Salmanwrites.com

The American invasion of Venezuela has been the root of unrest all across the globe; an invasion of such magnitude has caused profound concern amongst nations regarding the preservation of peace. However, there is one nation that is not concerned about the restoration of world order but is currently grappling with an unimaginable level of economic obscurity. That country is Saudi Arabia. As of now, Saudi Arabia is lauded as the largest oil exporter in the world; the country is home to 267 billion barrels of oil, making it the second largest holder of the precious liquid. The only nation that possesses more oil than Saudi Arabia is Venezuela, which possesses approximately 303 billion barrels of oil.

Despite being the frontrunner in the oil market, Venezuela’s production has been in a constant downward spiral due to several factors. The most prominent being the nationalization of this resource; once the oil was nationalized, the majority of oil companies were ruthlessly disbarred from doing business in Venezuela. Despite such drastic measures to protect their country’s oil, all Venezuelan governments have made minimal efforts to make the most of their natural resources. On top of that, poor infrastructure, blatant corruption, and arrantly incompetent efforts to form diplomatic relations have severely affected Venezuela’s oil production. As of now, Venezuela produces a measly 850,000 to 950,000 barrels of oil, compared to Saudi Arabia’s substantial 10.05 million.

Now the question persists: “How does all of this impact Saudi Arabia’s economy?” Well, KSA is heavily reliant on the exportation of oil to maintain its economy. For the entirety of their history, the Saudis have experienced exponential economic growth due to their unparalleled ability to provide the world with oil and remain exempt from sanctions. In spite of spearheading one of the most prosperous nations in the world, Muhammad Bin Salman is well aware that this is not a sustainable model. Taking into account the inherent vulnerability of his nation’s economic plan, the king diversified his model and implemented aggressive reforms to make Saudi Arabia the next UAE. Renewed efforts to make the country more tourist friendly included the legalization of alcohol, legalization of music concerts, and pumping the country’s football industry with over 300 billion dollars.

Even after accounting for tourism, the country still produces the bulk of its revenue through oil, and recent statements from Donald Trump, such as “We’re gonna make a lot of money” or “We’re invading them for their oil,” indicate America will extract every single drop of oil from Venezuela. Such actions would potentially result in the eradication of America’s reliance on Saudi oil. But is that really the case?

The potential revival of Venezuelan oil production poses less of a threat to Saudi Arabia than might initially appear. Francisco J. Monaldi, director of the Latin America energy program at Rice University, predicted it would take at least a decade and investments of more than $100 billion to rebuild Venezuela’s oil infrastructure and lift production to 4 million barrels per day. Moreover, even optimistic projections would leave Venezuelan production too small to materially affect Middle Eastern export strategies. There is plenty of room for OPEC’s Gulf producers (principally Saudi Arabia and the United Arab Emirates) to continue raising output by reversing past production cuts.

Saudi Arabia’s protection has still made MBS cynical regarding his country’s future, and the Kingdom has meticulously prepared its population for this scenario. Saudi television commentators have been emphasizing Crown Prince Mohammed bin Salman’s bold shift toward a market share strategy, educating the Saudi public about the short-term versus long-term revenue tradeoff and the need for a period of low prices to curtail competing supply growth.

Moreover, the Venezuela intervention provides Saudi Arabia with valuable political leverage. This new move gives Riyadh the ability to garner valuable political capital, as U.S. President Donald Trump has urged OPEC to lower oil prices.

The American invasion of Venezuela is widely regarded as the beginning of the end of Saudi Arabia’s monopoly. While the Kingdom faces near-term revenue pressures from lower prices, the intervention removes a potential long-term competitor before it can recover, validates Saudi Arabia’s market share strategy, and provides political capital with Washington.

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