CARACAS, Venezuela (AP) — Venezuela’s legislature on Thursday approved opening the nation’s oil sector to privatization, reversing a tenet of the self-proclaimed socialist movement that has ruled the country for more than two decades.
The National Assembly approved the overhaul of the energy industry law less than a month after the brazen seizure of then-President Nicolás Maduro in a U.S. military attack in Venezuela’s capital.
Shortly after it was passed, the Treasury Department officially began to ease sanctions on Venezuelan oil that once crippled the industry, and expanded the ability of U.S. energy companies to operate in the South American nation, the first step in plans outlined by Secretary of State Marco Rubio the day before. The moves by both governments on Thursday are paving the way for yet another radical geopolitical and economic shift in Venezuela.
The Venezuelan bill now awaits the signature of acting President Delcy Rodríguez, who proposed the changes in the days after U.S. President Donald Trump said his administration would take control of Venezuela’s oil exports and revitalize the ailing industry by luring foreign investment.
The legislation promises to give private companies control over the production and sale of oil and allow for independent arbitration of disputes.
Rodríguez’s government expects the changes to serve as assurances for major U.S. oil companies that have so far hesitated about returning to the volatile country. Some of those companies lost investments when the ruling party enacted the existing law two decades ago to favor Venezuela’s state-run oil company, Petróleos de Venezuela SA, or PDVSA.
The revised law would modify extraction taxes, setting a royalty cap rate of 30% and allowing the executive branch to set percentages for every project based on capital investment needs, competitiveness and other factors.
It also removes the mandate for disputes to be settled only in Venezuelan courts, which are controlled by the ruling party. Foreign investors have long viewed the involvement of independent courts as crucial to guard against future expropriation.
Ruling-party lawmaker Orlando Camacho, head of the assembly’s oil committee, said the reform “will change the country’s economy.”
Meanwhile, opposition lawmaker Antonio Ecarri urged the assembly to add transparency and accountability provisions to the law, including the creation of a website to make funding and other information public. He noted that the current lack of oversight has led to systemic corruption and argued that these provisions can also be considered judicial guarantees.
Those guarantees are among the key changes foreign investors are looking for as they weigh entering the Venezuelan market.
“Let the light shine on in the oil industry,” Ecarri said.
Oil workers dressed in red jumpsuits and hard hats celebrated the bill’s approval, waving a Venezuelan flag inside the legislative palace and then joining lawmakers in a demonstration with ruling-party supporters.
The law was last altered two decades ago as Maduro’s mentor and predecessor, the late Hugo Chávez, made heavy state control over the oil industry a pillar of his socialist-inspired revolution.
In the early years of his tenure, a massive windfall in petrodollars thanks to record-high global oil prices turned PDVSA into the main source of government revenue and the backbone of Venezuela’s economy.
Chávez’s 2006 changes to the hydrocarbons law required PDVSA to be the principal stakeholder in all major oil projects.
In tearing up the contracts that foreign companies signed in the 1990s, Chávez nationalized huge assets belonging to American and other Western firms that refused to comply, including ExxonMobil and ConocoPhillips. They are still waiting to receive billions of dollars in arbitration awards.
From those heady days of lavish state spending, PDVSA’s fortunes turned — along with the country’s — as oil prices dropped and government mismanagement eroded profits and hurt production, first under Chávez, then Maduro.
The nation home to the world’s biggest proven crude reserves underwent a dire economic crisis that drove over 7 million Venezuelans to flee since 2014. Sanctions imposed by successive U.S. administrations further crippled the oil industry.
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