Black gold, oil, is the keystone of the Venezuelan economy and the United States is the South American country’s largest trading partner; however, in late July, ‘Venezuelan President Hugo Chavez threatened to cut oil supplies to the United States in the event of a military attack from Colombia, a close ally of the United States. While many have watch the drama between Columbia and Venezuela unfold, many ask what the impact would be if Chavez cut off the United States from Venezuelan oil.
The State of Affairs
While the United States produces a moderate percentage of crude oil, other countries, such as Mexico, Saudi Arabia, Mexico, Canada, and Angola, are primary exporters of oil to the United States. Venezuela, a member of OPEC, gets more than 90 percent of its export income from oil sales, mostly to the United States,
Impact on the United States
Over the decades, many have believed that oil was a geopolitical weapon. It drives economies and disputes over the control of oil have forced countries to either be invaded or occupied. However, for the United States, any trade cessation with Venezuela would result in the an impact to the general economy. Venezuela imports billions dollars of agricultural products, including wheat, corn, soybeans and cotton. It stands as the United States 25th largest market.
While trade may be most impacted, the strained ties with Venezuela have also affected other international relations, especially with other OPEC nations. While Columbia stands as an ally, other South American countries side with Venezuela which will result in additional impacts on the safety of American citizens traveling abroad.
Also given the fact that the U.S. is in a recession, any impacts on oil supplies to the United States could result in stock market drops. The cascading effort could weaken the nation’s struggling economy. Impact on Venezuela
With almost 90 percent of Venezuela’s revenue is attributed to the income derived from the crude oil it exports, Venezuela’s economy is supported primary by its oil industry and the United States as its primary importer. In the absence of another significant importer, Venezuela’s economy would not be able to survive an oil embargo.
In addition to oil, Venezuela exports nearly $ 15 billion of products to the United States making it Venezuela’s 15th largest market. If ties were severed with the United States, the South American country’s economy would collapse.
Other considerations are Venezuela’s people. With only 3 % of the countries Gross National Product related to agriculture, Venezuela relies on other countries for basic food products. The United States is one of the countries largest suppliers of wheat, corn, soybean and vegetable oil. While complications may have been averted with the newly signed diplomatic agreement between Columbia and Venezuela, relations with Chavez’s Venezuela have been strained for years. Only time will tell whether relations with one of the United States more important markets will improve over time and whether the United States will rethink its dependence on Venezuelan oil.