Iraq’s Key Gas Field Sends a Long-Awaited Signal to Washington

Iraq has overhauled its contract terms for newly-awarded fields, but fields such as West Qurna 2 continued to be developed under the previous terms that were seen as unfavorable by international majors.

In 2024, Iraq moved to profit-sharing contracts for new bid rounds, from the technical service contracts it had awarded until then. With improved contract returns in the biggest change in Iraq’s petroleum regulatory landscape in decades, Baghdad seeks to attract more investment in its oil and gas industry by some of the world’s biggest oil firms.

Under the profit-sharing contracts, the foreign companies are being offered a share of the revenue from the license after deducting royalty and cost recovery expenses.

In contrast, traditional technical service contracts offer a flat rate for every barrel of oil produced after reimbursing costs. These generally pay foreign investors less than what they would have received under production-sharing contracts.

Foreign firms operating in Iraq have complained that the technical service contracts, with the flat rate, do not allow them to benefit when international crude oil prices rise. These contracts become even less lucrative for foreign investors when costs increase.

West Qurna 2, under Lukoil’s operatorship, was under a technical service contract. The contract offered one of the smallest returns of all deals in Iraq, according to industry sources who spoke to Reuters.

It’s no surprise then that Chevron seeks improved returns before committing to operating one of the biggest conventional oilfields not only in Iraq but also in the world.

Chevron, like other Big Oil firms, is carefully selecting investments these days and expects to get a bang for its buck, to continue boosting returns for shareholders. Each of the Big Oil companies has a few select priority areas that they consider core operations, both because they are huge in volumes and lucrative in returns.

So it is only natural that Chevron would want to see higher returns from West Qurna 2 before agreeing to take over the operatorship of the field.

Talks between Chevron and Iraq on West Qurna 2 continue, the Iraqi Oil Ministry told Reuters.

“The negotiations are still ongoing, with many details remaining under discussion,” the ministry said.

The crucial detail would be the project’s returns for Chevron.


Kazakhstan Seeks U.S. Approval to Buy Lukoil’s Kazakh Assets

Kazakhstan has filed a formal bid with the U.S. Treasury seeking authorization to buy out the Kazakh assets of Russia’s sanctioned oil firm Lukoil, Kazakhstan’s Energy Minister Yerlan Akkenzhenov said on Wednesday.  

The United States sanctioned Lukoil at the end of October, which prompted the Russian firm, the country’s second-largest oil producer, to seek a sale of its foreign assets.

Soon after, Lukoil accepted a bid from trading house Gunvor for its assets outside Russia, but the U.S. Treasury blocked the sale, saying that the trading group is “the Kremlin’s puppet.”


After Gunvor withdrew the bid, companies including private equity giant Carlyle, U.S. oil and gas supermajors Chevron and ExxonMobil, and International Holding Company (IHC) of Abu Dhabi have expressed interest to the U.S. Treasury to potentially acquire Lukoil’s international assets.

Kazakhstan – where Lukoil is a minority shareholder in huge oilfields and the pipeline consortium shipping crude to Russia’s Black Sea coast for exports –says it has pre-emption rights to buy out Lukoil’s stakes.

“We already said at the end of last year that we have a preemptive right under law to exercise our right to buy out the stake if Lukoil sells the assets in Kazakhstan. The Energy Ministry has sent the corresponding request to OFAC,” Akkenzhenov told reporters on Wednesday, as carried by Russian news agency Interfax.

“There are various forms to buy out the share package, including some kind of deferred payment or through proceeds from raw material sales. There are many options, and we are considering them all,” the Kazakh minister added.

OFAC has issued a general license until February 28, 2026 to enable Lukoil to divest its assets outside of Russia to non-blocked parties.

In Kazakhstan, Lukoil holds 13.5% in the Karachaganak oilfield, a 5% stake in the Chevron-led Tengizchevroil consortium operating the huge Tengiz oilfield, and 12.5% in the Caspian Pipeline Consortium (CPC), which operates the pipeline from the Caspian coast in northwest Kazakhstan to the Novorossiysk port on Russia’s Black Sea that handles most of Kazakhstan’s crude oil exports.

By Tsvetana Paraskova for Oilprice.com

 


Shell and BP Seek U.S. Licenses for Shared Venezuela-Trinidad Gas Fields

UK-based supermajors Shell and BP are seeking U.S. licenses to develop gas fields that Trinidad and Tobago shares with Venezuela, the Caribbean island’s Energy Minister Roodal Moonilal said on Wednesday.

BP and Shell have sought to develop two separate cross-border gas fields in Venezuelan and Trinidad and Tobago waters, but progress has been slow in recent years due to the frequent changes in U.S. policy toward allowing international firms to do business with Venezuela.

