Showdown for Oil Spoils

On Thursday, December 14, on the Caribbean island of Saint Vincent, Venezuela and Guyana are set to come to the negotiation table. Vital matters will be on that table for the negotiators. For the President of Venezuela, the stake is the opportunity to bolster dwindling oil revenues and gain additional support for his authoritarian rule. For Guyana, the stakes involve the prospect of securing a prominent position in the global club of oil rent recipients, somewhat akin to Kuwait's status. The focus is on the ownership of approximately two-thirds of Guyana's territory and its coastal area, where massive oil deposits have been discovered. The territory is disputed by both Guyana and Venezuela. But there's a twist.

Venezuela conducted a so-called plebiscite on December 3. Subsequently, the President of the country, Nicolás Maduro, issued several decrees approving the results of that plebiscite. So, the starting conditions for the negotiations are quite peculiar. Additionally, there's the matter of Venezuela's sizable army of around 130,000 against Guyana's 3,500. However, Guyana has a fairly close ally in the form of Brazil, with its 360,000-strong army and a similar number of reserves. While some are contemplating the quantity of bayonets, the more level-headed are considering the fact that the oil reserves of 11 billion barrels were uncovered by the American oil super-corporation Exxon Mobil under Guyana's license. Another crucial point is that the USA is currently conducting joint military exercises with Guyana.

Open warfare? Fortunately, not yet. Just four days after President Nicolás Maduro displayed a map of territorial acquisitions at a rally, taking a jab at its eastern neighbour, Guyana, talks are already ready to start. Maduro will sit at the negotiating table with Guyana's President Irfaan Ali. This is the result of intervention by several leading world figures, including UN Secretary-General António Guterres and Brazilian President Luiz Inácio Lula da Silva. It seems this is meant to put an end to the crisis that erupted so suddenly. Or not so suddenly?

Echoes of Colonial Times

The occasion lies in a longstanding territorial dispute that is over a century old. It's no secret that the borders of former Spanish, Portuguese, and British colonies in Latin America were shaped by the breakup of colonial empires through wars and revolutions. And this happened in a rather capricious manner.

In the end, a commission established in 1899 to settle the dispute between independent Venezuela and the British colony established the border approximately along the Schomburgk Line, with some deviations. The line is named after the famous English explorer of German descent, Robert Hermann Schomburgk, who, in the mid-19th century, at the request of Britain, was involved in surveying the borders between Venezuela and the British colonies. At that time, the United Kingdom acquired British Guiana (known as the colonies of Essequibo, Demerara, and Berbice until 1831) from the Netherlands in 1814, and the western border of this territory, bordering Venezuela, was not defined.

It turned out that the demarcation along the Schomburgk Line went beyond the territory of the British colony to the mouth of the Orinoco River. Venezuela, which was already independent for several decades at that time, contested this, explaining that Britain had thus acquired approximately 80,000 square kilometers. Instead, Venezuela insisted that its borders were limited to the Essequibo River. Essentially, the dispute revolved around the territory between the Orinoco and Essequibo rivers.

In 1966, when Guyana gained independence from Britain, the issue of the disputed territory resurfaced, acknowledging it as indeed contentious. It concerned an area of almost 160,000 square kilometers.

Then, the United Kingdom, Venezuela, and British Guiana signed the Geneva Agreement on February 17, 1966, which stipulated that the parties would find a peaceful solution through negotiations. If not, the settlement should be transferred to either the "appropriate international organ" or, if they cannot find one, to the UN Secretary-General. But the UN Secretary-General passed this matter to the International Court of Justice, which took it up on December 18, 2020.

And it would have gradually settled if not for the events in 2015.

Photo: President of Guyana Mohamed Irfaan Ali speaks at the 78th United Nations General Assembly at the UN headquarters in New York on September 20, 2023. He reported that on September 19, Guyana received a threatening message from Venezuela in the form of a communique, criticizing his country for placing certain oil blocks in its sovereign waters. Source: Getty Images.

Eldorado? No! Persian Gulf

When these areas—the basin of the Orinoco River and neighboring rivers—were first subjected to the onslaught of Spanish and other colonizers, it was believed that this was the legendary Eldorado, the land of gold with incredible treasures. However, the mythical country was never found, although substantial gold deposits were unearthed somewhere in the thickets. Yet, not as vast compared to, say, California or South Africa.

But in 2015, the American oil corporation Exxon Mobil discovered substantial oil reserves on the seabed near the shores of Guyana, precisely opposite the disputed territory. The estimated deposits amount to 11 billion barrels of oil. This discovery could radically transform the face of Guyana. The Guyanese government is already receiving approximately $1 billion annually from oil companies through fees and taxes. If this generous piece is not wrested away from the people of Guyana, this figure will increase to $7.5 billion annually by 2040. And this will propel relatively impoverished Guyana to the fourth position among the world's producers of offshore oil.

How crucial is this for the country? Before gaining independence, Guyana was considered the "breadbasket" of the region. However, it rapidly became impoverished after gaining independence. Currently, the GDP per capita is approximately $18,000, a consequence of the onset of oil extraction. Since 2016, the GDP per capita has tripled. Therefore, for a country with a population of around 800,000 people, oil is the key to a chance of breaking free from the ranks of the world's poorest countries.

On the other side is Maduro with his idea of giving a second wind to his already suppressed autocratic regime. And behind him looms the figure of the Russian dictator Vladimir Putin. Not so long ago, when Venezuela was under harsh sanctions, Russian private military companies, including the notorious Wagner Group, were operating there. Russian military planes landed at Venezuelan airports, joint aviation exercises were conducted, and Russian military ships paid visits to Venezuelan ports. In particular, the latest agreement on military-naval cooperation was signed in 2019, and a series of visits began as early as 2008.

Powerful developed countries hesitate to press too hard on Maduro. The reason is that the return of Venezuelan oil to the global market, recently under sanctions, stabilizes prices against the backdrop of OPEC's harsh actions. So, the fragile ice involves not only Nicolás Maduro but also those who are trying to curb his territorial appetites, which closely resemble those of his ally, Putin, who also resorted to referendums to legalize occupied territories.

Brazil? On December 11, the Brazilian Minister of Defense, José Múcio Monteiro, announced that his country would not get involved in the conflict under any circumstances, although he warned that Venezuelan troops would not be allowed through its territory. Therefore, on December 14, on the island of Saint Vincent, it will only just begin.