Facing economic collapse and severe sanctions, Venezuela’s socialist government proposes to provide a majority stake and control over its oil industry to large international corporations. The privatization of the sector will mark the end of decades of state control.

The government of President Nicolas Maduro has already held talks with Russia’s Rosneft, Spain’s Repsol and Italy’s Eni. The idea is to allow them to take over state-controlled oil assets and restructure some of the debt of the state-owned Petroleos de Venezuela SA (PDVSA).

The proposal, which could prove crucial for the sector in the country, is still at an early stage and will have to deal with significant obstacles. Venezuela’s legislation must be amended to make privatization a reality. There are also controversies in Caracas over how to fund operations because US companies are not allowed to do business with the Maduro regime because of Washington sanctions. They also limit investments by non-US companies in Venezuela.

The once glorious state oil company PDVSA, which produced 3.5 million barrels of oil per day, today produces a record low of 700,000 barrels per day, although the country is known for its large deposits of “black gold”. Venezuela’s economic crisis has plagued its lucrative oil sector for years. He could not be spared after the central bank’s foreign exchange reserves reached a 30-year low and the government’s money was already less than 1 billion USD.

In order to lift the US sanctions, the consent of opposition leader and National Assembly President Juan Guaido, supported by Washington, is likely to be required. Although he, like the opposition as a whole, is in favor of more foreign participation and investment in Venezuela’s economy, he is unlikely to agree to measures to support the regime.

PDVSA is asking the companies that have been interviewed for new investments, such as – if the proposal is moved, they will be paid for with oil, according to two sources. According to them, during the negotiations, it was suggested that part of the debt was to be converted into PDVSA securities.

PDVSA and Rosneft did not respond to a request for comment, and Repsol, Eni and the US Treasury Department declined.

Currently, several US subcontractors, including Chevron, have a temporary permit from Washington to operate in Venezuela. However, it is not yet clear what will happen to the licenses if the Maduro government takes action on privatization.

The oil sector is considered the pearl in the crown of the Venezuelan economy – such a valuable resource that restrictions on foreign ownership and participation are enshrined in the constitution.

But the severe economic and financial crisis resulting from chronic mismanagement has led the Maduro government to abandon many of its socialist principles.

For example, it discontinued state control of currency and imports, and according to some, negotiations were held with holders of 60 billion USD government bonds, some of which originated in the United States, with a proposal to replace them with oil extraction permits.