WHAT’S GOING ON IN VENEZUELA?

In 2008, Judith and I went on holiday in Venezuela. It didn’t seem like a happy place. We had been told to bring US dollars with us, rather than traveller’s cheques, and on arrival at Caracas airport we were directed, not to the official money-changing bureau, but to a man in a dark corner with a large satchel full of notes, who gave us bolivars not at the wholly unrealistic official exchange rate, but at the much better unofficial one. During our journey through this beautiful country, people we met kept taking us aside to tell us in anxious tones about the shocking corruption and lawlessness in their country. There was a sense of disquiet, of a lurking, unseen menace. Things were already bad, but during the years that followed, they were going to get much, much worse.

I have taken an interest in Venezuela since that time.

This article will attempt to explain the background to the seizure of President Maduro by US forces on Saturday January 3^rd, and will consider the opportunities and challenges facing Mr. Trump’s government as it attempts to restructure Venezuela and exploit its oil riches.

I’ll begin with a brief list of people you’ll encounter in what follows, divided into historical figures and influential figures in Venezuela today.

Key figures in Venezuelan history

Simon Bolivar – 1783-1830. Venezuelan freedom fighter and anti-slavery campaigner.

Juan Vincente Gomez – Military ruler/dictator. President 1908-35 under whose rule oil was first discovered.

Carlos Andrez Perez – President 1974-9, 1989-93. Imposed austerity measures during his second term, which failed. He was subsequently impeached.

Rafael Caldera – President 1964-79, 1994-99. The last president before Chavez

Hugo Chavez – 1954-2013. Military officer. Coup attempt in 1992 failed. President 1999-2013. Socialist. Instigator of the ‘Bolivarian Revolution’

Nicolas Maduro – Born 1962, age 63. Minister of Foreign Affairs under Chavez (2006-12), subsequently deputy President (2012-3). President 2013-date (or 2013-26, depending on your point of view). Chavez protégé who has continued with Chavista policies.

Key political figures today

Government

Delcy Rodriguez – Born 1969, age 56. Current acting President (sworn in Monday January 5^th). Foreign Minister 2014. Minister of Finance and Energy 2020. Brought in to reverse Venezuela’s cratering oil production under US sanctions. Brokered the licence deal under which Chevron is the only foreign oil company operating in Venezuela. Known to the US authorities through these negotiations. Subsequently Vice-President. Seen by the US administration as someone pragmatic who they can work with.

Jorge Rodriguez – Born 1965, age 60. Delcy’s older brother and key supporter. Chief political adviser to Maduro. President of the National Assembly of Venezuela since 2021, following the ousting of Juan Guaido.

Vladimir Padrino Lopez – Born 1963 age 62. Head of Venezuela’s armed forces.

Diosdado Cabello – Born 1963 age 62. Captain in Venezuelan armed forces. Former speaker of the National Assembly. Minister of the Interior, Justice and Peace (!) (2024).

These four individuals, all under US sanctions, are the most powerful politicians in Venezuela. The latter two, Lopez and Cabello, are the ‘heavies’ whose job is to stifle protest and keep the country ‘peaceful’. Cabello controls the colectivos, groups of gun-toting paramilitaries on motorbikes, who have been much in evidence on the streets of Caracas in recent days to prevent any celebrations over the fall of Maduro.

Opposition

Maria Corina Machado –  Born 1967 age 58. An industrial engineer by training. For years ran the Atanea Foundation for orphaned children living on the streets of Caracas. Leader of the opposition to Chavez and Maduro. National Assembly deputy 2011-4 until barred for unspecified reasons. Nobel Peace Prize winner 2025. Went to Oslo to receive her prize. Currently in hiding at an unknown location pending return to Venezuela.

Juan Guaido –  (Full name Juan Geraldo Antonio Guaido Marquez). Born 1983, age 42. Won the Presidential election in 2018, which was effectively stolen by the regime, but recognised by the US, the EU, and altogether 60 countries worldwide. Acting President 2019-23. Lost his position as head of Parliament 2021, at which point the EU withdrew support, followed by the US in 2023. Currently resident in Miami, Florida.