In July 2024, BP, together with its partner, the National Gas Company of Trinidad and Tobago (NGC), was awarded an exploration and production license by Venezuela for the development of the Cocuina gas discovery. Cocuina is part of the cross-border Manakin-Cocuina gas field.


However, Nicolas Maduro’s government last year halted joint development of gas projects with Trinidad and Tobago, while the Trump Administration in May 2025 revoked licenses for Shell and BP to develop joint fields.

But in October, the U.S. authorized Shell to develop the Dragon gas field offshore Venezuela, which is expected to supply gas to Trinidad and Tobago, which is an LNG exporter.

Now, after the capture of Maduro by the U.S., the supermajors have renewed efforts to secure licenses as the Trump Administration looks to have major oil companies develop Venezuelan oil and gas resources.

According to Trinidad’s minister Moonilal, Shell is working to get a license for the Loran-Manatee discovery, estimated to hold about 10 trillion cubic feet of natural gas, most of which is in Venezuelan waters.

BP, for its part, is seeking a license to develop Manakin-Cocuina, the minister added.

“The United States is an ally and a very strong friend trying to reform, so we would help the companies when it comes to supporting their applications,” Moonilal told Reuters on the sidelines of an energy conference in India.

BP is betting on Trinidad and Tobago to boost oil and gas output. Last year the company approved the development of the offshore Ginger gas project, which will be one of the ten major new projects that the UK supermajor promised to start up by 2027.

By Charles Kennedy for Oilprice.com


Venezuela's oil reform fails to lure US majors despite push for private investment

Venezuela's oil reform fails to lure US majors despite push for private investment
While smaller independent producers expressed eagerness to pursue opportunities, major oil companies are leaning against deploying the tens of billions of dollars needed for meaningful production growth without physical security guarantees, legal certainty and competitive fiscal terms.
By bnl editorial staff January 28, 2026

Venezuela's interim government has fast-tracked sweeping changes to the country's hydrocarbon law in a bid to attract foreign capital to its battered oil industry, but major US producers remain reluctant to commit billions of dollars amid persistent legal uncertainties and the absence of security guarantees from Washington.

The legislative reform, approved in its first reading last week following the capture of President Nicolás Maduro by US special forces, marks the first substantial overhaul of Venezuela's oil sector since Hugo Chávez's 2006 nationalisation. Under the proposals, private firms would gain authority to market their crude directly, joint venture minority partners would secure enhanced technical and operational control, and the government could slash royalty payments from the current 33% rate to a minimum of 15%.

Yet the changes fall short of what international oil executives say is needed to justify large-scale investment in a country whose industry has been crippled by decades of mismanagement, corruption and underinvestment, according to lawyers and company officials quoted by Reuters.

"This is sufficient enough for the transition, until there is a permanent government in Venezuela," Ali Moshiri, chief executive of Amos Global Energy Management, told the news agency. Moshiri, whose firm holds stakes in Venezuelan energy projects, cautioned: "If you don't make this [industry] more attractive, the entire progress we want to make is going to come to a halt."

The legislation would codify a model for production-sharing agreements that has existed informally under Maduro, giving participating companies greater operational independence in managing their oilfields. Several firms already work under such arrangements, which would continue alongside traditional joint ventures where PDVSA maintains majority control.

But scepticism runs deep, stemming from concerns about Venezuela's dismal institutional track record. "The past seven decades of Venezuela's oil industry are marked by broken contracts and resource nationalism," Francisco Monaldi, director of the Latin America Energy Program at Rice University's Baker Institute, wrote in Americas Quarterly. "No agreement has survived to maturity without significant deterioration of terms."

Industry associations and legal advisers have flagged imprecise wording in the latest bill and conflicting provisions regarding commercial operations, fiscal terms and recognition of international arbitration. The reform gives Venezuela's oil ministry broad discretionary powers to approve contracts and lower royalties without consulting the National Assembly, prompting criticism from the few remaining opposition lawmakers who received the text only hours before parliamentary debate began.

Legal experts warn that additional legislative changes would be necessary to secure the $100bn that the US says Venezuela requires to revitalise its ailing energy infrastructure. Modifications to income tax legislation and the removal of so-called shadow tax provisions, which guarantee the state receives no less than half of each barrel's value, remain pending, according to six lawyers and executives who spoke to Reuters.

The caution among international majors reflects both operational and political risks. Major US producers including ExxonMobil and ConocoPhillips have outstanding legal claims over assets seized during earlier nationalisations, with Conoco's three arbitration cases valued at up to $12bn. President Donald Trump has urged claimants to drop their cases, but the unresolved claims will not vanish on their own and still compound investor wariness.

