It all began in 1835 when the British Empire sent a German-born naturalist and explorer to conduct geographical research in the South American territory it had colonized and named British Guiana. In the course of his explorations, a map was drawn that well-exceeded the original western boundary first occupied by the Dutch and later passed to British control. Sparking the interest of the Empire’s desire to expand its borders into the area west of the Essequibo River that was known to be rich in gold, the British government commissioned the explorer to survey their territorial boundaries. What became known as the “Schomburgk Line,” named after the explorer, Robert Hermann Schomburgk, acquired a large portion of Venezuelan land, and provoked the beginning of a territorial confrontation that has remained unresolved to this day.
In 1850, after decades of arguing over the boundary line separating Venezuela from its colonized neighbor, both sides agreed not to occupy the disputed territory under further determinations could be made. But as the demand for gold and other natural resources grew in the region, the British again tried to claim the territory declaring the Schomburgk Line the frontier of British Guiana, in clear violation of the previous accord with Venezuela.
Ironically, Venezuela appealed to Washington for help at the time, using the Monroe Doctrine as a justification to prevent further colonization by the British Empire in the hemisphere. US President Grover Cleveland eventually declared the matter of US interest and forced Great Britain to sign a Treaty of Arbitration with Venezuela in Washington in 1897. Two years later, the Arbitration Tribunal, which had no representatives from Venezuela but instead two arbitrators from the United States said to be acting in Venezuela’s interest, ruled in favor of Britain. Venezuela rejected the decision, alleging there had been political collusion and illegal pressures in favor of the other side. These claims were supported by a letter written by Severo Mallet-Prevost, the Official Secretary of the US/Venezuela delegation in the Arbitration Tribunal, who revealed the President of the Tribunal, Friedrich Martens had pressured the arbitrators to decide in favor of Great Britain.
More than half a century went by until the dispute was re-introduced on the international stage, this time at the United Nations. Venezuela denounced the corruption that had led to the arbitrators decision in 1899 and reiterated its claim over the territory known as the “Essequibo”. In February 1966, at a meeting in Geneva, all parties to the conflict – Venezuela, British Guiana and Great Britain – signed the agreement to resolve the dispute over the border between Venezuela and British Guiana, known as the Treaty of Geneva. They agreed neither side would act on the disputed territory until they could resolve a definitive border, acceptable to all parties. Months later, in May 1966, Guyana achieved its independence from the United Kingdom, further complicating matters. On subsequent maps of Venezuela and Guyana, both countries claimed the territory as part of their sovereign land.
Despite minor disagreements since 1966, the dispute did not become the source of escalating regional tensions until 2015, when a large oil discovery was made by Exxon right smack in the middle of the Essequibo, and claimed by Guyana.
The Cooperative Republic of Guyana is the second poorest country in the Caribbean, only surpassing Haiti in per capita income. The country’s main economic activity is agriculture, specifically rice and sugar production, which account for over 30% of export income. Despite being surrounded by vast oil and gas reserves in neighboring Venezuela, which today has the largest oil reserves on the planet in its Orinoco River Basin, and nearby Trinidad and Tobago, up until recently Guyana had no known oil reserves within its territorial boundaries.
Enter Exxon Mobil, one of the world’s largest oil and gas companies, and a declared enemy of Venezuela. Until 2007, Exxon had a significant investment through its Cerro Negro Project in Venezuela’s Orinoco River Basin. Initially, U.S. oil and geological experts had classified the oil-based substance found in mass quantities in that area to be bitumen, a thick black tar-like asphalt, therefore rendering it not subject to the 1976 Hydrocarbons Law in Venezuela that nationalized oil and gas reserves. After President Hugo Chavez suspected the area actually contained huge oil reserves, he had his own research done and was proved right: the Orinoco River Basin was certified with over 300 billion barrels of heavy-crude petroleum.