Edmundo Gonzales –  Born 1949, age 76. After Maria Machado won a Presidential primary in 2023, she was banned by the regime from standing in the 2024 election, so she nominated Gonzales in her place, standing for the Unitary Platform. Independent observers agree that Gonzales won the election comfortably with a two-thirds majority, but Mr Maduro declared himself winner, and asked the supreme judicial body, which he controls, to confirm this result, which it did. Mr Gonzales was then charged with various offences amounting to conspiracy to undermine the state. He now lives in exile in Spain.

Early history 1500-1900.

Present-day Venezuela was colonised by Spain in 1502. It remained a Spanish colony until the early nineteenth century, apart from a brief spell under German rule (1528-46). The Germans called the territory Klein Venedig, or Little Venice (Spanish Veneziola), due to an imagined resemblance between native houses on stilts in Lake Maracaibo and the canals of Venice. Veneziola has evolved into Venezuela. During the sixteenth century, the main commercial activities were livestock farming and gold mining. Venezuela is rich in agricultural resources as well as minerals. The gold mining trade used slave labour, initially local, afterwards Africans as the Atlantic slave trade developed. When cocoa farming began in the eighteenth century, slave labour was used once again, on a larger scale this time.

Caracas University was founded in 1721. During this time the region was ruled remotely, from New Spain (today’s Mexico) and Peru.

The weakness of Spain during the Napoleonic wars allowed its colonies to declare independence. In 1808, Napoleon deposed King Ferdinand VII together with his father Charles IV (Ferdinand was restored later, in 1813) and placed his own brother Joseph on the throne. Spain then began a war of independence against France. Venezuela declared independence in 1811, but a massive earthquake in Caracas the following year led to the fall of the First Republic.

At this point Simon Bolivar ‘The Liberator’ comes on the scene. Bolivar was born in Caracas. Both his parents died when he was a child. He went to Spain to be educated, and it was there he decided that his mission in life would be to liberate the northern part of South America (a vast area encompassing modern Venezuela, Colombia, Ecuador, and Panama, together with parts of northern Peru, northwestern Brazil, and western Guyana) from Spanish rule. He also determined to end slavery in those countries. While in Spain, aged 18, Bolivar married his wife, Maria Theresa. She returned to Caracas with him and died there of yellow fever just six months after their marriage. Bolivar swore that he would never remarry, though it is said he had a string of amours with ladies he met on his travels, as he won battle after battle against the Spanish.

In 2013, Bolivar declared the Second Republic, but this too fell after the Spaniards reconquered the territory. Bolivar was finally successful in establishing the Third Republic in 1821, as part of Gran Colombia, the great empire he conceived arising from the liberated lands. However, the empire was short-lived, as the separate countries that we know today seceded in quick succession. Venezuela finally became an independent state in 1830, the year that Simon Bolivar died, aged 47, of tuberculosis. Bolivar remains an important symbol throughout the region, as an upholder of freedom and a champion of the oppressed.

At independence, Venezuela was possibly the most impoverished country in the region, decentralised and almost entirely rural. For the remainder of the nineteenth century, country remained poor. Politically, the presidency changed hands between an endless succession of strongmen or caudillos, punctuated by a bloody civil war (1858-63).

Oil

Venezuela is astonishingly rich in oil. It was first discovered by geologists working for Shell at La Rosa in the Maracaibo basin in 1922. Oil wasn’t hard to find, as it was lying around on the surface. The geologists hit a seam from which the oil burst upwards in a fountain, spouting crude oil into the air at the rate of around 100,000 barrels (420,000 gallons) a day. It took five days to get the flow under control.

We now know that Venezuela hosts proven oil reserves of around 303 billion barrels, 17% of the world’s total – larger than those of any other country, including Saudi Arabia and Iran, and almost four times Russia’s 80 billion barrels. At the same time, we know that Venezuela remains one of the world’s poorer countries, with its GDP (national income) per person roughly equivalent to those of Bangladesh, Cambodia and Kyrgystan. To turn such good fortune into calamity has required a combination of economic forces and mismanagement on a truly heroic scale.

