How Resource Nationalism Affects Investment in Venezuela
Resource Nationalism
Although Venezuela has experienced a modest economic recovery in recent years, its productive structure remains critically impaired, with poverty rates approaching three times the regional average and stark levels of inequality (El Pais, 2025). The country exemplifies the vulnerabilities inherent in a petrostate, a nation whose government revenue is heavily dependent on the export of oil and natural gas (Council on Foreign Relations, 2024). Since the early 2000s, the Venezuelan government has maintained strict control over key economic sectors, implementing policies such as asset expropriations, restrictions on foreign investment, and other measures that have contributed to prolonged economic instability (El Pais, 2025).
The resource sector has been particularly impacted by the emergence of resource nationalism, a phenomenon characterised by various forms of state intervention in the extraction, processing, and marketing of natural resources (Dou et al., 2023:9). This approach often occurs at the expense of private and foreign investors and encompasses measures such as the nationalisation and expropriation of foreign enterprises, the imposition of export restrictions, cartel-like pricing strategies, and elevated taxation (GOV.UK, 2014). Recent developments in global energy markets, combined with ongoing U.S. sanctions and persistent political controversies, have further complicated the landscape for investors, creating an increasingly challenging environment.
The Political and Economic Context in Venezuela
The resource sector in Venezuela has historically been dominated by its state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA), which has faced persistent challenges stemming from chronic underinvestment, mismanagement, and international sanctions. Despite holding the world’s largest proven oil reserves (Council on Foreign Relations, 2024), Venezuela has experienced a significant decline in oil production in recent years, as illustrated in Figure 1. Efforts to rejuvenate the industry remain hindered by pervasive political uncertainty and the continuation of U.S. sanctions, which restrict the country’s access to global markets. Although negotiations between the United States and Venezuela in 2023 suggested the possibility of sanction relief and a tentative rapprochement, Caracas’ failure to fulfil conditions for a fair electoral process led to the reimposition of sanctions in 2024 (Council on Foreign Relations, 2024).
Figure 1 – Oil Production in Venezuela from 2011 to 2023 (in million barrels per day).
In light of declining engagement from Western nations, Venezuela has increasingly turned to China and Russia as strategic partners in its resource extraction industries. China has notably provided loans to Venezuela, repayable in oil, thereby securing access to Venezuelan crude at preferential rates (The Oxford Institute for Energy Studies, 2016). Concurrently, Russia has expanded its influence within Venezuela’s oil and mining sectors, leveraging its involvement to maintain significant political sway over the nation’s economic trajectory. During a visit to Venezuela in the previous year, Russian Foreign Minister Sergei Lavrov underscored this relationship, describing Venezuela as one of Russia’s ‘closest and most trusted friends in Latin America and in the world’ and emphasising their ‘close strategic partnership ties’ (France24, 2024). These geopolitical alignments complicate Venezuela’s investment environment by restricting foreign competition and further entrenching state control over resource exploitation.
Beyond its oil sector, Venezuela is emerging as a player in other critical resource markets, particularly gold. In response to the volatility of the oil market, the country has increasingly turned to gold mining as an alternative revenue stream (CEIC, 2024). Furthermore, while Venezuela has not yet established itself as a significant producer of lithium, its proximity to the ‘Lithium Triangle’, comprising Bolivia, Argentina, and Chile, is strategically situated to potentially capitalise on this growing market (World Population Review, 2024). However, the governance of Venezuela’s mining sector raises substantial concerns. A significant portion of these resources is controlled by state-affiliated entities or armed groups, fostering conditions that enable illegal mining operations, environmental degradation, and widespread human rights abuses (InSight Crime, 2023). Investors seeking to engage with Venezuela’s mining industry must contend with a highly unstable regulatory framework, characterised by inconsistent enforcement of legal provisions and the pervasive influence of political favouritism on extraction rights.
The Investment Risks
Investors in Venezuela’s resource industries face significant legal and expropriation risks. The Venezuelan government has a well-documented history of nationalising foreign-owned assets, as demonstrated by the cases of ExxonMobil and ConocoPhillips, whose assets were expropriated without adequate compensation (Reuters, 2012). Consequently, companies considering joint ventures with PDVSA or other state-controlled entities must meticulously assess the stability of contractual agreements and the enforceability of legal protections through international arbitration. Furthermore, legal recourse within Venezuela is notably weak; the judiciary is widely perceived as being subject to government influence, with the country’s justice system consistently ranked among the least effective globally (The Justice Journal, 2022). Given Venezuela’s track record of disputes with international investors, implementing robust risk mitigation strategies, such as political risk insurance and international legal safeguards, remains essential.
Operational risks also represent a significant challenge for investors in Venezuela. The country’s deteriorating infrastructure, frequent power outages, and shortage of skilled labor exacerbate the difficulties associated with resource extraction activities (eurasiareview, 2024). Notably, the nation’s oil refineries are plagued by inadequate maintenance, insufficient infrastructure, and a lack of investment, resulting in declining production efficiency (GeopoliticsUnplugged, 2025). Additionally, security risks pose further obstacles; the presence of organised crime and illegal armed groups substantially increases operational costs and liabilities (Human Rights Watch, 2025). To sustain stable operations, companies must allocate considerable resources to security measures and infrastructure development.
Finally, geopolitical risks continue to exert a significant influence on Venezuela’s investment climate. The outcome of U.S.-Venezuela negotiations remains a critical determinant of the nation’s future economic trajectory (Reuters, 2025). Meanwhile, the sustained involvement of China and Russia in Venezuela’s economy not only generates strategic tensions for Western investors but also raises concerns about potential further deviations from democratisation, posing challenges to U.S. interests (Atlantic Council, 2025). Moreover, persistent political frictions with neighbouring countries, such as Colombia and Brazil, contribute to regional instability that could adversely affect resource-related investments (International Institute for Strategic Studies, 2024). In response to these multifaceted risks, investors must adopt a comprehensive, long-term risk management strategy, emphasising the diversification of exposure, securing robust legal protections, and maintaining vigilance over the evolving political landscape.
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