Will the Next Geopolitical Flash Point Be a Centuries-Old Border Dispute in an Oil-Rich Corner of South America?

Ominously, both the US and the UK are deeply involved in Venezuela’s escalating face-off with neighbouring Guyana. 

Tensions are rising fast in one of Latin America’s longest-simmering border disputes. On Friday (Nov 10), the president of Venezuela, Nicolás Maduro, accused Washington of “incubating a military conflict” in Essequibo, a vast 160,000 square-kilometre chunk of neighbouring Guyana that was a former Dutch and then British colony that has been claimed by Venezuela for the past 200 years, ever since it gained independence from Spain.

Maduro’s remarks came three days after the US’ newly appointed ambassador to Guyana, Nicole Theriot, stated that the US intends to strengthen its bilateral relationship in defence matters with Guyana, with a view to “improv[ing] mutual security objectives, address[ing] transversal threats and promot[ing] regional security.” This is all happening as tensions between Venezuela and Guyana escalate over Essequibo.

“We all have a lot of important work to do, and together I believe we can and will address the shared challenges in our collective neighbourhood, no matter how daunting they may seem,” Theriot said at a press conference with Guyana’s president, Irfaan Ali.

Plans for a New US Military Base?

Venezuela’s Foreign Minister Yván Gil took these comments as yet further proof that the US is seeking to increase its military presence in the region, “to protect American energy companies.” You can hardly blame him: as People’s Dispatch reported in September, the US and Guyana already unveiled “a commitment in 2020 to undertake joint military patrols in the Essequibo region, ostensibly for ‘drug interdiction’ and to provide ‘greater security’ to the South American country.” US Southern Command has signed similar agreements with the governments of Ecuador and Peru in recent months.

At the United Nations General Assembly in September Gil denounced Southcom for trying to “establish a military base in the disputed territory of Essequibo in order to create a spearhead for its aggression against Venezuela and seize our energy resources.” According to Maduro, Guyana’s government is “under the orders” of the US oil major, ExxonMobil, which is leading a consortium that discovered huge deposits of oil in Essequibo in 2015. Its partners include China National Offshore Oil Corporation, or CNOOC, China’s third largest national oil company.

Guyana’s economy has grown significantly following the discovery, with GDP almost tripling in size between 2020 and 2022. This is despite the fact that the terms of the production sharing agreement the government signed with the consortium were so egregious — with Exxon Mobil retaining 75% of the oil revenue as “cost recovery” and the remaining to be split 50-50 with Guyana — that a former presidential adviser cautioned that the country was being “recolonised.”

Among the conditions identified as abusive in the 2016 Stabroek offshore license were the Guyanese government’s measly 2% royalty payment, which many argue does not remotely compensate Guyana for exploitation of a non-renewable resource; the absence of ring-fencing provisions which allows the consortium led by Exxon Mobile to deduct costs from one oil field against the revenues of another; and a permanent stability clause which prohibits Guyana from introducing new laws adverse to the oil companies until 2056, barring any extensions.

In 2020, Global Witness published a report claiming that Guyana could lose billions of US dollars as a result of the deal. From Village Voice:

Global Witness said its investigation showed that Guyana’s lead negotiator-former-Natural Resources Minister Raphael Trotman – rushed to sign Exxon’s deal despite knowing the company would soon announce new oil find results and while experts were telling him to seek more information.

During negotiations, Trotman also suffered an apparent conflict of interest as he was close political allies with one of Exxon’s Guyanese lawyers. The lawyer- Nigel Hughes – has denied he represented Exxon on the deal, but admitted that his firm had represented Exxon since 2009 and that he has worked for the company on other matters.

Exxon’s license is the subject of ongoing litigation in Guyana, with civil society groups arguing it is illegal.

Essequibo is not only rich in oil and gas; it boasts other mineral deposits, including Gold and Bauxite, as well as huge fish stocks and fresh water supplies, which a government minister even recently talked about exporting to other countries. As the Commander of US Southern Command (USSOUTHCOM), General Laura Richardson, said in January, Latin America is home to 31% of the world’s fresh water.

But for the moment, it is Guyana’s vast untapped energy supplies that are of prime interest to US and global corporations. According to U.S. Geological Survey estimates, Guyana’s coastal area has roughly 13.6 billion barrels of oil reserves and 32 trillion cubic feet of gas reserves waiting to be drilled. For a country with one of the lowest population densities on the planet and a GDP of slightly less than $10 billion, a bonanza awaits. But Caracas contends that the untapped energy supplies belong to Venezuela and that the arbitration panel that granted Guyana jurisdiction over Essequibo was rigged.