Let’s look at the economic forces first. Venezuela suffers from a malaise sometimes referred to as Dutch Disease, where one predominant economic sector effectively blights all the others. Venezuela produces far more oil than it needs domestically, so it is able to export almost as much as it can produce. Importers buy the Venezuelan currency to pay for their oil, which pushes up its value. The higher bolivar makes imports cheaper, but it makes all other exports from the country more expensive, and therefore harder to export. At the same time the oil industry is far more lucrative than any other occupation, so it sucks expertise out of the agricultural and manufacturing sectors. Over a century, Venezuela hasn’t found a solution to this conundrum. Today oil still comprises 96%, in other words nearly all, of the country’s exports.

The disadvantage of relying on oil to such an extent is you are at the mercy of the oil price, which is highly volatile. World supply and demand are kept roughly in balance most of the time, but on the occasions when supply and demand become mismatched, the price can fluctuate alarmingly (a recent example – in the early stages of covid in April 2020, when demand plunged, the world ran out of storage space, and the price of oil briefly went negative – you couldn’t even give it away!). Whenever there has been a slump in world oil prices, a crisis in Venezuela has ensued, whatever government has been in power at the time.

The untold wealth of black gold presents national politicians with an almost irresistible opportunity for corruption – an opportunity that few have been able to resist.

The warning signs were there from the beginning. In 1908, President Cipriano Castro travelled to Germany for medical reasons, leaving his vice-President, Juan Vincente Gomez, in temporary charge. Gomez promptly declared himself President, barred Castro from returning to his homeland, and ruled as a quasi-dictator for the next 27 years. One of his earliest actions was to repudiate all foreign debt. The oil boom began under Gomez, who established the principle that landowners only owned their land to a spade’s depth, with everything below being the property of the state – at a stroke nationalising all of Venezuela’s oil assets. However, at the same time, he established the concessionary system, granting licences to friends who for the most part sold them abroad. He used oil revenues to improve national infrastructure, but apart from that Venezuela’s citizens saw no benefits, while those in competing industries were squeezed by the stronger bolivar and the seductive pull of the oil sector.

By 1927, oil was the country’s most valuable export, and by 1929, Venezuela was the world’s largest oil exporter.

Since the end of Spanish colonial rule, Venezuela has been mostly ruled by autocrats, apart from a period of democracy (1958-99) which began well but fell victim to the country’s oil addiction. During the Yom Kippur war of 1973, OAPEC (the Organisation of Arab Petroleum Exporting Countries) ceased supplying the US and its allies who supported Israel, leading to a roughly five-fold price spike, from $2 to $10 per barrel. This event handed a huge windfall to Venezuela, and to the officials who were able to siphon the profits off. The windfall cash was not used wisely, and was not only all spent, but augmented with many $billions of debt.

The normalisation of the oil market a decade later, when the crude price fell from $40 a barrel in 1980 to just $10 six years later, came as a hammer blow to the economy and the government’s revenues. Austerity measures were imposed, including an increase in the domestic price of oil, which has traditionally been heavily subsidised. Austerity led to protests culminating in the Caracazo (‘the big one in Caracas’) in 1989, in which 277 people on official estimates, but possibly as many as ten times more, lost their lives. In 1990, government debt stood at $34bn and the poverty rate was 70%. The democracy never really recovered from these events.

In 1998, Hugo Chavez was elected President. Within a year he had created a new constitution and renamed the country The Bolivarian Republic of Venezuela. Chavez’ doctrine has become known as Chavismo and his supporters Chavistas. His ‘Bolivarian Revolution’, essentially socialist, stood for economic independence, popular democracy, the equitable distribution of oil revenues, and the end of political corruption. But these noble aims went unrealised.

In his first couple of years, Chavez’ popularity plummeted due to his increasingly authoritarian rule, using emergency powers to bypass the National Assembly. In 2002, during a general strike, he was deposed for two days but was subsequently reinstated.

In 1976, the oil industry had been centralised into a single company called Petroleos de Venezuela SA (PDVSA). The uprising against Chavez was provoked by his dismissal of the president of PDVSA and most of its board members, which he had done with a view to bringing the independent company under closer state control, and many of its employees joined the strike. Chavez subsequently dismissed workers who had taken part in the strike, weakening the company, and further weakened it by making it pay for his social programmes. He also appropriated the assets of all foreign oil companies within Venezuela, effectively banning them from the country. None of these companies received compensation. Their claims are still outstanding.

