The United States has escalated its economic pressure on Venezuela, ordering a total blockade of oil tankers used by the South American nation to bypass long-standing sanctions. This drastic move threatens to cripple Venezuela's already struggling oil industry, potentially cutting its vital exports by half and plunging the economy into a deeper crisis.
Escalation of a Long-Running Conflict
On Tuesday, US President Donald Trump announced a "total and complete blockade" targeting sanctioned oil tankers that Venezuela has relied on for years. This action marks a significant intensification of Washington's campaign against the government of Venezuelan leader Nicolas Maduro, whose re-elections have been widely condemned as fraudulent.
The US has significantly increased its naval presence in the Caribbean Sea since September, conducting strikes on boats allegedly involved in drug smuggling. These operations have resulted in numerous casualties, including fishermen. Maduro has accused the US of using anti-drug operations as a pretext to overthrow his government and seize Venezuela's vast oil resources.
The State of Venezuela's Oil Industry
For years, Venezuela has managed to circumvent a US oil export embargo by selling its crude at heavily discounted prices, primarily to China. US authorities claim this income funds illicit activities, including what they term "drug terrorism." Despite holding the world's largest proven oil reserves—estimated by OPEC at 303 billion barrels—the country's production has collapsed due to chronic mismanagement and corruption.
Output plummeted from a peak of over three million barrels per day in the early 2000s to a historic low of 350,000 barrels per day in 2020. It has since recovered to roughly one million barrels per day, but this still represents only about two percent of global supply. Prior to the new blockade, Venezuela was forced to sell its oil at discounts of up to 35 percent below market price.
The Venezuelan state oil company, PDVSA, insists its export operations continue normally. However, last week's seizure by the US military of the "ghost" tanker M/T Skipper, carrying over a million barrels of sanctioned oil, demonstrates the new enforcement reality. An AFP analysis indicates there are about 600 oil tankers under US sanctions globally, with 23 specifically listed under programs targeting Venezuela.
Dire Economic Consequences and Future Outlook
Energy experts warn the blockade will have severe immediate effects. Francisco Monaldi, an economist at the Baker Institute, predicts exports could drop by as much as 50%, depending on how aggressively sanctioned tankers are intercepted. The need to offer even steeper discounts to attract remaining buyers will further slash revenue.
The seizure of The Skipper reportedly halted PDVSA's loading operations for six days. With limited onshore storage capacity—reportedly a maximum of 15 days—the company faces a critical logistical bottleneck. Monaldi warns that the most likely outcome is a forced shutdown of production, which could reduce output by roughly 400,000 barrels per day.
China, which receives 80% of Venezuela's crude exports, will be the most impacted buyer. Economist Asdrubal Oliveros notes that a drop in Asian exports could cost Venezuela billions in annual revenue, cutting off a key economic lifeline. The forecasting firm Capital Economics echoed this, stating lower shipments would severely harm Venezuela's economy in the near term.
A notable exception is the US oil giant Chevron, which operates in Venezuela under a special license and accounts for about 10% of the country's production. Its shipments to the United States are unaffected by the new order. However, its current license restricts cash payments to the Venezuelan government, instead requiring taxes and dues to be paid in crude oil, which further limits Caracas's access to essential US dollars.