Complex and Messy

Like most centuries-old border disputes, the Essequibo question is both complex and messy. The area in dispute accounts for roughly two-thirds of Guyana’s entire territory. Not only that but Guyana is also locked in a dispute with another neighbour, Suriname, over Tigri, a wooded area that is controlled by Guyana but claimed by Suriname. As with Essequibo, the roots of the dispute, which briefly exploded into violence in 1969, date back to the colonial period when the UK and the Netherlands ruled Guyana and Suriname, respectively.

Essequibo has been under the jurisdiction of Guyana for over a century. Ironically, at the Paris Tribunal of Arbitration, convened in 1899 to settle the dispute, Venezuela’s claims were supported by Washington. Sitting on the five-member court were two Americans, representing Caracas, two Britons, representing, of course, the interests of Her Majesty’s Empire, and a Russian. The latter, Friedrich Martens, was instrumental in tilting the ruling in the British colony’s favour. But the outcome of the arbitration had apparently been rigged from day one, according to a document by one of the US judges released decades later.

Generations of Venezuelan leaders have refused to accept the ruling, on the grounds that the country was not “directly represented” among the judges of the Paris Tribunal of Arbitration. Instead, Caracas has given priority to a treaty that was signed in 1966 between Venezuela and the UK (Guyana was still a British colony at the time), called the Geneva Agreement, under which the parties agreed to reach a mediated solution to the Essequibo dispute, recognising Venezuela’s nullification of the 1899 decision.

But Guyana refused to engage in direct negotiations, preferring instead to pursue UN-based mechanisms including through the General Assembly and the Security Council. In 1987, both countries agreed to thrash out their differences through a UN-mediated “Good Offices” process. During the Hugo Chávez era, integration with the neighbour was prioritised over territorial differences.

To begin with, Maduro continued along the same path. In September, 2013, months after Chávez’s death, he made an official visit to Georgetown and declared that the dispute was a legacy of colonialism.

Even Washington kept uncharacteristically quiet on the issue. For decades, it had more or less stood on the sidelines, calling for a “timely resolution” of the Essequibo dispute. But that all changed in 2018, when it began calling for the hugely controversial 1899 arbitration decision to be upheld. In the same year, Guyana filed an application before the International Court of Justice (ICJ) asking the Court to reaffirm the 1899 arbitration award that established the boundary between Guyana and Venezuela. In 2020, the ICJ ruled against Venezuela, whose government refuses to acknowledge ICJ jurisdiction on the matter.

Juan Guaidó Joins the Picture

All of this has happened for one simple reason: Exxon Mobil discovered vast reserves of crude oil in disputed waters off the Essequibo coast. As part of the Stabroek offshore license drawn up in 2016, Exxon Mobile paid the Guyanese government an $18 million signing fee, which the government then used to  finance its legal battle against Venezuela over the Essequibo dispute.

In 2019, Venezuela’s US-appointed “interim” President Juan Guaidó’s “ambassador” to the UK, Vanessa Neumann, said in a leaked recording of a phone conversation with Guaidó’s international coordinator, Manuel Avendaño, that Guaidó’s team should concede Venezuela’s claims to Essequibo in return for UK support for the coup. As Declassified UK reported in December 2020, UK investors are also interested in pursuing oil ventures in Guyana:

In 2017, the British High Commissioner to the country, Greg Quinn, said interest from British companies to invest in Guyana had “gone through the roof” after the discovery of large offshore oil resources.

“We are now at the stage of seeing new companies coming out here every week,” he added.

The following year, Quinn made a flying visit back to Britain and spent a week in the Scottish oil town of Aberdeen. He was joined there by Guyana’s ambassador to the UK, Frederick Hamley Case, who was leading a trade mission aimed at “building relationships to support the country’s fledgling oil and gas sector”. They toured Scottish energy firms and visited local universities.

During the trip, Quinn told Energy Voice, an industry media website: “A lot of the work that I do is to support the UK companies who are looking to come out” to Guyana. He reiterated that the number of British firms arriving in Guyana has “skyrocketed” since ExxonMobil made its major discovery in 2015.

The Foreign Office would facilitate UK investment in Guyana, according to Quinn.

“The bottom line is if there is a company here in Aberdeen that is looking for an opportunity to get into business in Guyana, we should be their first port of call,” he added.

The UK military has also been involved in the process.

In July 2016, a year after offshore oil was discovered, Britain’s Royal Navy gave four Guyanese personnel a one-week crash course in how to protect their Exclusive Economic Zone – the stretch of water 200 nautical miles from Guyana’s shoreline, which contains the oil fields.

