LATAM BLOG: Iran war fuels Venezuela's oil comeback, but democracy lags behind
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Venezuela is set to reap a substantial windfall from the global oil shock triggered by the US-Israeli military campaign against Iran and the effective closure of the Strait of Hormuz. But the country's new leadership faces a paradox that analysts say could entrench autocracy while delaying any democratic transition for years.
The conflict, which began with US and Israeli strikes on Iran on February 28, sent Brent crude prices to a high of $120 a barrel on March 9 before Donald Trump's mixed signals about the war's progress dragged them back to around $90 by end of trading. Oil economists broadly agree that if hostilities persist beyond a month, prices could breach the $100-per-barrel mark, a level that, following Russia's 2022 invasion of Ukraine, eventually peaked at $124.
For Caracas, the timing is both a gift and a trap.
Venezuela, which holds the world’s largest proven oil reserves, has historically benefited from instability in the Middle East. Each time conflict disrupts Gulf exports, importing nations scramble to secure crude stocks, propelling prices higher and delivering a surge of oil income to Caracas. Venezuelan economist and former industry minister Víctor Álvarez, writing in El País, argues that the country has never managed this boom-bust cycle without trauma, oscillating between euphoria and despair without building resilience for either phase. "When prices rise, we become intoxicated by the feast of plenty," Álvarez said. "We believe that oil revenues will continue to grow and we don't prepare for times of scarcity."
What has changed structurally this time is that, following the January 3 capture of Nicolás Maduro by US forces, Venezuela no longer controls its own oil revenues. Under Executive Order 14373, signed by Trump and titled "Safeguarding Venezuelan Oil Revenue for the Good of the American and Venezuelan People," proceeds from Venezuelan crude sales are deposited directly into designated US Treasury accounts. US Energy Secretary Chris Wright, who travelled to Venezuela last month for talks with acting president Delcy Rodríguez, announced that oil payment flows are now deposited directly in US Treasury accounts, replacing an earlier mechanism that had channelled revenues via Qatar.
While the US treats the funds as Venezuela's sovereign property in principle, in practice both the Secretary of State and the Treasury Secretary must jointly approve any movement or allocation, determining how much flows back into the domestic financial system, how much underwrites bilateral trade, and how much is directed towards decrepit public infrastructure.
Washington has disclosed that of a first tranche valued at roughly $2bn, some $500mn has been remitted to Venezuela, where it is reportedly being channelled through the banking system to fund hard-currency purchases by private importers.
This arrangement means that any windfall from soaring oil prices will be filtered through Washington before it reaches Caracas – limiting, though not eliminating, the regime's ability to deploy petrodollars as a political instrument.
State oil company PDVSA issued a statement earlier this month pointing to supply contracts with trading houses delivering crude and refined products to the US market as evidence of what it called a historic commercial relationship. The company styled itself as a "reliable provider" committed to the "necessary equilibrium" in global energy markets amid global tensions, and renewed its call for sanctions on the Venezuelan oil industry to be fully lifted.
Chevron this month resumed shipments of diluted crude oil (DCO) – extra-heavy Orinoco Belt crude that requires naphtha as a diluent to achieve the viscosity needed for pipeline transport – to the US Gulf Coast, marking the resumption of a trade flow that had been suspended for months under US sanctions. By late February, PDVSA's storage tanks held 4.8mn barrels of DCO, the largest accumulation of any heavy Orinoco grade, that had been sitting idle throughout that period, according to The Street.
The Hormuz Strait's closure, strictly enforced by Iran's Islamic Revolutionary Guard Corps, transformed what would have been a routine supply story into one with immediate geopolitical stakes. The waterway handles around 20mn barrels per day, close to a fifth of all oil consumed globally, with Saudi Arabia, Iraq, the UAE and Kuwait all routing exports through the passage. Venezuelan crude, by contrast, travels through the Caribbean and into the Atlantic, entirely outside the conflict zone.