In fact, past disputes over contractual terms continue to shape their calculations. After Chávez consolidated control over PDVSA during the early 2000s, he replaced much of the state company's qualified management and engineering staff with party loyalists before imposing revised agreements that increased fiscal burdens and mandated state majority stakes. Conoco and Exxon rejected the renegotiated terms and withdrew, initiating arbitration proceedings. Chevron remained under the new arrangements, though Monaldi notes that Chávez and Maduro subsequently "kept reneging on deals with foreign investors, driving most of them out of the country."

The gap between Trump’s encouraging rhetoric and Washington’s limited policy support has also added to the uncertainty. "Oil and gas companies operate all around the world in all different settings, they're well versed in those challenges," Energy Secretary Chris Wright said in a Bloomberg TV interview, ruling out security guarantees for firms operating in Venezuela.

The American Petroleum Institute has said policy changes, security arrangements and investment protections are prerequisites for significant industry engagement. Mike Sommers, the group's president, outlined these conditions earlier this month as US refiners began purchasing Venezuelan crude at steep discounts through trading houses.

Some analysts expect the largest US producers to remain on the sidelines until clearer reforms emerge and a more representative National Assembly takes office.

“This law is a law of ambiguity, designed to avoid openly breaking with Chavez’s oil legacy,” said Jose Guerra, former director of research at Venezuela’s Central Bank, according to Al Jazeera. “It is not emphatic about private participation.”

In a similar vein, Monaldi argues that meaningful recovery requires more than legal reforms. "Venezuela needs stable, constructive relations with the US and Europe, and a permanent end to oil sanctions," he wrote. "Investors must see genuine political stability and a durable consensus among the country's leadership and society to reopen the sector to foreign participation.”

Venezuela holds roughly 17% of the world's proven oil reserves, predominantly extra-heavy crude suited to certain US Gulf coast refineries. Yet output has plummeted from 2.5mn barrels per day in the mid-2010s to approximately 1mn b/d currently, following years of sanctions, capital flight and operational deterioration.

Acting president Delcy Rodríguez, Trump’s handpicked successor to rule the country following Maduro’s ouster, has said the reform would preserve national sovereignty whilst enabling Venezuela to emerge as a major hydrocarbon producer backed by private capital. She recently met with executives from oil companies including Repsol, Chevron and Shell at PDVSA's Caracas headquarters as part of a public consultation process required before the bill can clear parliament. Investment in the oil and gas sector is projected to reach about $1.4bn this year, up from nearly $900mn in 2025, she told oil executives.

Following the meeting, Chevron's representative said the US company was prepared to continue contributing technology and expertise, pointing to its longstanding partnership in the country. In contrast, Halliburton, the US oil services company that departed Venezuela in 2019, said commercial and legal terms must be clarified before it considers re-entering a market that previously generated approximately $500mn in annual revenue.

Monaldi suggests Chevron has an extra edge because it is already on the ground with contracts offering significant development potential, allowing it to reinvest some cash flow. Spanish oil firm Repsol and perhaps Italy’s Eni could add more modest production increments. But he warns that "major projects requiring substantial fresh capital and long maturity will remain out of reach" without deeper institutional change.

In the near term, Venezuelan barrels are re-entering global markets through discounted spot trades rather than upstream investment. Refiners including Valero and Phillips 66 have bought cargoes through trader Vitol at discounts approaching $9 per barrel below Brent benchmark prices, attractive economics for Gulf Coast facilities designed to process heavy sour grades.

Venezuela's reserves present significant technical challenges. The country's largest deposits contain ultra-heavy crude that requires specialised and expensive extraction methods, and commands substantial discounts in global markets. Industry analysts say such projects would need oil prices considerably higher than current Brent levels near $50 to $55 per barrel to become economically attractive.

Production growth forecasts suggest output might increase by 200,000 to 250,000 b/d annually over four to five years, assuming investment of $10bn per year. Major oil companies, however, face difficult allocation decisions, particularly during a period of subdued prices when financial discipline typically takes precedence.

Venezuela's National Assembly, still dominated by the ruling socialist bloc despite Trump's claims of maintaining oversight following Maduro’s removal, is now expected to approve the reform after brief public consultations. The bill must still undergo article-by-article debate before enactment.

But Big Oil remains in no rush to re-enter Venezuela. The tepid response from executives at a White House meeting with Trump earlier this month laid bare the industry's hesitancy. Most brazenly, ExxonMobil chief executive Darren Woods told the gathering the oil-rich nation remained "uninvestable" after the company had its assets seized twice previously. "To re-enter a third time would require some pretty significant changes from what we've historically seen and what is currently the state," he said. Trump "didn't like" his response and threatened to keep Exxon out of the country.

