The arrest of Venezuela’s long-time president Nicolás Maduro on Saturday (3 January) was immediately presented by Washington as a targeted liberation operation, combining the fight against drug trafficking with the restoration of democracy. Behind the official narrative, though, American motivations appear to be manifold.
Domestically, the operation is part of a proven strategy of demonstrating firmness on issues such as security, crime and drug-trafficking. Historically, episodes of external confrontation have often temporarily boosted presidential popularity, which is important in the run-up to the mid-term elections.
Geopolitically, meanwhile, this intervention serves as a warning to other regimes such as Iran and marks a deliberate return to the Monroe Doctrine – reminding us that the Western Hemisphere remains, in Washington’s eyes, an area of direct influence. Finally, energy plays a central role in strategy: Venezuela has the world’s largest proven oil reserves and, in theory, remains a potential lever on the global energy balance.
The parallel with Operation Just Cause – the US intervention in Panama that led to the capture of Manuel Noriega – is obvious. But Venezuela in 2026 is not Panama in 1989, which could complicate the scenario. In 1989, the Panamanian state remained functional, the army was largely disloyal to Noriega, society was relatively cohesive and the economy intact. The intervention was brief, the objective clear and the exit controlled.
Venezuela, on the other hand, is a deeply dilapidated state. Its institutions have been methodically stripped of their substance, social polarisation is extreme, the security apparatus is both militarised and intertwined with economic and criminal networks and the oil economy – the backbone of the country – has been largely destroyed. Production has fallen from around three million barrels per day in the early 2000s to less than one million today.
Three scenarios
In this context, the disappearance of the head of state would not be enough to bring down the system. Three scenarios are now emerging, with asymmetrical probabilities. The first is that the regime will survive without Maduro: military and administrative structures remain in place, the transition remains formal and chaos is contained but persistent.
The second is that of a fragmentation of power, paving the way for prolonged violence, or even civil war, implying a de facto long-term US presence, well beyond a one-off operation. The third scenario, a stable democratic transition – the White House’s preferred outcome – remains the most desirable for the markets. In practice, the first two scenarios pose significant risks.
“The repercussions of this weekend’s events are not yet known but they bear the hallmarks of the ongoing tectonic shifts in geopolitics and politics.
Oil market consequences
The immediate consequences are concentrated on the oil market and this is precisely where a major misunderstanding may arise. Contrary to potential expectations, no additional barrels are likely to reach the market in the short term.
Venezuelan exports have already been halved. Sanctions and the blockade remain unchanged. And production capacity, which has been severely degraded, does not allow for any immediate increase. In other words, the political narrative has changed radically since 3 January, but physical flows remain constrained.
In the very short term, the risk is even negative for supply: the blockade limits imports of the diluents needed to process heavy crude, operational constraints are mounting and several Petróleos de Venezuela partners have been asked to reduce their production. According to Energy Aspects estimates, 200,000 to 300,000 barrels per day could be shut down.
At the same time, OPEC+ remains immobile. No production adjustments have been reported. The freeze on increases is being maintained, the pause extended and the alignment between Saudi Arabia, Russia and the United Arab Emirates remain intact. In the short term, therefore, the Venezuelan crisis is not leading to an easing of supply, but potentially to additional tension, linked to physical constraints rather than geopolitical considerations.
The real issue lies in the medium term. If minimal political stabilisation were to emerge, combined with a gradual return of foreign investment, Venezuela could once again become a structurally disinflationary factor for the global economy.
This paradox is key: a major geopolitical shock is not necessarily inflationary in the long term. A delayed easing of energy tensions would alter the trajectory of US inflation and, in turn, interest rates, which should resume their downward trend.
Institutional implications
This dynamic cannot be separated from its institutional implications. The weakening of the multilateral order and the renewed primacy of the executive branch on the international stage are fuelling a re-centralisation of power in Washington.
With the mid-term elections approaching, the risk of a strengthening of the unitary executive – the doctrine that the entire executive branch must be fully subordinate to the president – is becoming more tangible. In this context, certain institutions – foremost among them the Federal Reserve and certain semi-independent agencies – could find themselves under increased pressure.
The repercussions of this weekend’s events are not yet known but they bear the hallmarks of the ongoing tectonic shifts in geopolitics and politics. They highlight the contrast between the prevailing instability – currently more institutional than economic – and the extreme concentration of the market, the persistent strength of momentum and certain excessive valuations.
This contrast tends to reinforce our belief that medium to long-term investors need to diversify their allocations and themes more than ever – especially those that are still in vogue. President Trump reiterated this weekend the US’s interest in Greenland – an anecdote that may not be an anecdote at all and which can only be seen in Europe as a reminder of the urgent need to improve its structure.
Benjamin Melman is chief investment officer and Michaël Nizard is head of multi-asset and overlay at Edmond de Rothschild Asset Management