Output could recover to between 1.1mn and 1.2mn barrels per day by year-end if sanctions relief is sustained, according to data analytics firm Kpler.
Since the licensing expansion that followed Maduro's toppling, Vitol and Trafigura together have moved approximately 27mn barrels of Venezuelan crude, predominantly the Merey heavy grade. Chevron, the only US major that remained in the country during the Chavista regime thanks to ad-hoc waivers, now operates under an indefinite licence with threat of revocation. A new Hydrocarbon Law enacted in late January, championed by Rodriguez, paved the way for the grand return of the private sector by restructuring the terms for foreign investors, lowering the fiscal burden and, crucially, granting access to international arbitration.
ExxonMobil, which departed Venezuela after the Chávez-era nationalisations, is reportedly weighing a return with a scoping team expected to visit in the coming weeks, in a striking reversal after chief executive Darren Woods declared the country “uninvestable” as recently as January.
And in yet another sign of a business frenzy, Reuters reported that caravans of hedge fund managers, energy investors and private equity groups are flocking to Caracas to meet senior political and business figures and assess potential opportunities.
The geopolitical windfall, though, may prove most advantageous not to the Venezuelan people but to Delcy Rodríguez, who assumed power following Maduro's capture under Washington’s watchful approval. Trump has praised her as a “terrific person” who is “doing a great job” in managing the three-phase transition outlined by Secretary of State Marco Rubio, but her democratic credentials are questionable, as she served in the Chavista regime for nearly two decades in different positions. The Miami Herald columnist Andrés Oppenheimer identifies three structural reasons why the conflict is likely to strengthen her hand.
Rising oil prices will boost the regime's export revenues regardless of the US revenue-control architecture, providing fiscal breathing room. The Iran campaign is also pulling US military assets away from the Caribbean. Washington had already repositioned the USS Gerald Ford carrier strike group from Venezuelan waters to the Middle East in the days before the strikes began, reducing the coercive leverage it had previously held over Caracas.
And crucially, Oppenheimer argues, Trump has reframed his Venezuela policy around stability rather than democracy, repeatedly praising Rodríguez, sidelining opposition leader Maria Corina Machado and citing post-Maduro Venezuela as a template for what he would consider a successful outcome in Iran.
The diplomatic posture of the post-Chavista administration over the Iran war, meanwhile, has been conspicuously cautious, underlining the sea change in Caracas’ foreign policy following Maduro’s ouster. Rodríguez's only public comment was an expression of solidarity with Qatar, steering away from statements of solidarity with the “brotherly Islamic Republic of Iran” typical of the Maduro era.
Rodríguez has moved quickly since Maduro's ouster, enacting a sweeping amnesty law and pushing through oil and mining reforms that some observers have cautiously welcomed. But Washington has yet to announce a timetable for the release of all political prisoners, press freedom restoration or free elections.
Alejandro Werner, a former head of the IMF's Western Hemisphere department, told Oppenheimer that a prolonged conflict could also attract oil investment that had previously been conditional on democratic progress. "In a new world where Middle Eastern oil exports decline or are unreliable, some companies that were hesitating whether to invest in Venezuela until there is a return to democracy will now say, 'it may be worth taking a risk in Venezuela,'" Werner said.
Beneath the immediate market dynamics lies a longer-standing question of whether Venezuela can break its inglorious rentier cycle. Álvarez advocates converting the US-administered accounts into sovereign wealth funds: accumulating windfall revenues rather than exhausting them during booms, channelling profits back into the oil sector and the broader economy, and stripping governments of the discretionary power to distribute petrodollars as political patronage. Such a model, he argues, would dismantle a system in which oil revenues have underwritten political control for decades.
