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US needs a new partnership with Guyana

AP Photo/Eugene Garcia, File
FILE – Cargo vessels are anchored offshore near oil platforms, before heading into the Los Angeles-Long Beach port on Oct. 5, 2021. The first official federal calculations of the new spending package that President Biden signed show it will slice America’s carbon pollution by more than 1 billion tons by the end of the decade. The new law’s provisions that call for oil and gas leasing on federal land and water “may lead to some increase” in carbon pollution, the federal analysis said.

The United States needs a more active partnership with Guyana. If managed properly, Guyana will be one of the greatest oil producers in the Western Hemisphere. The small country is barely on the radar of anyone outside of a very small but growing number of observers in the United States. Five years from today, Guyana will likely be producing 1.2 million barrels a day, which is far more than the number of barrels Venezuela is producing at the moment. Guyana will produce far more than that 15 years from today. Guyana’s increased energy production can be a huge blessing for Guyana and the world. But the country will have to navigate some challenges to get to a new golden age, and the United States should be Guyana’s partner of choice.

Since the 15th Century, the country shifted among the Dutch, the French, and the British. Eventually, in 1814, during the Napoleonic Wars, Britain occupied Guyana which led to the declaration of Guyana as a British colony in 1831. Fast forward some years: Gold was discovered in Guyana, which led to an economic boom. With the abolishment of slavery in 1834, plantations imported laborers from other countries, notably India. In 1961, Guyana was granted autonomy from the British, and in 1966, it became independent. Shortly after, in 1970, Guyana officially became the “cooperative republic” that it is now.

The small country has a population of roughly 800,000 people, a little more than North Dakota. It is a racially diverse society with five major communities: Indo-Guyanese (40 percent), Afro-Guyanese (30 percent), mixed (20 percent) and Indigenous (10 percent). Guyana is the only country in South America to have English as an official language. It considers itself a Caribbean nation. It is home to lush forests, arable land, bountiful fish stocks, as well as significant mining assets of gold, bauxite, and diamonds. Only in 2015, was a significant stock of oil discovered there.

Exxon affiliate Esso Exploration and Production Guyana Ltd., Hess Guyana Exploration Ltd, and China National Offshore Oil Corp., a subsidiary CNOOC Petroleum Guyana Ltd., work in a consortium and are developing a substantial amount of oil in Guyana. The recoverable oil and gas figure was recently reported at roughly 11 billion barrels. The barrels have just started to scratch the surface as John Hess, CEO of Hess Corporation, stated at a recent CSIS event that most of the discoveries were found at a depth of 15,000 feet, but that the consortium plans to drill deeper, at 18,000 feet. Hess believes that multi-billion barrels of reserves remain to be discovered.

Guyana is experiencing an oil-driven boom. Between 2019 and 2021, the country’s economy grew by a massive 72 percent. Despite, the COVID-19 pandemic, which wreaked havoc on the Latin America and globe, Guyana’s economy grew.

Center for Strategic and International Studies (CSIS) recently hosted a discussion with Guyana’s President Mohamed Irfaan Ali. President Ali has an impressive vision of economic diversification and is moving forward on a plan to develop the oil resources while seeking to protect and properly manage Guyana’s enormous, pristine rainforest.

With the increased oil revenue that the country will see in the next few years, the Ali administration hopes to transform lives by investing in education and healthcare, building infrastructure, and investing in solar energy. If the government succeeds, it will be beating the odds, because few poor countries that suddenly become rich with oil have managed to that transition successfully.

Guyana is going to need a lot of assistance from reliable partners if this is to succeed.

Guyana has what it characterizes as a “controversy” with Venezuela over the border between the two countries. The U.S. supports Guyana’s claim that the border was settled by a boundary commission in 1899; however, since the 1960s, Venezuelans across the political spectrum, have claimed up to two-thirds of Guyanese territory — including much of the energy producing parts of the country. Even a change in government in Venezuela will not end Venezuela’s insistence on this matter. The Caribbean Community (CARICOM) has also declared strong support for Guyana in this dispute.

When asked about this controversy, President Ali said: “We [Guyana] believe in the rule of law. We have approached the International Court of Justice (ICJ), and it is looking at this matter.” He encouraged Venezuela to participate fully with the (ICJ) and respect the outcome. Venezuela has, so far, not wanted to engage in the process.

Given this controversy, Guyana could follow the route of Kuwait, Bahrain, UAE and Qatar, which are all small energy producing countries that cannot choose their neighbors but can choose their security partners. There are several security challenges for Guyana, including illegal, unreported and unregulated fishing, illegal mining, drug cartels, and the on-going controversy with Venezuela.

Guyana should consider establishing a deeper U.S. security partnership and a deeper partnership with other countries in the region to help mitigate these security risks.

The U.S. needs a deeper partnership across a number of other dimensions. The U.S. should explore a different kind of trading partnership with Guyana. Perhaps this is the time to revisit a Trade and Investment Framework Agreement (TIFA) or a Bilateral Investment Treaty (BIT).

Moreover, the U.S. has a minimal foreign assistance presence. As Guyana becomes wealthier, it will be ever harder to justify spending American foreign aid dollars on a “middle-income” (at least on paper) country. Perhaps, USAID could open a full USAID mission in Guyana to focus on issues such as economic diversification, environmental stewardship, as well as supporting Guyana’s aspirations to carefully administer the future oil revenues.

As time goes on and as the oil revenues come online, Guyana could share the costs with the United States and ultimately bear all the costs of any assistance program similar to the ways that countries like Oman and Saudi Arabia have “bought” expertise from the World Bank Group.

The country faces a number of risks, but if managed properly, Guyana could be on the threshold of a golden age. Now is the time for a broader U.S. relationship with Guyana: economic diversification, development, environment, trade and security.

Daniel F. Runde is a senior vice president and William A. Schreyer chair in Global Analysis at CSIS. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America and the Middle East. He is the author of “The American Imperative: Reclaiming Global Leadership Through Soft Power” to be published in December by Bombardier Books.

Tags Guyana oil production Venezuela
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