Introduction:

The year 2026 has begun with yet another shockwave blow being delivered to the international community. Heightened diplomatic tensions had existed between the USA and Venezuela since the beginning of December 2025, but have led to one of the most consequential geopolitical escalations in the region. President Nicolas Maduro, along with the first lady Cilia Flores, have been detained by the US Military and flown to the United States, and are set to appear before a New York federal judge and will be facing drug and weapons charges. Meanwhile, an interim government has been installed in Venezuela. Washington deemed its actions necessary in order to achieve political stability and governance reforms in Venezuela. However, the detention of the country’s sitting president has had consequences on Venezuela’s economic and commercial landscape. 

There is an existence of an uncertainty over contact enforcement and the degree of state control over the country’s strategic assets. The continuity of energy export has also been hampered, all of which has raised concerns among investors and trading firms alike. The energy companies await regulatory clarity with regards to the payment mechanisms and ownership authority. Venezuela is home to the world’s largest proven oil reserves and massive gold reserves. This natural resource places Venezuela at a crucial intersection of global politics, the future of energy, and the shifting dynamics of the world order. Internally, Maduro’s detention has caused uncertainty over executive authority and political instability. For the business community, the major point of concern is now the operational ambiguity in essential sectors such as those related to energy and mining, along with other infrastructure sectors. The overall commercial activity in the country has slowed down as firms await clarity and remain cautious about the legitimacy of the interim leadership, which has severely impacted the short-term production, foreign engagement and the exports.

Origins of the Crisis:

Venezuela’s political instability can be attributed to its history of economic mismanagement, US sanctions, and the contested legitimacy of domestic elections. Nicolas Maduro had maintained a firm grip over the country mainly through military and strategic backing from countries such as Russia, China, and Iran, which also share a history of hostilities with the USA. The bilateral relations between the USA and Venezuela had significantly deteriorated in recent years, because of which Washington had imposed extensive economic and financial restrictions on Venezuela. The restrictions and sanctions had limited the country’s ability to access the international markets and had often resorted to informal trade mechanisms.

Immediate Escalation:

On 3 January 2026, President Trump gave the green light for the execution of ‘Operation Absolute Resolve.’ Following this, several loud explosions were heard in the capital city of Caracas. Meanwhile, US forces reached Maduro’s residence and captured both him and his wife. The couple was flown to the USS Iwo Jima, which was stationed off the coast of Venezuela in the Caribbean Sea, and later were taken to New York to be placed before a federal judge. Maduro’s administration had been accused by the USA of obstructing democratic electoral reforms and of enabling transnational criminal networks, especially linked to arms and drug trafficking into the United States. 

As a result, the US forces carried out a targeted operation in Venezuela, which led to the detention of President Nicolas Maduro and his wife. The operation was designed to avoid dragging the USA on a prolonged military confrontation with Venezuela. Since then, the detention has become the focal point of extensive domestic and international debates.  There have been mixed reactions from the public following the deposition of Maduro. Several people have taken to the streets celebrating their freedom from Maduro’s regime, but have also shown concern for the uncertainty of who will replace Maduro and whether they would be any better. 

The people are celebrating the deposition of a President which has been accused of stealing the elections. Moreover, Maduro had banned Maria Corina Machado, a former Deputy of the National Assembly of Venezuela, who was awarded the 2025 Nobel Peace Prize. Further, under Maduro’s regime, Venezuela has lost more than 75% of its GDP and about 1/4th of the population fleeing his oppressive regime. Venezuela convened an emergency cabinet meeting where the Vice President of Venezuela, Delcy Rodríguez, was made the interim leader by the Venezuelan apex court. The interim government established is part of the efforts of State institutions to assert continuity. However, opposition groups and other civil society actors have questioned the leadership succession. 

The detention of Nicolas Maduro has ushered in a new wave of political uncertainty within Venezuelan politics as different interest groups are vying for greater influence within the state Institutions.

Strategic Implications for State and Non-State Actors:

Energy Markets and Investor Confidence:

At the centre of this geopolitical escalation lies Venezuelan crude oil. The effects have been seen in the global energy markets of the Asia-Pacific due to the uncertainty over who controls the massive oil reserves now. In the 1970s, Venezuela had nationalised its oil industry and established the monopoly of the state-controlled PDVSA (Petróleos de Venezuela). Therefore, there now exists a risk of a halt in exports of oil since the commercial chain has been disrupted, and investors simply do not know who to send money to. The European markets have also experienced a rise in stock prices as speculations are being made of how badly the oil supply would be impacted, especially considering the fact that Venezuela is a founding member and a major player in OPEC.

Financial Markets and Global Capital Flows:

Doubts about the effectiveness of diplomatic restraint and predictability of the Trump Administration have now been expressed. Moreover, the markets were already fatigued with the overlapping crises. However, companies that had a hedging strategy have benefited from these escalations. The defence stocks in Europe have risen as experts now try to speculate if this instability will result in a spillover effect to other neighbouring countries as well. The prices of gold have also increased, and from an investor's perspective, American control over Venezuelan oil could unlock massive quantities of oil reserves. The injection of these oil reserves into the global economy comes at a time when energy prices have already reached a new high due to the Russo-Ukrainian conflict and the Chinese threat of invasion of Taiwan.

India’s Strategic Outlook and Economic Exposure:

The Indian economic engagement with Venezuela has been restricted and cautious. However, Venezuela was always seen as a major potential supplier of heavy crude oil to India. The major issue that India faced in its engagements with Venezuela was supplying Venezuela with goods and services against deferred payment arrangements backed by oil, which were uncertain and time-consuming. Therefore, India has about USD 1 billion in stalled receivables, majorly due to the heavy sanctions that were imposed on Venezuela by the USA in 2020, an amount which India now hopes to recover quickly with the new interim administration in place. Moreover, with the new developments, businesses can expect the sanctions on Venezuela and those engaging with it, to be eased, opening up new avenues of engagement with the country and its industries. 

Nevertheless, India faces the threat of an increased import bill because the developments have increased the prices of Brent and sour crude oil. This increased cost of import would directly impact the inflationary rates of the Indian economy; therefore, India has been presented with a new opportunity, utilising which could lead to a greater Indian presence in Venezuela and also a potential alternate supplier of crude oil to India in an era where the global supply chains remain deeply vulnerable to the dynamic geopolitical tensions.

Conclusion:

The Venezuelan crisis is not just a story of regime change and an act of bringing democracy to the country; it is a result of the intersection of global energy supplies, great power rivalry, and hegemonic acts. The detention of the Venezuelan president sets a dangerous precedent in the international community. China and Russia have condemned the American actions, while India, too, has expressed deep concerns but has fallen short of open condemnation. The American action has targeted toward breaking major arms and drug trafficking networks, which may result in unintended consequences. 

It has caused leadership uncertainty in an already fragile institutional and administrative system of Venezuela, and how the USA intends to ensure a democratic transition of power in Venezuela is something we are yet to see. Moreover, it has disrupted the energy supply value chains because the energy firms and industries try to gain clarity in Venezuela, which is a founding member of OPEC. And now, there exists an uncertainty over the future of ownership of the vast oil and gold reserves of Venezuela. 

The political developments in Venezuela have resulted in the formation of a power vacuum in the Venezuelan administration. The international community watches Venezuela with much concern and hopes that the crisis remains contained and normalcy have returned to the country’s governance.

BY TEAM GEOSTRATA