Guyana and Venezuela: Tensions over Essequibo region defused after mediation but century-old dispute is not settled and will continue to simmer

Event

In the past months, tensions have flared up between neighbouring countries Venezuela and Guyana. The issue at stake is the Essequibo region (160,000 square kilometres of land or roughly the size of Suriname). Venezuela has long disputed an international arbitration tribunal’s decision of 1899 to award the Essequibo region (accounting for two thirds of Guyana’s territory) to Guyana. However, it did not actively pursue the claim until the world’s biggest recent oil and gas finds off the coast of Essequibo in 2015. The production and export of this light oil, with a production cost of only USD 20 per barrel, started in 2019 and made Guyana’s economy one of the fastest growing economies in the world.

However, in September 2023, tensions escalated between the two countries as Guyana granted new exploring rights of gas blocks ¬– in waters claimed by Venezuela – to ExxonMobil. In response, Venezuela organised a referendum in December, to renew its claims on Essequibo. This has put tensions on edge. According to the referendum outcome, an overwhelming part of Venezuelans allegedly wants control over the disputed region. Therefore, Maduro announced that Venezuelan state-owned firms can start exploiting oil, gas and mines in Essequibo, and maps of Venezuela were redrawn to add the disputed region to Venezuela. Maduro also announced a three-month window for foreign companies to cease operations in Essequibo, but it was unclear if there are any consequences for those who do not comply.

Impact

Venezuelan President Maduro is in a tight spot domestically, as his popularity is low and the opposition has – at long last – rallied behind one very popular candidate ahead of the 2024 presidential elections: María Corina Machado. Maduro likely wants to gain domestic popularity by drawing attention to this dispute and away from domestic issues, such as the multi-year economic crisis Venezuela is experiencing with hyperinflation and shortages of fuel. It is not the first time this tactic is used by authoritarian presidents facing low popularity polls. Another possibility is that he is using this conflict to postpone the elections all together.

The risk of military annexation of Essequibo is low. It should be noted that none of the announced measures by Maduro involves plans to deploy the military to enter the disputed territory or to permanently occupy it. Moreover, Latin America, under brokerage of Brazil, reacted swiftly to the escalation of the tensions and started mediation quickly. After a meeting on 14 December, a joint statement was issued by Guyana and Venezuela, announcing that they “will not threaten or use force against one another in any circumstances” and “will refrain, whether by words or deeds, from escalating any conflict or disagreement”. A joint commission was also created, for which both countries agreed to meet in Brazil in March 2024. The joint statement clearly defused tensions but did not settle the dispute.

The matter is currently before the International Court of Justice, but it could take several years before a final ruling is issued. Moreover, Venezuela questions the court’s authority on the issue. This row –which is already more than a century old – is therefore likely to be protracted, and regularly outbursts of tensions are likely in the future. Hence, an accidental military escalation or miscalculation is always possible, especially given the high geopolitical tensions of this current era. Though in this case Guyana’s military capacity is far weaker in comparison to Venezuela’s, Venezuela has limited space to finance a prolonged military operation. Essequibo lacks infrastructure and is mainly covered by rainforest, which increases the difficulty to take over the region. Moreover, the USA, the UK and probably also Brazil would provide military support to Guyana in case of military escalation. On top of that, Venezuela’s belligerent behaviour poses a risk to the temporary relief of US sanctions on the country, as they can be reversed at any time.

In this context, the MLT political risk ratings for Guyana (4/7) and Venezuela (7/7) remain stable as the risk of a military annexation of the disputed region is low. As long as the dispute does not escalate or domestic tensions do not rise, Guyana’s political violence risk rating remains in category 3/7, with a negative outlook, and Venezuela’s in category 6/7.

Analyst: Jolyn Debuysscher – J.Debuysscher@credendo.com