Venezuela’s economy has recovered despite tough U.S. sanctions that sought to isolate Caracas from global energy and capital markets, experts said.
The coercive measures have had “a devastating effect” on ordinary Venezuelans and caused Venezuela’s oil production to decline. The economic impact of that reduction was compounded by the collapse in fuel prices in 2014, when Brent oil fell below $27 a barrel in early 2016.
This confluence of events substantially weakened the Venezuelan state as well as its finances.
“It has been clear for some time that Washington’s strategy to contain Venezuela and change the country’s government has failed, and the Venezuelan people are the ones who suffer the most from the consequences of US sanctions,” expert Matthew Smith of “Oilprice” said.
“The Venezuelan economy grew again in 2021, with an increase in gross domestic product (GDP) of 0.5%, while during 2022 it grew an impressive 8 percent, the third-best performance in South America, and the IMF forecasts GDP will expand 5% by 2023, the second-highest forecast on the continent,” Smith added.
“The main reason for the improved economic situation is Caracas’ success in finding alternative sources of capital and rebuilding the oil industry, which is economically vital to the country,” according to Smith.
Thus, in July 2023, Venezuela produced an average of 772,000 barrels per day (b/d), which is 40% more than the 553,000 b/d produced in 2021. According to the analyst, such a growth in oil production would not have been possible without the help of Iran, which ranks eighth in the world in oil production.
Tehran is providing Caracas with considerable material support, including the financing, parts, and technicians needed to rebuild key oil infrastructure. For example, earlier this year, in 2023, Iran committed to renovating the Paraguaná refining complex, with a capacity of 955,000 b/d, which is the largest facility of its kind in Venezuela and one of the largest in the world.
In addition, the two states recently signed an agreement by which the eighth-largest oil producer committed not only to rebuild Venezuela’s refineries but also to develop the oil fields and eventually contribute to the recovery and further growth of the South American country’s production.
