Maduro says PetroCaribe to be revived this year

The Venezuelan government has said that it intends to revive its PetroCaribe oil programme this year.

The mechanism previously offered oil to recipient countries in the Caribbean and Central America on preferential and deferred terms linked to local development arrangements.

Speaking on 18 December, the Venezuelan President, Nicolas Maduro, told the closing ceremony of the seventeenth ALBA summit held in Havana that it was Venezuela’s intention to “commit … to relaunching PetroCaribe with great strength in the first semester of 2020.”

In a subsequent tweet he indicated that it was his wish to reintroduce the mechanism, “which represents the energy security of the peoples of the Caribbean, with great force”.

Supplies under PetroCaribe were suspended to most Caribbean states in June 2018 as a result of plummeting Venezuelan crude output, US political pressure on Caracas and recipient countries, and falling world oil and gas prices, all making it more beneficial to purchase oil elsewhere. Cuba, however, continued to receive oil under a separate element of the programme.

President Maduro’s comments were made in the context of his government’s commitment to ALBA, the Bolivarian regional integration initiative established by his predecessor, a group founded by the late Hugo Chavez as a counterweight to US influence in the hemisphere.

How Venezuela intends relaunching PetroCaribe in an effective manner, avoiding stringent US sanctions affecting Dollar-related financial transactions and maritime transport, or what the likely uptake will be, is far from clear. No details of what is planned or how a new arrangement might function in the light of US sanctions have yet been provided.

The announcement comes against a background of increasing US financial and other pressure on the country’s state-owned oil company PDVSA, and measures against third country companies shipping Venezuelan oil and oil products to Cuba.

It also comes at a time when a humanitarian crisis continues to seriously affect the Venezuelan people, about 2m of whom in total have now fled to Colombia, Brazil, Trinidad, Curacao, Aruba and much further afield in the Americas according to the UN refugee agency, the UNCHR.

The announcement came before oil prices passed the US$70 a barrel mark in early January, following the assassination by the Trump Administration of the Iranian general, Qassem Soleimani, and subsequent global uncertainty about the possibility of conflict in the Middle East.

The PetroCaribe programme, has in recent years proved controversial in some recipient countries and nations beyond the region for having created longer term indebtedness, enabled Venezuelan political influence in international fora, and acted as a vehicle for facilitating corruption. The US government has been particularly critical at a time when it is seeking the departure of President Maduro and his government through a programme of sanctions.

In Haiti, claims of corruption related to PetroCaribe continue to swirl around the country’s President, Jovenel Moïse, and have led to months of continuing and serious street demonstrations after a report was published detailing allegations that funds intended for social programmes and infrastructure had seen as much as US$2bn go missing.

In the past, PetroCaribe has supplied oil at market prices in exchange for a 40% down payment with the balance being repaid over 25 years at 1% interest and Governments benefitting from the sale of oil and oil products into the market providing an immediate cash boost to government finances. The scheme also provided for sliding scales of interest, moratoria on payments, payments through barter trade, and debt forgiveness under certain circumstances. When global oil prices peaked at more than US$100 per barrel and during the global financial crisis of 2007/8 PetroCaribe proved to be particularly valuable as the revenues enable indebted Caribbean governments to finance their social and economic development programmes.

However, as oil prices collapsed, the overall mismanagement of the Venezuelan economy took hold, and political instability in Venezuela became commonplace, many of the beneficial development aspects ceased, leaving some Caribbean nations with a continuing dependence on hydrocarbons at a time when the pressure was to move to renewables. 

Of PetroCaribe’s seventeen members, 14 are in the Caribbean although their level of engagement varies with Jamaica and the Dominican Republic having all but withdrawn from the arrangement. Only Barbados and Trinidad are not members, although the latter is in discussion with Venezuela about oil and gas production sharing arrangements. Cuba has a special strategic arrangement with Venezuela with Caracas having met, in the past, up to 80% of its oil needs under a barter agreement for Cuban services, the details of which are not public.

At the ALBA meeting, member nations agreed also to try to develop the organisation’s economic role by strengthening the ALBA Bank, and to construct “a new financial architecture” among its members. Current members of ALBA include Venezuela, Cuba, Nicaragua, Dominica, Grenada, St Kitts, Antigua, St Vincent, St Lucia, and Suriname. Haiti, Syria and Iran are listed as observers.

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.