For now, that transformation remains theoretical. According to The Street, PVM Oil analyst Tamas Varga offered a blunt assessment of Venezuela's near-term market impact: "The world has enough oil in 2026 with or without Venezuela. What Venezuela represents right now is not a price catalyst. It is a signal that the geopolitical and commercial ice around one of the world's most resource-rich countries is finally starting to thaw."
Whether that thaw benefits Venezuela's post-Chavista regime, its population, or primarily Trump's strategic calculus is the riddle at the heart of the country's oil comeback. And the Iran war has now made it considerably harder to solve.
Imperial Oil Grab: The Abduction of Venezuela’s President as a Prelude to the Attack on Iran
Venezuela and Iran hold the largest and third-largest petroleum reserves in the world, respectively. Both have been targeted for regime change by Washington. The world’s hegemon naturally seeks access to such resources. Yet it would be simplistic to think that would be only for narrow economic motives.
Dominion over energy flows – especially from countries with large reserves – is central to maintaining global influence. Washington requires control of strategic resources to sustain its position as global hegemon; a goal reflected in its official policy of “full spectrum dominance.” The 2017 National Security Strategy establishes “energy dominance” as an instrument of imperial power.
For Venezuela and Iran, sovereign control over their vast hydrocarbon wealth is a prerequisite for exercising even a modest degree of independence and some regional and global influence within a geopolitical landscape dominated by the US and its allies.
Venezuela-Iran nexus
Venezuela and Iran were founding members of the OPEC alliance of oil-producing countries in 1960. Both countries rejected Western dominance and nationalized their considerable oil sectors. In Iran, Prime Minister Mohammad Mossadegh established the National Iranian Oil Company in 1951, precipitating the CIA-MI6 coup that deposed him. In Venezuela, President Carlos Andrés Pérez nationalized the oil industry in 1976 through the creation of state oil company. The PDVSA was later expanded and reoriented by President Hugo Chávez after 2002.
In a prescient address at Tehran University, Venezuelan President Chávez admonished:
“If the US empire succeeds in consolidating its dominance, then humankind has no future. Therefore, we have to save humankind and put an end to the US empire.”
Venezuela’s Bolivarian Revolution and Iran’s Islamic Revolution are both of necessity anti-imperialist projects that have forged ties with Russia and China, Washington’s two major-power “strategic competitors.” The hegemon’s response reflects its broader pattern of targeting resource-rich, independent states that resist integration into the US-led “world order.”
Both countries have been targeted for their non-aligned foreign policy. Iran occupies a central position in the resistance to Zionism, supporting Hezbollah, the former Syrian government, Ansar Allah (the Houthis), and above all the Palestinian struggle. Likewise, Venezuela has been among the strongest supporters in Latin America of Palestinian self-determination, severing relations with Israel in 2009. Venezuela, too, has been the main supporter of the beleaguered Cuban government.
In 2015, US President Barack Obama declared Venezuela an “extraordinary threat” to US national security as an excuse to impose unilateral coercive measures on Caracas. Two years later, President Donald Trump intensified the hybrid war against Venezuela, modeled on the “maximum pressure” campaign against Iran.
Washington has repeatedly signaled its disregard for international law: Obama’s drone strikes on US citizens in 2011; Trump’s killing of Iranian General Qasem Soleimani in 2020; the January kidnapping President Nicolás Maduro and “First Combatant” Cilia Flores; and on February 28, the murder of Iran’s Supreme Leader Ayatollah Ali Khamenei.
In short, the US-led empire has demonstrated its readiness to capriciously employ lethal force whenever deemed expedient – with confidence that it will face few immediate consequences from the international community.
Oil markets and the timing of war
The US-Israeli attack on Iran of February 28 was anticipated. Iran’s Defense Minister Aziz Nasirzadeh and Foreign Minister Abbas Araghchi both warned of an imminent strike. Nasirzadeh was killed in the attack, while Araghchi survived. Israeli officials had earlier described previous attacks as “only the beginning,” while President Trump publicly acknowledged that a strike “could very well happen.”