US Rekindles Its Interest in Latin American Oil and Gas

Both the US government and military are disarmingly candid about their own growing interest in Latin America’s energy resources, including, of course, Venezuela’s. As a 2018 report by US Southern Command conceded, the US will have increasing difficulties securing enough energy to meet domestic demand in the decades to come. Though the report does not mention Guyana directly by name, it leaves little doubt that the US economy’s main source of energy supplies in the years to come will be its direct neighbourhood:

According to the Department of Energy, three (Canada, Mexico, and Venezuela) of the
top four foreign energy suppliers to the U.S. are located within the Western
Hemisphere. According to The Coalition for Affordable and Reliable Energy, the U.S.
will need 31 percent more petroleum and 62 percent more natural gas in the next two
decades. As the U.S. continues to require more petroleum and gas, Latin America is
becoming a global energy leader with its large oil reserves and oil and gas production
and supplies.

Even before Exxon Mobil discovered huge deposits of oil off the coast of Essequibo, tensions were rising between Guyana and Venezuela. In 2013, the Venezuelan coast guard detained a survey boat being used by Texas-based Anadarko Petroleum Corp for violating Venezuelan waters. The government in Georgetown accused Venezuela of threatening its national security by evicting the RV Teknik Perdana survey boat from Guyanese waters.

Today, the consortium led by Exxon Mobil is extracting around 400,000 barrels of oil a day. But this is just the beginning. In September, Guyana opened up bids for eight new offshore oil blocks, with oil companies from all over the planet, including Exxon Mobil and Total Energies, paying an interest. Caracas responded with the following statement:

“The Bolivarian Republic of Venezuela strongly rejects the illegal licensing round being carried out by Guyana as it intends to use maritime areas that are subject of delimitation between both countries.”

It has also announced plans to hold a referendum on the annexation of Essequibo on December 3. The five questions Venezuelan citizens will be asked are:

1. Do you agree to reject by all means, in accordance with the law, the conditions fraudulently imposed by the Paris Arbitration Award of 1899, which seek to deprive us of our Guayana Esequiba?
2. Do you support the 1966 Geneva Agreement as the only valid legal instrument to reach a practical and satisfactory solution for Venezuela and Guyana regarding the controversy over the territory of Guayana Esequiba?
3. Do you agree with Venezuela’s historical position of not recognising the jurisdiction of the International Court of Justice in resolving the territorial controversy over Guayana Esequiba?
4. Do you agree to oppose, by all legal means, Guyana’s claim to unilaterally dispose of a disputed maritime area, illegally and in violation of international law?
5. Do you agree with the creation of the state and the development of an accelerated plan for comprehensive care for the current and future population of that territory that includes, among other things, the granting of citizenship and a Venezuelan identity card, in accordance with the Geneva Agreement and international law, consequently incorporating said state on the map of Venezuelan territory?

Guyana’s government has responded by rejecting the question, particularly the last one which, it says, posits a potential annexation of Guyana’s territory — in blatant violation of various regional and international agreements. For its part, the Maduro government insists that the referendum is purely consultative and non-binding. The country’s Vice President Delcy Rodríguez last week reiterated that Venezuela does not recognise the ICJ’s jurisdiction while calling for the Guyanese government to resume bilateral negotiations.

On Friday (Nov 10), a spokesperson for the United Nations Organization (UN), Stéphane Dujarric, released a statement urging Venezuela and Guyana to conclude discussions on the border controversy between both countries, “for the sake of peace”:

“The Secretary General of the UN, Antonio Guterres, is following the situation with concern and has expressed his confidence that the conflict will be resolved in order to cancel any action that aggravates or prolongs the controversy.”

All of this is happening at the same time that the US is harbouring Juan Guaidó, who fled Colombia for the safety of Florida in April and was recently the subject of yet another arrest order back in his native Venezuela. The charges against Guaidó include treason, usurpation of functions, profit or extraction of money, securities or public goods, money laundering and association to commit a crime.

“Guaidó used resources from PDVSA (Petróleos de Venezuela) to cause losses close to or greater than $19 billion,” said the prosecutor, supported by “revelations” provided to the press “by a federal court in the United States.”

The Biden Administration is also loosening its sanctions on Venezuela, or more specifically Venezuela’s oil industry, while also encouraging private negotiations between the Venezuelan ruling party, its opposition and international actors, including the US itself. As an article in Voice of America helpfully pointed out a few days ago, “the Guyana case and the agreements in Venezuela do not represent a conflict of interest for the US” — at least not according to the US analysts/spooks consulted.