Collapse

What follows is so appalling that the bare statistics can only give the merest hint of the suffering that took place in these years.

On the death of Chavez the economy continued to rely on oil, but with production solely reliant on a much-weakened national monopoly, which had suffered from decades of underinvestment and lost many of its most experienced workers.

Between 2014 and early 2016, the world price of crude oil collapsed again, this time from $100 to $30. Once again, Venezuela had no financial reserves and no alternative sources of income to fall back on. An already bad situation became catastrophic.

Between 2012 and 2020, Venezuela’s national income fell from $373bn to $44bn, an astonishing 88%.

Venezuela topped the World Misery Index in 2013, 2014 and 2015.

The government continually expropriated the assets of property developers. Venezuela’s property rights were the weakest anywhere in the world, scoring 5 out of a possible 100. Venezuela had become a kleptocracy where private investment makes no sense.

In 2016, a National Living Conditions Survey found that 75% of the population had lost an average of 19 pounds in weight during the year.

That year, inflation was running at 800%.

Luis Almagro, Secretary-General of the Organisation of American States (the OAS) said ‘I have never seen a country going down so fast, at every level, politically, economically, socially’.

Starved of money, the health and education systems collapsed. There were no medicines to treat routine conditions.

In the first year of his first term in office, Donald Trump imposed sanctions on Venezuela, which had the effect of closing export markets and denying access to the US financial markets. Inflation, already extremely high, became toxic as food shortages grew. In July 2018, the Financial Commission of the National Assembly noted that prices were doubling every month, with an annualised inflation rate of 25,000%. 25,000% means that if you had £100 at the beginning of a year and didn’t spend it, the purchasing power of that money by the end of the year would be just 40p. Such inflation destroys the value of all savings.

Today around 80% of Venezuelans live in poverty, and over half in extreme poverty. Unemployment stands at roughly 35%. It has been estimated that 20% of the country’s national income is derived from illegal activities.

The country became impossible to live in, and anyone who could leave, left. Out of a population of 35m, nearly 8m left between 2014 and 2024. Their main destinations, interestingly, were not the US, but mainly Colombia and Peru, with smaller numbers going to Ecuador and Brazil.

Economic conditions improved somewhat under the Biden administration, when economic sanctions were eased in exchange for reform. But after the corrupt election of 2024, sanctions were reimposed.

Venezuela’s Bolivarist regime took office with high socialist ideals but has become a corrupt clique clinging onto power in a bankrupt country by means of violence, falsifying elections and imprisoning political opponents, of whom nearly a thousand remain in gaol. Delcy Rodriguez and her brother Jorge, who together oversaw 2024’s stolen election, are every bit as culpable as Mr Maduro himself.

The arrest of President Maduro and his wife Celia Flores

President Trump must be delighted with the success of Operation Absolute Resolve, which must have been achieved with help from the inside – and there are those in high places who stand to benefit from the removal of Nicolas Maduro. Trump assumes that he can work with Delcy Rodriguez, at the same time warning her of dire consequences should she fail to toe the line. This is primarily about oil. The US expects its oil majors to move into Venezuela and rebuild its oil infrastructure. Much of Venezuela’s oil is ‘heavy’ oil, which the refineries on the US Gulf coast are ideally adapted to process. Where better to send Venezuelan oil to be processed than the Southern United States? The terms of the deal aren’t known but can be expected to be highly favourable to the US. Mr Trump expects the oil to start flowing in around 18 months’ time.

What could possibly go wrong?

Here are a few possibilities.

The Regime

Delcy Rodriguez’ government has to perform a near-impossible balancing act – she has to convince her patriotic supporters that she is opposed to the brazen kidnapping of the nation’s leader, while at the same time convincing her new American masters that she is happy to work with them. Following last Saturday’s raid, she said ‘There is only one President in this country and his name is Nicolas Maduro.’  On Sunday 4^th, however, she insisted that her priority was to ‘move towards a balanced and respectful international relationship between the US and Venezuela’. If she fails to obey the US, she will be deposed. On the other hand, if she acts against the drugs trade, she will be undermining her own supporters. Marco Rubio, US Secretary of State (the equivalent of the UK’s Foreign Minister) takes a relaxed view of Ms Rodriguez’ pro-Maduro comments, no doubt understanding the delicacy of her position. He said ‘we’re going to make an assessment on the basis of what they do, not what they say publicly in the interim’. This more relaxed stance buys Rodriguez some time, but in the end if she fails to curtail the flow of drugs through the country, repudiate Venezuela’s long-established ties with Russia, China and Iran, or eliminate all barriers to the successful redevelopment of the oil industry, she is unlikely to survive as President.