Energy markets had also been anticipating escalation. Official agencies, market commentary, and the corporate press repeatedly warned about potential oil supply disruption, especially via the Strait of Hormuz chokepoint. Oil market indicators reflected these concerns, with oil prices surging in the days preceding the attack.
For years US policymakers had explicitly linked Iran sanctions to oil-market management. Foreshadowing the present escalation, the US announced in 2019 that ending Iranian oil waivers was intended to drive Iran’s exports to zero, while coordinating with major producers to keep global markets “well supplied.” Secretary of State Mike Pompeo based the pace of reducing Iranian oil exports on “market conditions.”
At the same time, US officials openly discussed Venezuela’s vast oil resources as strategically significant. This convergence suggests that Venezuelan oil capacity played a role – at least indirectly – in the timing of Washington’s Iran policy.
Oil-market stability therefore acted as a timing constraint on Washington’s Iran policy. In this context, Venezuelan oil assets could potentially be an offset option to buffer the impact of supply disruptions in the Middle East. It was expedient for the US to stabilize the Venezuelan oil supply prior to upending the Iranian one.
Thus, Washington’s Venezuela strategy was in part to secure oil assets to cushion markets. The same senior personnel and “maximum pressure” logic applied to both countries. Elliott Abrams, for example, held roles relating to both Iran and Venezuela during the first Trump administration. US interdictions of Iranian petroleum shipments to Venezuela in 2020 further illustrated how the two sanctions theaters intersected.
At the same time, Venezuelan oil was only one factor. Washington had already identified Saudi and Emirati production capacity as critical to maintaining global supply should Iranian exports disappear. Restoring Venezuela’s oil infrastructure to former levels will take time. So US intervention there may mainly serve a psychological purpose – helping calm markets during the Middle Eastern conflict.
Venezuela’s resilience
Despite the January 3 seizure of President Maduro, Venezuela’s Bolivarian Revolution survived the decapitation with a seamless continuation of leadership under interim President Delcy Rodríguez. This outcome compelled the US to negotiate rather than outright conquer – as they did in Iraq and Libya and are attempting to do in Iran. Still, the strategic balance of power is heavily titled in Washington’s favor.
So far Venezuela has avoided Iran’s fate: an ever mounting death toll, massive infrastructure devastation, widespread destruction of cultural institutions, and the assassination of top political, religious, and military figures. The US president has even floated the threat to “wipe them [Iran] off the face of this Earth.” The same USS Gerald R. Ford – the world’s most technically advanced aircraft carrier – was part of the January 3 attack on Venezuela and is now deployed off the coast of Iran.
Against this backdrop, President Rodríguez received the CIA director, cabinet-level energy and interior secretaries, the commander of US Southern Command, and the US diplomatic envoy. On March 5, Washington and Caracas announced an agreement to reestablish diplomatic and consular relations.
Venezuela’s new Organic Hydrocarbons Law reflects changing conditions since the original legislation was enacted a quarter of a century ago. Higher cost structures for heavy and extra-heavy crude require major investments, while Venezuela’s ability to attract foreign capital has been strangled by US sanctions.
The new law preserves state ownership of PDVSA and majority state ownership in joint ventures. In contrast, opposition politician María Corina Machado’s “Venezuela, Land of Grace” program would privatize it all.
An ephemeral détente
But make no mistake – the ultimate goal of the empire remains regime change. Washington’s kidnapping of President Maduro was intended to demonstrate the empire’s dominance. Yet it also revealed its limits: the durability of the Bolivarian Revolution and the reality that even great powers must sometimes negotiate with governments they oppose.
As Venezuelan oil analyst Franco Vielma observed, the country’s leadership has developed “creative resilience, strategic prudence, and pragmatic flexibility.”
“They have their strategy, and we have ours,” said Venezuelan President Rodríguez. The contest between imperial domination and national self-determination therefore continues.
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