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- Venezuela Economic Crisis Explained; Nicolas Maduro Vs US | India Crude Oil
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On January 3, America attacked and arrested President Nicolas Maduro. Venezuela was once among the richest countries in the world. Today he has become a pauper.
This is the story of a country which has more oil than Saudi Arabia, but lost 80% of its GDP in the last decade. This country, once among the richest countries in the world, mismanaged its wealth to such an extent that today its people are leaving the country.
We are talking about ‘Venezuela’, which was attacked by America on Saturday, January 3 and President Nicolas Maduro has been arrested. This movement happening thousands of kilometers away in South America can also affect the common man in India.
President Donald Trump has posted this picture on the social platform ‘Truth Social’. In this photo, Nicolas Maduro is seen in American custody.
In this report, we will know the inside story of Venezuela’s destruction and its impact on India…
1950s: When Venezuela’s fortunes were shining
In the 1950s, when half the world was recovering from the losses of the Second World War, Venezuela’s fortunes were changed by the black gold or oil coming out from under the ground.
In 1952, Venezuela had become the fourth richest country in the world. At that time, luxury cars were running on the streets of the capital Caracas and skyscrapers were standing.
By the 1960s, Venezuela was no longer just an oil-selling country. On the initiative of Venezuela, countries like Saudi Arabia and Iran joined hands and laid the foundation of ‘OPEC’.
The Venezuelan delegation to the 1960 Baghdad meeting was led by Juan Pablo Pérez Alfonzo. OPEC is an international organization of 12 major oil producing countries of the world, which works to control the supply and prices of crude oil in the global market.
When the oil crisis hit the world in the 1970s and prices began to skyrocket, it started raining dollars into Venezuelan homes. The stories of that period are famous even today…
- People used to fly straight to Miami on weekends to go shopping. Venezuela was one of the world’s largest buyers of the most expensive Scotch whiskey and Champagne.
- People started feeling that there was no need to work hard anymore. Its per capita income was much higher than developed countries like Spain, Greece and Israel.
- In 1976, the government nationalized the oil industry and created the state-owned company PDVSA. It was one of the most profitable oil companies in the world.
In the early 1960s, Venezuela was considered a wealthy country. After the return of democracy in 1958, the nation was moving rapidly on the path of development.
Beginning of ruin: Economy sinking due to 3 main reasons
This is the largest collapse of the economy of a country without any war in history. In the last decade, this country lost everything that it had earned in 70 years.
- Dutch disease: Venezuela put all its energy into extracting oil. He did not pay any attention to farming, factory and other businesses. The result was that they became dependent on other countries for everything from needles to food and started buying goods in exchange for oil.
- Populist Policies: After 1999, the government wasted money on free schemes instead of investing in the future of the country. As long as oil was expensive, everything was fine, but as soon as oil prices fell, the government was left with no money even to pay salaries.
- Corruption and brain drain: The state oil company (PDVSA) was filled with political loyalists by replacing capable engineers. Due to this, the technology of oil production deteriorated and more than 60 lakh educated people (doctors, engineers) left the country.
Today’s situation: 80% GDP lost, inflation sky high
By the year 2018, the rate of inflation here had crossed 1,30,000%. People there were forced to carry bags full of notes even to buy a dozen eggs. Notes were not counted, rather goods were placed on one pan of the scale and bundles of notes were placed on the other.
The country which used to rule the world by producing 35 lakh barrels of oil daily in the late 1990s, is now down to barely 8 to 11 lakh barrels by the beginning of 2026. Due to lack of maintenance by the government oil company, everything became junk. Petrol is being imported from abroad.
Venezuela has lost 80% of its GDP. That is, if the country’s economy was worth Rs 100 in 2012, today it is worth only Rs 20. Inflation emerged as the scariest face of this destruction, which in the language of economics is called ‘hyperinflation’.
- Venezuela’s GDP peaked in 2012 at $372.59 billion.
- The situation worsened and GDP fell to $43.79 billion in 2020.
- Now there has been a slight improvement in it and it is close to 101 billion dollars.
Woman with her two-month old malnourished son. The child’s blood test is being done in a clinic in Barquisimeto, Venezuela. Photo: 14 August 2019
The situation of hyperinflation in Venezuela was such that people stuck the notes on the pillars in protest. Here, even to buy a dozen eggs, people had to carry a bag full of notes.
Today’s crisis: Will America be able to change its fate?
The Trump government claims that after this military operation, American oil companies will now invest billions of dollars in Venezuela and fix the broken infrastructure there. However, whether there will be any change or not will depend on the new government formed there.
If a stable US-backed system comes in place, then the harsh economic sanctions imposed for years will be lifted and Venezuelan oil will again start coming to the global market in large quantities.
This will not only bring the economy back on track but countries like India will also be able to get cheap crude oil.
In this photo posted by US President Donald Trump on the social platform ‘Truth Social’, a glimpse of the military operations of the attack on Venezuela is visible.
Impact on India: Cheap crude oil can be available
Venezuela is about 15 thousand km away from India, but the change in power there can be beneficial for India…
1. Petrol-Diesel: Expected to get ‘discount’ like Russia
India imports 85% of its oil needs. Venezuela has the world’s largest reserves, but due to US sanctions, India was not able to buy oil from there.
- What will be the effect: Now when America supported system comes there, the restrictions will be removed. Like Russia, India can also get crude oil from Venezuela at huge discounts.
- Relief on pocket: If Venezuelan oil starts coming to Indian refineries in large quantities, then it is possible to reduce the prices of petrol and diesel in the country.
2. Reliance and ONGC also expect profit
India’s Reliance Industries has a refinery that is considered the best in the world for cleaning Venezuela’s ‘heavy and thick’ oil.
Due to sanctions, Reliance had to stop taking oil from Venezuela. Now the stuck money and business of Reliance and government company ONGC (which has invested crores in Venezuelan oil wells) is expected to start back.
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