Calling it Quits?: How Strategic Interest Outweighs Political Rivalry Among Nations

Relations between the US and Venezuela reached a boiling point on several occasions during the presidency of Hugo Chavez. The two countries have been in conflict on a variety of issues over the past 14 years, including human rights, freedom of media, capitalism, and ideology. Although some analysts were guardedly optimistic about the possibility of normalized relations between the US and Venezuela after the death of Chavez earlier this year, diplomatic fallout over the Edward Snowden affair has reminded observers that the process of thawing such deep-rooted trust will not occur over night. There may be little hope for an improvement in political relations in the near future, but how much do poor diplomatic ties affect commercial relations between countries in conflict?

One would expect trade levels between the US and Venezuela to have diminished in recent years considering the fiery anti-imperialist rhetoric Chavez employed as president. U.S. Census data shows that bilateral trade levels have continued to increase since Chavez first took office in 1999. The annual total of American exports to Venezuela more than doubled from 1998 to 2012, while imports have quadrupled during that time frame to $38 billion. The United States has been a critical market for Venezuelan goods, as exports to the US accounted for over 39% of the country’s total exports in 2012. This has not been dispelled by the fact that these two countries mutually expelled their respective ambassadors in 2008.

Domestic and foreign investors are guaranteed the same legal protections under the current Venezuelan constitution. The same article of protection also states that exceptions are made for “strategic interests”, including oil and other goods for public benefit. This exception obviously creates the legal pathway for nationalization. Although Maduro has yet to invoke this policy during his time in office, his predecessor frequently nationalized firms to assert governmental control. American firms were not the only ones subject to having their assets seized during Chavez’s time in office. Foreign oil companies have been frequently targeted; but to say that Exxon Mobil and Conoco Phillips were singled out for being North American firms would an incomplete explanation at best. Oil was, and continues to be, the crux of the chavista economic program. In addition to being its primary revenue stream, it is often used as a source of repayment for loans from China. It is also used to support its alliances with countries like Belarus, Cuba, Iran, and Syria. Thus, a firm of any national origin with a controlling interest in a key asset like energy, is far more likely to be nationalized than an American company with no assets of strategic value for the Venezuelan government.

Recent attempts to thaw relations have been thwarted by new obstacles, such as the ongoing Snowden saga referred to earlier, as well as Venezuelan officials’ anger over Samantha Powers’ comments to the UN regarding human rights in the South American country. However, with over 500 American firms operating or represented in Venezuela, it is unlikely the freeze in relations between the two countries will have an impact on commercial ties. Venezuela, despite previous threats to cut off supply to the United States, remains one of the top oil suppliers to the United States. There is a degree of interdependence that even heated rhetoric by public officials cannot break.