On May 1, 2007, Chavez officially declared all hydrocarbons in that region subject to the prior nationalization laws, legally binding any foreign companies operating there to engage in joint-ventures with the Venezuelan public oil company, PDVSA. The law required a minimum of 51% ownership by the Venezuelan state, with a maximum of 49% for foreign companies. Only two companies refused to cooperate with the new laws. Both were from the United States: ConocoPhillips and ExxonMobil. Both sued Venezuela over the nationalizations.
ConocoPhillips’ claim was significantly smaller than Exxon’s, which demanded over $18 billion for the expropriation. Venezuela offered market value and the case went to an international arbitration tribunal that eventually ordered the Venezuelan government to pay Exxon $1.6 billion, a mere fraction of what the US oil giant had expected.
In an apparent act of revenge, Exxon found a way to get Venezuela’s oil without following Venezuela’s rules, albeit through illegal and potentially dangerous channels.
As the Obama administration was amping up hostility against Venezuela, declaring it via Executive Decree an “unusual and extraordinary threat to U.S. national security” and imposing potentially vast-reaching sanctions on government officials, Exxon was making a deal with Guyana to explore oil deposits in the disputed Essequibo territory.
In May 2015, just as Guyana was swearing in a new president, the conservative military officer David Granger, a close U.S. ally, Exxon was making a huge discovery in the Atlantic Ocean near the Venezuelan coast. According to reports, the deposits found by Exxon in the ’Liza-1 well’ hold over 700 million barrels of oil, worth about $40 billion today. The find could be a major game changer for Guyana, representing more than 12 times its current economic input, that is, if the oil actually belonged to Guyana instead of Venezuela.
On January 26, 2015, U.S. Vice President Joe Biden hosted the first Caribbean Energy Security Initiative, bringing heads of state and high-level officials from Caribbean nations together with multinational executives in Washington. The stated goal of the new initiative is to help Caribbean nations “create the conditions to attract private-sector investment”, but Biden made the true objective clear when he declared, “…whether it’s the Ukraine or the Caribbean, no country should be able to use natural resources as a tool of coercion against any other country.”
Without mentioning it by name, Biden was referring to Venezuela and its PetroCaribe program that provides subsidized oil and gas to Caribbean nations at virtually no upfront cost. PetroCaribe has been fundamental in aiding development in the region during the past ten years since its creation. And clearly, its perceived as a threat to U.S. influence in the Caribbean, and an affront to traditional corporate exploitation of small, developing nations.
In addition to the Obama administration sanctions aimed at isolating Venezuela in the region and portraying it as a ‘failed state’, the Caribbean Energy Security Initiative takes a direct stab at Venezuela’s lifeline: oil. In the U.S. Senate Report on the Department of State’s Foreign Operations Budget for 2016, $5,000,000.00 was recommended for “enhanced efforts to help Latin America and Caribbean countries achieve greater energy independence from Venezuela”. Falling oil prices have already done damage to Venezuela’s economy, but forcing it out of the regional oil trade would hurt even more.
The main conundrum of figuring out how to replace Venezuelan oil in PetroCaribe was resolved with the stroke of a pen by Guyana’s new president, a former instructor at the U.S. Army War College who made a secret trip to the United States just three days after taking office in May. Hours later, Exxon’s oil exploration rig, Deepwater Champion made its first major lucrative discovery in the large Stabroek Block in the disputed coastal territory.
The Venezuelan government warned Exxon to leave the area, citing its claim over the Essequibo territory and the ongoing dispute with Guyana subject to UN mediation. But Exxon paid no heed to Venezuela, following President Granger’s lead in openly defying the Geneva Agreement and Venezuela’s calls to solve the conflict through diplomacy, involving the UN Good Offices in the resolution of the centuries-old dispute.
UN Secretary General Ban ki-moon has pledged to send a commission to both Venezuela and Guyana to seek resolution for a problem that now, as Washington hoped, is dividing the region. President Maduro and his Foreign Minister Delcy Rodriguez have been making their case before regional leaders, encouraging other Caribbean nations to support their claim over the Essequibo, or at least approve the involvement of the UN to arbitrate the dispute. In the meantime, Guyana continues to aggressively push forward with Exxon to pursue what could become the largest oil theft in the Americas.