Venezuela Crisis: India May Gain Big From US Action; Major Oil Reserves At Stake

New Delhi: The US assault on Caracas and the detention of Venezuela President Nicolas Maduro by the American military has put the world on edge. The incident has sparked outrage across the globe with several Latin American countries and Asian powerhouse China condemning the US move. However, the crisis may prove to work out in India's favour with major oil reserves on the line.

What is the impact of the Venezuela attack? 

The impact of US control over Venezuela's oil sector is expected to be seen in crude oil prices. While this US action has increased tensions in several countries, including Russia, it could prove beneficial for India. 

According to reports, US control over Venezuelan oil could lead to the payment of India's outstanding dues of $1 billion and a potential increase in production.

Media reports quote analysts and industry experts as saying that the US-led takeover of Venezuela's oil sector could directly benefit India. It is stated that this could potentially lead to the payment of long-pending dues of approximately US$1 billion (more than Rs 9000 crore).

Furthermore, after the US takes control, crude oil production in sectors operated by India in this Latin American country, which has been affected by various sanctions, could increase.

It is worth noting that amidst the action against Venezuela, Donald Trump has stated that US oil firms will enter Venezuela and invest billions of dollars to improve the dilapidated oil infrastructure there. 

"We are in the oil business, and we know how oil companies make profits," Trump had told the media.

What was India’s position in Venezuela?

India was once a major importer of Venezuelan crude oil. At its peak, the country imported more than 400,000 barrels of oil per day from Venezuela. However, the situation changed in 2020 when imports were banned due to sanctions imposed by the US and the increasing risk of compliance issues. 

State owned Indian company ONGC Videsh Limited (OVL), India's leading overseas exploration and production company, jointly operates in the San Cristobal oil sector in East Venezuela. Due to US sanctions, its operations and oil production have been severely curtailed since 2020.  As a result, existing reserves in the country remain untapped, and outstanding payments are stuck.

According to reports, these problems have led to a delay in the payment of $536 million in dividends owed to OVL for its 40% stake in the project, due by 2014.  A similar amount is also outstanding for the period since then. Significantly, these outstanding payments could not be settled due to the lack of audit permission.

Why has India's hope been revived?

India's hope of recovering this nearly $1 billion in outstanding payments has been revived because the US, under the leadership of Donald Trump, is expected to regain control over Venezuelan oil, potentially restoring oil exports to the global market. This could help ONGC Videsh Limited recover its dues. It is believed that a relaxation of the sanctions imposed by the US could allow Venezuelan oil to flow back to India.