Venezuela has been shaped by the Carribean, much more so than by the interior of the South American continent.
In order to understand Venezuela’s energy policy, one has to take a look at Venezuelas history. The country has been shaped by Spanish domination and Spanish colonial might played a central role in the Caribbean region, at the beginning of the Spanish colonial period in South America. With the construction of a settlement in Cumaná, Venezuelas history as a dominion of foreign powers began. Even then, Venezuela’s resource wealth was important to the Spanish empire. To this day, foreign powers, the United States in particular, continue to shape the nation’s politics, and play an important role in the minds of Venezuelan leaders. In fact, one gets the feeling as of late that American energy policy encompasses the entire Caribbean Sea.
The history of crude oil in Venezuela is closely linked to the welfare state.
Of course, it was not obvious at that time that Venezuela had the largest untapped oil reserves in the world. This is astonishing because we might be tempted to think that Saudi Arabia has the largest untapped but recoverable oil reserves. However, we must bear in mind that Venezuela produces far less oil than it could actually produce, due to the intervention of the socialist government, which decades ago expropriated private owners of oil refineries and confiscated American property. After the intervention in privately run oil production companies, there was an outflow of capital and a loss of investment in Venezuelas technical infrastructure. In a way, Venezuela has not recovered yet. The Venezuelan government was strongly oriented towards the Cuban government, and for a very long time there has been a hearty cooperation between the two brother nations. Among other things, Venezuela supplied Cuba with crude oil, which meant that Venezuela exerted a certain degree of influence on Cuba. However, Cuba exerted its influence on Venezuela through humanitarian activities, as it send well-trained doctors to Venezuela to help Venezuelans set up the local health care system. At the supranational level, Venezuelan and Cuban leaders often speak with one voice.
What the Venezuelan government is doing with the profits from its oil exports.
The Venezuelan government uses revenues from oil reserves to maintain an elaborate welfare state that reaches beyond what the country could afford. This is one of the main reasons why Venezuela is in a fiscal crisis, although it is energy self-sufficient and could finance itself through oil exports. But it is precisely this energy self-sufficiency that worries the United States. The United States have replaced the Spaniards and the British as the dominant power in the Caribbean. Venezuela, one of the most important countries in the Western Hemisphere, is independent, freely chooses its political partners, and is located on the southern edge of the Caribbean.