Guayaquil, Ecuador, December 19, 2021 (venezuelanalysis.com) – Venezuela has steadily grown its oil production to end the year while strengthening alliances with Iran looking ahead to 2022.
The Caribbean country pumped 625,000 barrels per day (bpd) in November, 15,000 bpd up from October, as measured by secondary sources in the latest Organization of Petroleum Exporting Countries (OPEC) report. For its part, state oil company PDVSA registered a much higher 824,000 bpd figure, a 68,000 bpd rise from the previous month. The Venezuelan government had set a one million bpd target for the end of the year.
Output had not reached the 600,000 bpd mark since early 2020 as Washington tightened sanctions aimed at shutting out Venezuela’s oil industry from international markets. Starting in 2017, the former Trump administration ramped up regime change efforts by imposing financial sanctions, a full-fledged oil embargo, and a host of secondary measures. As a result, the country's foreign revenues shrank severely, seriously worsening an economic crisis.
The current Joe Biden government has not moved to alleviate or remove sanctions against Venezuela’s main industry despite growing calls from the United Nations (UN), independent human rights experts and even US Congress members to lift the measures.
The Nicolás Maduro administration has looked to recover crude production by finding alternate sources of capital, markets, and much-needed materials, notably Russia, China and Iran.
A steady supply of Iranian condensate has been key for the recent increase in oil production. According to Bloomberg, Iran has sent at least three shipments containing 4.6 million barrels of the blending material since July. The condensate is mixed with the extra-heavy crude produced in the Orinoco Oil Belt to be transported, processed and exported. A fourth cargo was reportedly unloaded in Venezuela this week.
The Iranian assistance is part of ongoing cooperation between the two countries to circumvent US sanctions, with a condensate-for-crude swap deal sealed in September. Furthermore, on December 6, President Maduro held a phone call with his Iranian counterpart Ebrahim Raisi to strengthen ties for next year.
In the conversation, Raisi reaffirmed his commitment to expanding the Iran-Venezuela alliance, calling for “greater steps” to ramp up energy projects.
"Oil cooperation between the two countries must take a new form, and in the field of refining and petrochemical resources, we need to take greater steps," stated the Iranian president.
Raisi likewise condemned the sanctions regime imposed by the “arrogant system of the United States on the Venezuelan people and government.” Tehran has faced Washington’s coercive measures since 1979.
With Iranian assistance reviving Venezuela’s production, exports have also ticked up in recent months. PDVSA’s export average has risen to 500,000 bpd over the year, with China as the main facilitator and final destination for the Venezuelan crude trade. According to documents seen by Reuters, the growing oil revenues will fund 61 percent of the country’s 2022 budget. However, no government official has specified financial sources for next year’s plan.
On December 14, Venezuela’s National Assembly (AN) approved the 2022 budget for a total amount of 62 billion bolívares (around US $13 billion), some 60 percent higher than the 2021 equivalent. During the annual plan presentation, Vice President Delcy Rodríguez explained that 77 percent of resources will be allocated for social programs.
Additionally, the high-ranking official has introduced a bill to partially reform taxes on large transactions in order to prioritize the use of the local currency and continue boosting national production. The legislation is yet to be discussed and approved in parliament.
"The 2022 budget is framed in policies that have allowed us to defend our currency and advance in the fight against hyperinflation," said Rodríguez.
The government's strategy for next year's economic comeback builds ongoing efforts to slow down the inflationary spiral, stabilizing the exchange rate between the digital bolívar and the US dollar. The measures have seen the country experience three consecutive months of single-digit inflation for the first time since 2016.
Venezuela’s Central Bank (BCV) reported 8.4 percent inflation in November following 6.8 and 7.1 percent registered in October and September, respectively. Accumulated inflation stands at 631.1 percent in 2021.
The inflationary deceleration is not the only sign of economic stability. The Venezuelan Association of Exporters (AVEX) recorded a 30 percent increase in sales abroad this year compared to 2020. The majority of exports correspond to sea products, cocoa, chocolate, wood, tropical fruits and the automotive sector.
Likewise, international agencies have apprised Venezuela's economic upswing after a seven-year recession. In October, Credit Suisse predicted the South American nation's gross domestic product (GDP) to grow by 5.5 percent in 2021. Although these predictions are a significant change of trend from recent years, analysts argue it does not necessarily mean economic recovery will be achieved in the near future, with US financial and oil sanctions still weighing down on the country.
For his part, President Maduro reiterated that 2021 had seen significant economic and political stabilization, opening the path for favorable expectations next year. “No attack will be able to stop the Venezuelan people in their search for happiness. We will continue in active resistance and permanent victory,” he wrote on Twitter on Friday.
Edited by Ricardo Vaz from Caracas.