Tensions between Argentina and Venezuela have worsened after a diplomatic spat between the two South American nations.
Argentina has accused Venezuela of cutting the power supply to its embassy in Caracas after its diplomats invited Venezuela's opposition leaders due to concerns about "the deterioration of the institutional situation and the acts of harassment and persecution directed against political figures in Venezuela."
In a statement released on Monday by the Office of Argentine President Javier Milei, Argentina has lamented that the embassy's power was turned off in a "deliberate action that endangers the safety of Argentine diplomatic personnel and Venezuelan citizens under protection."
Tensions between Buenos Aires and Caracas have been simmering after Venezuela's socialist President Nicolás Maduro criticized far-right Milei's election victory in November last year, claiming the "neo-Nazi extreme right" had won power.
The situation reached fever pitch a couple of weeks ago after Argentina announced diplomatic actions against Venezuela following Maduro's ban on Argentine-licensed aircraft from accessing Venezuelan airspace.
Whereas Venezuela's crude oil production has declined sharply from 3.2 million b/d in 2000 to 735,000 b/d in September 2023 mainly due to sanctions and poor maintenance, Argentina's crude output has been increasing with Milei vowing to shake up the system.
At a time when a wave of nationalization is sweeping through Latin America, Milei has proposed to privatize 41 state-owned companies, including national oil firm YPF, nuclear power company Nucleoeléctrica Argentina and energy infrastructure player EnergÃa Argentina. He is also looking to unshackle crude exports and leave local fuel prices at the mercy of market forces.
"Energy prices will couple with international values. The most radical change is eliminating the requirement to satisfy the needs of the local market - it's a historic rupture with a century of Argentine tradition," Juan Jose Carbajales, energy consultant and former oil and gas undersecretary, wrote in a report.
Fitch Solutions has reported that Argentina's crude oil production in 2023 grew by 8.7% y-o-y to ~640,000 b/d bolstered by pipeline expansion.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More