The most recent plunge in oil prices—falling from more than $100 per barrel in 2014 to a low of under $30 per barrel in early 2016—has sucked Venezuela into an economic and political spiral, from which it could take decades to recover.

Its hyperinflation is running at 80,000%, soaring debts leading to sovereign defaults, falling oil production and growing autocracy of president Maduro to maintain power has affected Venezuela and its citizens very bad.

USA wants Nicolás Maduro out as president and Juan Guaido, the president of the National Assembly, in. The USA has issued sanctions against Venezuela’s state-run oil company, PDVSA recently. With this, American imports of crude oil will reduce and there is more supply for OPEC producer’s other big customers viz. India and China.

India and Venezuela relations:

• India and   Venezuela   have   been   maintaining   cordial    
• The 50th Anniversary  of  the  establishment  of  diplomatic  relations  was  celebrated  in 
• There is  a  similarity  of  views  on  major  international,  political  and  economic  issues. 
• Venezuela has emerged as India’s fourth largest oil supplier, after Iraq, Saudi Arabia and Iran, in 2018, and is among the top 10 crude oil suppliers to India.
• The supplies accounted for about 8 percent of total imports.
• The Indian  pharma  industry  has  already  made  a  mark  and  some  reputed  companies  (example:  Sun  Pharma,    Reddy’s) are operating in Venezuela.

The developments in Venezuela will offer huge advantages to India

• US sanctions against Venezuela could further help India getting cheaper supplies of oil.
• The opportunity to soak up the extra supplies from Venezuela at potentially cheap prices would be a boon for the Asian countries, where the governments are trying to support slowing economic growth.
• India is considering setting up a rupee-payment mechanism for trade with Venezuela, besides exporting rice and drugs to the South American nation, all in return for crude oil.
• The rupee-payment mechanism is also being considered to benefit Indian exporters, particularly pharmaceutical products and non-basmati rice.
• This would help save the US Dollars and stabilize the shaky Rupee- dollar exchange rate to an extent.
• The oil trade will also help reduce the increased dependency on the middle-east nations which is also in turmoil.
• India could export up to half-a-million tonnes to Venezuela on a regular basis, if a rupee-based payment mechanism is set up.

Concerns in Oil trade:

• The quality of Venezuelan oil has been deteriorating after years of under-investment and aging infrastructure.
• One point of uncertainty is whether the potential U.S. action will be similar to measures against Iran that has forced nations across the globe to limit purchases from the Persian Gulf state.
• Any disruption in Venezuelan supplies is also likely to increase demand for heavy-sour crudes — the dense, viscous and relatively more sulphurous varieties that the Latin American nation produces.
• Political turmoil in the Venezuela is another sticky point in oil trade.

Conclusion:

        India must closely monitor the situation and try to maximize the most. This will be a win-win situation for both India and Venezuela in terms of trade. India must also provide the required humanitarian assistance to people suffering due to political and economic turmoil and help Venezuela stand back to its feet.