Donald Trump has intensified pressure on Venezuela’s president, Nicolas Maduro, and his government in a major escalation aimed at the country’s main source of income: the oil industry.
The White House called for a blockade on all Venezuelan oil exports one week after the US seized an oil tanker off the the country’s coast in what Maduro called “an act of international piracy”.
The move adds to a growing US military presence in the region, which is estimated to now be the largest there since the US invaded Panama in 1989.
What has Trump announced?
Trump posted on his Truth Social platform late on Tuesday that he was ordering a “total and complete blockade” of all oil tankers that are under sanctions entering and leaving Venezuela, although it remains unclear how Trump would impose the embargo.
One option would be to turn to the US Coast Guard to seize vessels carrying Venezuelan crude, as he did last week. Washington has already moved thousands of troops and nearly a dozen warships, including an aircraft carrier, to the region.
Trump wrote that Venezuela was “completely surrounded by the largest Armada ever assembled in the History of South America”, warning that it would “only get bigger” and “be like nothing they have ever seen before”.
Why is Trump taking aim at Venezuela?
Trump has used social media to publicly accuse Maduro’s government of using “stolen” oil to “finance themselves, Drug Terrorism, Human Trafficking, Murder, and Kidnapping”.
The White House has repeatedly accused the country of facilitating the drug trade. The US military has killed at least 90 people since September in strikes on boats in the Pacific and Caribbean that Washington claims were carrying illegal narcotics to the US.
However, the Trump administration has provided no public evidence that these vessels were carrying fentanyl, which is mainly produced in Mexico, or cocaine, which is typically produced in neighbouring Colombia and shipped to the US via various routes.
Trump has also made unsubstantiated claims that Maduro is “emptying his prisons and insane asylums” and “forcing” inmates to migrate to the US. Close to 8 million Venezuelans are estimated to have fled the country’s economic crisis and repression since 2013 and Maduro was sworn in for a third term of office in January after an election widely viewed as fraudulent.
Maduro has strongly denied all these accusations and in turn has accused the US of using its “war on drugs” as an excuse to topple his government and lay claim to the country’s oil.
How important is Venezuela to global oil supplies?
Venezuela is home to the world’s largest oil reserves but produces about 0.8% of the world’s output because of struggles in the wider economy and its state-owned oil company.
It exports about 900,000 barrels of oil a day, mostly to buyers in China, a fraction of the almost 22m barrels of oil produced by the US. Still, oil is the main source of foreign revenue, with profits from the sector financing more than half of the government’s budget.
Market analysts at Goldman Sachs said the loss of Venezuelan crude exports owing to Trump’s blockade could cause the market to tighten slightly in the short-term, which would lead to higher prices. But in the longer-term, a political upheaval that would allow for an influx of western oil companies into the country could mean an increase in oil exports and greater supplies in the market.
How has this affected the global market?
The blockade prompted a sharp rise in the international oil price as traders factored in the growing possibility of disruption to global supplies.
The price of Brent crude shot up by 1.5% to reach almost $60 a barrel on Wednesday afternoon, after the price fell below $60 a barrel for the first time since 2021 earlier this week.
Wednesday’s jump put an end to the steady slide in the global oil markets throughout the month as political leaders inched towards a peace deal between Russia and Ukraine that could lead to the full return of Russian oil barrels to the market.