Meanwhile, it’s clear from the elections of 2018 and 2024 that Venezuelans are desperate to be rid of the clique which has presided over the collapse and impoverishment of their country. Citizens must feel conflicted – on the one hand, delighted to see the fall of the tyrant Maduro, and on the other humiliated and anxious over the deadly raid by the US bully. The streets of Caracas, which could have been full of celebration, are empty as the colectivos ride up and down looking to suppress any partying. It’s equally clear that the Trump America First administration is not primarily interested in the restoration of social justice. No mention has been made of the release of political prisoners, or of restoring the country’s democratically-elected leaders. Will Venezuela’s 28 million inhabitants or its diaspora of another perhaps 10 million, be prepared to sit and watch as the US neo-colonialists (as they would see it) ship their oil wealth back to the home economy? In other words, the people of Venezuela appear likely to gain little from the new situation and may not be willing to accept the new status quo. If things don’t improve for the people, one might expect riots and possible sabotage.

It has been suggested that the US could have invited Maria Machado to form a government, as her party, Vente Venezuela (‘Come Venezuela’) is the people’s choice. It is hard to see how this could have been achieved without first holding elections, which would take time to organise, but Mr Trump hasn’t suggested this course of action even as a possibility. At a recent Q & A session Trump, asked about Machado, called her ‘a very nice woman’ but said that ‘she doesn’t have the support, she doesn’t have the respect in the country’ to become its leader, which clearly isn’t true. There may be other reasons. Mr Trump himself has autocratic tendencies and may prefer working with the incumbent autocrats. He knows them well but has never met Ms Machado.

In his first term, Trump supported Juan Guaido, the real winner of the 2018 election, hoping that he would be able to oust Maduro, which didn’t happen, so this may be a case of ‘once bitten, twice shy’. Also, Ms Machado has just won the Nobel Peace Prize, which may have caused a degree of resentment in Mr Trump, who makes no secret of his belief that the prize should have been awarded to him.

In an ideal world, the US would ‘make Venezuela great again’. After restoring security and an improved standard of living, it would oversee free and fair elections, leaving a grateful and newly prosperous democracy in charge of its own destiny. But this isn’t an ideal world. America hasn’t mentioned elections and its fixation on oil will do nothing to cure the ‘Dutch Disease’ which has plagued Venezuela for the last century.

Extracting the oil

Venezuela has oil, the US has three oil majors, one of whom, Chevron already has a presence in the country where it employs 3,000 people. The other two, Conoco Phillips and Exxon, could quickly become involved. But it would be a mistake to underestimate the scale of the task ahead. There simply hasn’t been any investment for decades, not even for maintenance. Fires, explosions and leaks are commonplace. In 2021, the state oil company PDVSA produced a report stating that it hadn’t updated its pipelines in 50 years. Facilities are in a ‘catastrophic state’. The El Furrial field, which once produced 400,000 barrels a day has become so run down that its output today is ‘negligible’. At the moment, the embargo remains in place, so oil isn’t being exported, and storage facilities, those that remain serviceable, are at or near full capacity. It is likely that the embargo will be lifted soon.

Venezuela once produced 3.5 million barrels of oil a day. Today, that figure has fallen below 1m. In the last few days various experts have produced estimates of the cost of restoring the industry to a point where production could be doubled. A figure of $180-200bn has been mentioned. This is more than double the combined annual expenditure of the three US oil majors, a vast sum. The first question is, where does the money come from? It could perhaps come in the form of loans guaranteed by the US government. The second is, why would anyone make long-term investments in a country as desperately impoverished and politically unstable as this one? Even if the cash were available, where are the experts capable of running such a project? Abroad, for the most part. Can they be tempted back?

