“What we are watching is not another regional conflict”, Yanis Varoufakis, a prominent Greek economist and politician, says, “it’s fundamentally a restructuring of global economic power that will have a cascading effect on energy markets, currency systems and trade relationships for decades to come”.
Venezuela has one of the largest oil deposits in the world- 303.8 billion barrels-representing 18% of global resources. It’s more than what Saudi Arabia, Canada and Russia have, enough to tempt the imperialist power to intervene for its corporate sector, salivating to control the biggest source of cheap oil in the world. The US has deployed over 12000 troops across dozens of vessels near Venezuelan waters. The USS Gerald Ford, the world’s largest aircraft carrier-after Israel-is stationed in the Caribbean waters. The purpose of the blockade is not only the strangulation of Venezuela’s economy but to overthrow the revolutionary governments of Cuba and Nicaragua- the thorns in the US flesh.
Venezuela, akin to Iran and Cuba, is one of the most sanctioned countries in the world. In the 1990s, under US sanctions, its oil output collapsed from 3.5 billion barrels a day to 700,000 barrels a day. That led to the massive exodus of nearly 7.7 million Venezuelans- almost a quarter of the total population- to various countries, especially to Colombia, which has already absorbed 2.9 million Venezuelan refugees. Mexico saw a steep rise in Venezuelan migrants. Many who moved to the US because of Trump’s inhuman and atrocious policies are now suffering a terrible fate in the dungeons of El Salvador for uncommitted crimes.
The Trump administration has declared Venezuela a terrorist state and placed a bounty of $50 billion on Maduro’s head- equivalent to the bounty once placed on Osama bin Laden – in a bid to provoke the army into removing him. But as the Wall Street General admits Madero possesses the quality of a “coup- proof” president, the US has decided to invade an economically strangled country, while also imposing twenty-five % tariffs on Venezuela’s goods.
Under the US-imposed unilateral sanctions, Venezuela can neither freely buy nor sell goods abroad. Venezuela imports $12.6 billion worth of goods from China, Brazil, Turkey and the European Union. If these countries stop trading with Venezuela for the fear of criminalisation, its economy-already contracted to 75% since 2013, and GDP has fallen from $337 billion to $97 billion-will face a catastrophic collapse seen only in wartime.
Unlike Iraq, Venezuela’s people and army are standing right behind Maduro. His overthrow will not solve any problems but is likely to engage the US in protracted guerrilla warfare.
China and India, both energy-starved countries, import roughly 400,000 and 200,000 barrels per day of fuel from Venezuela. If sanctions block the supply of oil from Venezuela, they will be forced to compete in an already tight global market. Should they defy the sanctions, they must face retaliation from the US. Much will depend on their export volumes to the American market.
India exports to the US to the tune of 18%, which is $780 billion annually. China exports 16% of its goods to the US- nearly $ 500 billion. Currently, oil is trading at $87/barrel. In the case of war, the oil price in the market can shoot up to $120 to 140 $ a barrel. Every increase of one cent in the oil prices will likely reduce the world GDP growth by approximately 0.2 percentage points. If the oil price is sustained at 130 a barrel, the global growth will reduce to 1 percentage point.
Every one-cent rise in the oil prices represents roughly $ 1.4 billion in added annual consumer spending on fuel. For Americans alone, this could mean an additional $250-$300 billion spent on gasoline. Ordinary Americans will face not only higher prices but also regressive taxes. For the US, military costs are already exorbitant. One aircraft carrier costs $6.5 million a day to operate, and the US is currently deploying around a dozen. Their total cost is staggering $ 8-10 million per day or roughly $3 billion/annum. If the standoff continues indefinitely- as is likely- the US sanctions on Venezuela will remain. Its oil production will continue to decline. For its survival, Venezuela will be more dependent on Russia and China. It will survive the odds, but it is merely a survival with no progress. The world will face high fuel prices, the process of de-dollarisation will accelerate, and the US will incur high military expenditures.
In the short term, the military drag may reduce US GDP by 0.2 to 0.3 percentage points- manageable. But over a decade, the cumulative cost would be substantial. The US stands to lose nearly $ 500-700 billion in growth.
The Russian situation is intriguing. If sanctioned Venezuela is unable to provide oil to China and India, Russia will fill the vacuum. However, Russia is resolutely standing behind Venezuela. In October 2025, Putin ratified a partnership treaty with Venezuela-not an ordinary agreement. Russia is ready to provide Venezuela with intermediate-range Oreshnik and Kalibr cruise missiles. Venezuela already possesses Russian Pantsir-S1 and Buk-M2 air-defence systems. If attacked, the US naval system is likely to get major blows from Venezuela. One USS Gerald Ford carrier costs $13.3 billion. Losing one will dent the US hegemony drastically.
Unlike Iraq, Venezuela’s people and army are standing right behind Maduro. His overthrow will not solve any problems but is likely to engage the US in protracted guerrilla warfare. Is America prepared to bring home the body bags while its economy tumbles? Even if Maduro were overthrown today, Venezuela would need $100-200 billion of investment over a decade to raise oil production within 5-7 years. Given the risks, no investor would be willing to commit funds-and if they did, they would demand a 10-15% return at current oil prices. Meanwhile, the shift toward renewable energy will further discourage investment.
The Venezuelan conflict has the potential to engulf the entire Latin America. Destabilisation of Latin America will create more problems for the US than it solves. The problems of migration, devastation and de-dollarisation, with US involvement in Ukraine, Taiwan and Palestine, overstretching its military resources, will lead to the explosion of its federal budget deficit to the tune of $ 2.5 to 3 trillion annually. The surging military expenses will bring the collapse of economic growth, a phenomenon that may become global.
The standoff has become a clash of egos. The declining empire cannot swallow its pride, but more than pride, its status as a hegemonic power is at stake. Throughout its history, it encircled nations, exploited their resources through sanctions, the monetary system and direct invasions. Emergence of a new power block-still in the process of consolidation- is threatening the empire’s domination. China, hungry for energy, has enormous economic might but little concern for Maduro’s survival or for any human cause-evident when it sacrificed the Palestinians on the hypocritical altar of Trump in the UN. Russia, on the other hand, commands influence in parts of Latin America, especially in Venezuela. It won’t abandon them easily. Besides, it wants to use Venezuela as a bargaining chip in its war against Ukraine. The Monroe Doctrine is haunting the US, but the world is changing.
The US is experiencing a strong dialectical contradiction. Accumulation through dispossession demands a war, but the US is not prepared for a war. It can only realise the capital of its military-industrial complex, but at the cost of borrowing a huge debt from its adversaries in the shape of treasuries and bonds, which the latter are unprepared to buy. Mounting debt and falling demand for the dollar are becoming America’s nemesis. Capitalism is doomed, yet the working class shows no sign of seizing power. The old is dying, but the new has yet to be born. The time for the monsters has grown too long.
The writer is an Australian-based academic and has authored books on socialism and history. His Latest Work: “God’s Republic Making & Unmaking of Israel & Pakistan” is available in Pakistan & on Amazon.com. He can be reached at saulatnagi @hotmail.com