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Weekly Report - 27 February 2020 (WR-20-08)

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VENEZUELA: Military loses full control over Pdvsa

Venezuela’s de facto president Nicolás Maduro has declared an emergency in the state-run oil company Pdvsa. Maduro made the announcement directly after the US government slapped sanctions on the trading arm of Russia’s state-owned oil producer Rosneft last week [WR-20-07]. Pdvsa is no stranger to emergencies. Twice in 2017 Maduro announced a decisive restructuring of Pdvsa to much fanfare. Then, it was ostensibly designed to snuff out rampant corruption but was motivated by a clear political agenda. It was the first time the armed forces had been put in control of the state cash cow, but the promised surge in oil production has not been forthcoming, declining even further. Now, Maduro is empowering civilians to try and set things straight, albeit with a strong military presence.

“I declare an energy emergency in the hydrocarbons industry with the aim of adopting urgent and necessary measures to guarantee national energy security and protect the industry from imperialist aggression,” Maduro said at Pdvsa headquarters in Caracas on 19 February. Maduro said the oil industry would be transformed in accordance with “a new model of 21st-century socialist management”. Creating new layers of bureaucracy to carry the nation to a great victory is the customary response of the Bolivarian government to recurrent emergencies in Venezuela. But this change is more eye-catching because the military, essential to keeping Maduro in power, has seen its wings clipped.

Maduro designated the economic vice president, Tareck el Aissami, as the head of a presidential commission that will have full powers to restructure the oil industry, with former oil minister Asdrúbal Chávez serving as his deputy. This is an indirect acknowledgement that the military has failed to turn Pdvsa’s fortunes around. Maduro was naturally keen not to present it as such. Indeed, he pointed out that the defence minister, Vladimir Padrino López, and his number two, Remigio Ceballos, would both sit on the commission, “in order to harness all of the power of the armed forces”. The current oil minister and president of Pdvsa, Major General Manuel Quevedo, who has presided over a sustained slump in oil production, will also sit on the commission but this is technically a demotion.

Oil production

Nicolás Maduro said the presidential commission would start work immediately and begin a process of “revision and recovery”. Maduro said there would be no more excuses, crude production would be lifted to at least 2m barrels per day (bpd), a figure which would once have been disappointing but which now is a pipe dream. According to the Organization of the Petroleum Exporting Countries (Opec), citing secondary market sources, oil production in Venezuela last December stood at just 714,000 bpd. Even by the government’s own inflated figures oil production was only 907,000 bpd.