The recent military intervention by the United States in Venezuela has introduced fresh layers of uncertainty for India, which has substantial energy investments and millions in unpaid dividends locked in the sanctions-hit nation. Despite holding the world's largest proven oil reserves, Venezuela's contribution to global crude supplies is expected to remain negligible in the near term, offering little immediate relief to import-dependent countries like India.
Production Bottlenecks and Limited Refining Capacity
Experts highlight a stark contrast between Venezuela's potential and its current output. Prashant Vasisht, Senior Vice-President at ICRA Ltd, notes that while Venezuela sits on roughly 18% of global oil reserves, it currently produces a mere 0.8% of the world's output. Years of underinvestment and operational decay at the state-owned PDVSA have severely crippled production capabilities.
For India, the return of Venezuelan crude to the market is constrained by more than just supply. Before US sanctions were imposed in 2020, India imported approximately 400,000 barrels per day of Venezuelan crude. Today, those imports are negligible. A key hurdle is the specific nature of the crude itself. Sumit Ritolia, Lead Research Analyst at Kpler, explains that Venezuelan crude is predominantly heavy to extra-heavy, a grade that only a handful of complex Indian refineries can process on a sustained basis.
"A stabilization of Venezuela's oil sector could allow limited volumes of discounted heavy crude to re-enter India's import mix," Ritolia said. However, he emphasized that any impact would be incremental and dependent on sanctions policy and the pace of production recovery.
India's Stakes: Billions in Investments and Unpaid Dividends
The US operation, which culminated in the capture of President Nicolás Maduro on 5 January 2026, directly impacts India's financial interests. Indian state-run firms had invested around $2.5 billion in Venezuela before the 2020 sanctions. A potential easing of sanctions could, over time, restore access to Venezuela's oil and about $600 million in unpaid dividends owed to Indian companies.
ONGC Videsh Ltd (OVL) faces significant exposure. It holds a 40% stake in the San Cristobal oilfield, where production and dividend repatriation were blocked by sanctions. Separately, a consortium of OVL, Indian Oil Corp., and Oil India Ltd invested $2.2 billion in the Carabobo-1 project, which also suffered after sanctions.
Choice Institutional Equities stated in a report that Indian upstream players might benefit if access to equipment and investments is granted, potentially increasing output from these joint ventures with PDVSA. However, they project that in a best-case scenario for 2026, Venezuela's output might only increase by 150,000 barrels per day, requiring primarily operational rather than capital expenditure.
Strategic Benefits and Market Outlook
Despite volume limitations, renewed access to Venezuelan crude carries strategic value for India. Ritolia points out it could improve feedstock optionality, enhance procurement flexibility, and strengthen India's negotiating leverage with other suppliers. Vasisht adds that Venezuelan crudes, being heavy and sour, are cheaper, and any lifting of sanctions could open a lower-cost procurement avenue for capable Indian refiners.
The broader market context also matters. SBI Research has projected a fall in oil prices, with crude potentially touching $50 a barrel by June 2026. For India, which imports about 88% of its oil needs, price movements have a massive fiscal impact: a $1 per barrel increase raises the import bill by approximately ₹13,000 crore.
India's trade with Venezuela has dwindled. In FY25, crude oil imports from Venezuela stood at $255.3 million, an 81.3% fall from $1.4 billion in FY24. India has expressed "deep concern" over the developments, reaffirming support for the Venezuelan people's well-being. The ultimate fate of India's multi-billion-dollar stakes now hinges on the volatile political transition in Caracas and the subsequent pace of the oil sector's recovery.