While smaller independent producers expressed eagerness to pursue opportunities, major oil companies are leaning against deploying the vast sums needed for meaningful production growth without physical security guarantees, legal certainty and competitive fiscal terms – conditions that Venezuela's US-mandated reform has yet to convincingly deliver. 

Venezuela Signals a Historic Energy Reset as Oil Laws Open to Foreign Capital

  • Venezuela is moving to overhaul its hydrocarbons law, opening the door to deeper foreign and private-sector participation.

  • The reforms introduce far more flexible operating and fiscal structures, allowing private and mixed companies to take on operational control.

  • If paired with sanctions relief, the changes could mark a true reopening of Venezuela’s oil sector, shifting policy from ideological rigidity toward pragmatic, investment-led recovery.

Venezuela is edging toward what could become the most consequential energy shift in a generation. Interim President Delcy Rodriguez reportedly met with senior international oil executives this week at a PDVSA facility, as the government opens consultations on a partial reform of the country’s Organic Hydrocarbons Law.

The proposed changes, now moving through Venezuela’s National Assembly, would fundamentally reshape the fiscal and contractual rules governing the country’s oil and gas sectors.

 While the state would retain sovereignty over Venezuela’s oil, highlighting how the reform can foster growth and attract investment can inspire confidence among industry professionals and investors.

If approved, the new framework would allow external operators to become more deeply involved in the production process than ever before, potentially increasing foreign investment and modernizing Venezuela’s oil industry.

One of the reform’s most significant shifts is an expansion of who can operate upstream. It would allow mixed enterprises, as well as private Venezuelan-domiciled companies, to work in tandem with state authorities on contracted projects.

In essence, this would create a dual-track system, one more aligned with the financial realities of Venezuela’s oil industry. Rather than forcing all investment projects into a single joint-venture model, the government would gain more flexibility to structure deals around the realities of capital requirements.

Capital-intensive developments, including pipeline repairs, which have been neglected for many years, could finally attract the scale of private investment that they so desperately require.

The intent of the interim administration is clear. Venezuela is moving away from the inflexible investment framework that has long constrained the sector.

Perhaps even more important, however, is how the reform plans to tackle control dynamics. State-owned companies and their subsidiaries would be permitted to transfer operational responsibility to private partners by contract, either full or in part. While this may appear as a minor technical change, it represents a substantial shift in the government’s policy.

For years, Venezuela’s joint-venture system has been defined by a distinct structural rigidity. External partners have been allowed to supply capital and expertise, but operational control remained tightly held within state entities. The proposed reforms would alter that long-standing balance, giving space for hybrid operating models that are better suited to the complex nature of oil projects and to both their construction and financing.

The royalties would remain capped at 30%, but the actual rate will be set project-by-project. A new Integrated Hydrocarbons Tax will apply at up to 15% of gross income, but again would be adjusted depending on the demands of each project.

The government is also looking to address some of the financial bottlenecks that have historically worried international investors. Minority partners would not only be allowed to open and manage bank accounts in any currency or jurisdiction, but also to directly market their share of production.

Direct commercialisation improves cash-flow visibility, while offshore banking flexibility removes the friction of getting foreign direct investment into Venezuelan ventures. New project contracts will also include expanded dispute-resolution mechanisms. In essence, removing the additional layers of complications that have previously slowed or complicated arbitration agreements.

The reforms aim to make Venezuelan projects easier to finance and to protect external capital, emphasizing that stability and sanctions reform are essential for success, reassuring policymakers and investors.

The proposed changes in Rodriguez’s government acknowledge that reviving the country’s oil sector requires long-term investment, which can reassure investors and industry stakeholders of sustained commitment.

Considering the scale and scope of the large upstream developments and infrastructure projects that Venezuela’s oil industry will require to start seeing consistent increases in production, investment horizons have to be widened. The reforms are seeking to do precisely that.

While the reforms to the bill are still navigating Venezuela’s legislative process, for international investors, the intention behind them is encouraging. They represent a substantial strategic pivot, moving Venezuela’s oil industry away from the constraints of ideology and toward a programme of pragmatic partnership.

Venezuela needs investment, and that investment will come from partnerships that have the flexibility to invest in the ways and at the scale they need.

Of course, the success of the reforms will hinge on broader sanctions reform and stabilisation of the region’s geopolitical situation. But at the legislative level, Venezuela seems to be building a framework to say what it has not said clearly in years: the door is open again, and this time, the terms are negotiable.

By Cyril Widdershoven for Oilprice.com