Venezuelan oil is heavy and viscous. To run through pipelines, it needs to be mixed with a lighter substance, usually naphtha. This naphtha has been imported mainly from Russia and China. Will this trade be allowed to continue? The European oil companies Eni (Italy) and Repsol (Spain) have been supplying PDVSA with naphtha. PDVSA is in default, so up until March 2025 the companies received payment in crude oil, and since crude shipments were banned under the embargo, they have been receiving IOUs. The United States has rescinded all licences for foreign companies with the exception of Chevron to trade with Venezuela, and the US Treasury is showing no interest in helping the companies to recover what is owed to them. Without naphtha, Venezuelan oil won’t be going anywhere.

The Maduro trial

The eyes of the world will be on this event. It is important for the US to convict Maduro, otherwise their whole project would collapse. Their case is that he was personally involved in trafficking drugs, mainly cocaine, to the US, through issuing diplomatic passports to traffickers. Maduro will argue that the trial itself is illegal, as he has been kidnapped and is in any case innocent. Experts in international law believe he has a case.

Relations with Russia

The Maduro regime has enjoyed close ties with Russia, China and Iran, all of whom endorsed the election results in 2018 and 2024. Mr Putin has not made a personal statement on the events of the last week, but the Russians have made their stance clear. Russia’s Foreign Ministry has called the appointment of Delcy Rodriguez a step to ensure peace and stability in the face of ‘blatant neo-colonial threats and foreign armed aggression’, adding ‘we welcome the efforts undertaken by the official authorities of country to protect state sovereignty. We affirm Russia’s unwavering solidarity with the Venezuelan people and government’ and saying ‘we will provide the necessary support’.

Two days later US forces impounded a Russian oil tanker bound for Venezuela.

Russia has made it clear that it intends to win its war in Ukraine before discussing peace. Mr Putin believes he is winning the war and Mr Trump appears to agree. Russia continues to pursue the dual strategy of all-out assault at the front, aiming to maximise territorial gains regardless of the cost in terms of people (around 1200 casualties per day) or material, while intensifying its destructive raids on Ukraine’s civilian energy infrastructure. It is possible that Mr Trump, who has failed to make any progress in his aim to bring peace to Ukraine, will take a harder line with Russia following their stand-off over Venezuela. It’s equally possible that he will stand aside, waiting for what he believes is Russia’s inevitable victory, and then get involved in the peace process, brokering a deal which would involve security guarantees in exchange for Ukrainian minerals. Mr Trump’s pro-Russian sympathies have survived a good deal and may well survive this crisis too.

Friction

Mr Trump’s government is at the beginning of a vast, complex and risky project in Venezuela, but he talks as if it was a done deal. He is now ready to buy or otherwise annex Greenland and perhaps make a similar move as in Venezuela to take over the running of Colombia. Meanwhile, many of his activities of the last year look likely to need further attention. His tariffs may be declared illegal by the Supreme Court and have in any case pushed up inflation in the US, where the job market has started to weaken. Making America Great Again must include reducing its vast government debt, but in 2025 US national debt increased by a further 6% to $38.4 trillion, accelerating in the final quarter of the year. The Gazan peace process appears to have stalled. The National Guard has killed three civilians in the last few days in its search for illegal immigrants. And so on. Trump has an aura of invincibility. 2026 may be the year when his project begins to lose momentum. The choice of his top team on the basis of loyalty rather than ability or experience puts more pressure on the main man. Will Venezuela prove to be the last straw? Only time will tell.

The price of oil

Before last Saturday’s events, the world price of oil was cheap at a little over $60. Supply is expected to exceed demand this year. The oil price fell initially on the news of Mr Maduro’s capture but has since begun to rise back to around where it was before. This seems about right. On Mr Trump’s best-case scenario, Venezuelan oil exports won’t rise significantly for another 18 months. Bearing in mind the many thorny issues that will have to be resolved, the timescale could be a whole lot longer.

Tony Yarrow

January 2026

Please note – this article contains the personal opinions of Tony Yarrow and does not contain financial or investment advice.

I have constructed this article from my usual sources – the Financial Times, the Economist, the BBC, and a range of publicly available websites.