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Venezuela: Background and U.S. Relations
The Venezuela government also provides a significant amount of oil under favorable terms to
Cuba and other Caribbean Basin nations, which altogether reportedly amounts to more than
400,000 bbl/day.'32 Venezuela signed an agreement with Cuba in 2000 that currently provides the
island nation with some 100,000 barrels of oil per day. In payment for the oil, Cuba has provided
extensive services to Venezuela, including thousands of medical personnel and advisers in a
number of other areas. Since 2005, Venezuela has provided oil to other Caribbean Basin nations
with preferential financing terms in a program known as PetroCaribe. Most Caribbean nations are
members of PetroCaribe, with the exception of Barbados and Trinidad and Tobago. In Central
America, Belize, Guatemala, and Honduras have participated in the program, although in
November 2013 Guatemala announced that it was withdrawing from PetroCaribe because of
increased financing terms. El Salvador became a member of PetroCaribe in June 2014. Some
analysts have expressed concern about the increasing debt owed to Venezuela by Caribbean
nations, many of which are already saddled with high levels of public debt. Others maintain that
Cuba, which is dependent on Venezuela's preferential oil program, and some other Caribbean
nations would face difficult economic situations without the Venezuelan program. The EIA
reports many analysts believe that Venezuela will need to redefine the terms offered under
PetroCaribe given PdVSA's difficult financial circumstances and the country's shrinking
international reserves.
A domestic subsidy makes gasoline almost free for Venezuelans; at the official exchange rate,
gasoline cost about five U.S. cents per gallon, and it is even cheaper at the black market exchange
rate. The subsidy has increased consumption, spurred smuggling operations at the border with
Colombia, and reduced government revenue that could be used toward building infrastructure or
providing services.33 Raising the price of gasoline, however, is sensitive politically in Venezuela;
in 1989, austerity measures that included gas price increases led to riots in which several hundred
people were killed. The Maduro government has been considering raising the price of gasoline,
but the departure of Rafael Ramirez (a key proponent of such a strategy) from his posts as oil
minister and head of PdVSA in early September 2014 has left doubts about whether the
government will make that policy move."4
Under President Chivez, the Venezuelan government asserted greater control over the country's
oil reserves. By 2006, it had completed the conversion of its 32 operating agreements with
foreign oil companies to joint ventures, with the Venezuelan government now holding a majority
share of between 60% and 80% in the ventures. In 2007, the government completed the
conversion of four strategic associations involving extra-heavy oil Orinoco River Basin projects.
Six foreign companies had been involved in the projects-U.S.-based ConocoPhillips, Chevron,
and ExxonMobil; Norway's Statoil-Hydro; Britain's BP; and France's Total. In the conversion to
Venezuelan government majority ownership, Chevron and BP maintained their previous
investments, Total and Statoil-Hydro reduced their holdings, and ConocoPhillips and
ExxonMobil chose to leave the projects. Subsequent bilateral agreements for the development of
additional Orinoco Belt resources have involved PdVSA partnering with a number of foreign oil
companies, including Chevron.
132 EIA, "Country Analysis Brief, Venezuela," June 20, 2014.
133 Angel Gonzalez, "In Venezuela, Almost-Free Gas Comes at a High Cost," Wall Street Journal, April 12, 2013.
134 Jim Wyss, "In Venezuela, Cheap Gasoline Prices Stir Debate," Miami Herald, August 28, 2014; and Diego Ore,
"Venezuela in Dilemma over Hiking World's Cheapest Fuel," Reuters News, September 10, 2014.Congressional Research Service
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Sullivan, Mark P. Venezuela: Background and U.S. Relations, report, October 2, 2014; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc806966/m1/45/: accessed May 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.