Despite some of the world's worst inflation and an economic crisis so severe that 2.3 million people have fled the country, Venezuelan President Nicolas Maduro isn't currently facing major street protests and his political opposition remains fractured.

Venezuela has the world's largest proven oil reserves, but shortages of food, medicine and electricity continue to ravage the country. The International Monetary Fund predicts inflation could reach one million per cent by year's end.

These conditions should be ripe for political unrest.

But the demonstrations, which last year brought hundreds of thousands into the streets, have largely fizzled, and the socialist government's political opposition has weakened in the past year.

Political change over the next 18 months is unlikely as Maduro's United Socialist Party tightens its grip on the economy, the courts and the press, said Raul Gallegos, a Bogota-based associate director with Control Risks, a security analysis firm.

Rather than young activists protesting in public squares, some analysts believe the most likely force to spur serious political change in Venezuela comes from spreadsheet-wielding bond traders and well-heeled sovereign debt lawyers as they move to seize state-owned energy assets to recoup money owed.

Venezuela's government maintains it will pay all of its debts and is working to reform its economy by cutting fuel subsidies and changing how its currency is managed — all aimed at fighting what it calls an "economic war" being waged against the country by the U.S., neighbouring Colombia and domestic business owners.

Uniquely vulnerable to asset seizures

Analysts, however, don't believe the government's economic measures will work and foresee creditors launching additional court action over outstanding debt.

"We are going to see the dam break," said Duke University law professor Mitu Gulati, who specializes in international arbitration and bankruptcy. "It's astounding how bad things are for a country that is so rich … this has to crash soon.

Venezuela owes about $65 billion US in outstanding bonds, according to Caracas Capital, a financial advisory firm based in the country's capital. That's in addition to other debts owed by the government and state companies — an estimated total of about $150 billion US.

Holders of that debt include some of the biggest names in U.S. finance, such as BlackRock, T. Rowe Price, Northern Trust and the U.K.-based Ashmore Group, Reuters reported in April. Venezuela also owes tens of billions of dollars to Russia and China, after borrowing heavily from the two countries in recent years, largely through oil-for-loan deals.

Omar Mujica, a car mechanic, and other Venezuelans walk toward Lima, along the shoulder of the Pan-American Highway, after crossing the border from Ecuador into Peru in August. The UN estimates 2.3 million Venezuelans — about seven percent of the country's population — have fled since 2014 as the country plummets into an economic crisis worse than the Great Depression. (Martin Mejia/Associated Press)

With oil accounting for about 98 per cent of Venezuela's export earnings, the country is uniquely vulnerable to a debt default, Gulati said. That would allow creditors to seize oil shipments or refining infrastructure in the U.S. and the Caribbean, where much of Venezuela's oil is stored and refined before being sold on international markets.

These seizures are already starting to happen and are expected to intensify through September, Gulati added.

Court showdowns

In August, a judge in the U.S. state of Delaware authorized the seizure of assets owned by Citgo, an affiliate of Venezuela's state oil company, to satisfy debts owed by Venezuela to Canadian mining company Crystallex.

Venezuelan-linked assets in the U.S. could be worth as much as $10 billion US, Gulati​ said.

The U.S. court action followed a similar move in Curacao, a small Dutch Caribbean island, where more than 15 per cent of Venezuela's crude exports were stored and refined before being sold to international customers.

Venezuelan oil production has crashed to a 50-year low, depriving the government of cash to pay its debts and to import food, medicine and other necessities. (Fernando Llano/Associated Press)

In May, ConocoPhillips, a U.S. oil producer whose assets were expropriated by Venezuela's government in 2007, won an international arbitration action against Venezuela's state oil company, PDVSA. This allowed Conoco to start seizing Venezuelan oil in Curacao and other Dutch Caribbean islands in a bid to recoup $2 billion US.

"These oil seizures are a fundamental challenge to the government … it's a huge deal for them," said David Smilde, a senior fellow at the Washington Office on Latin America, who specializes in Venezuela.

"If [Venezuela's] defaults and different economic commitments get to a point where their facilities abroad get confiscated, that will make oil sales difficult."

Even in default, Venezuela should still be able to sell some oil by loading it directly onto customer-owned ships at domestic ports to avoid seizures, Smilde added, although this would significantly reduce the government's already sputtering revenue stream.

China is the largest holder of Venezuelan government debt; the world's most populous country has lent the oil producer about $62 billion US over the past decade, according to the Washington-based think-tank Centre for Strategic and International Studies.

With Venezuela unable to pony up the cash to pay, China has been receiving interest payments in the form of oil. This arrangement didn't stop at least one major Chinese oil company, Sinopec, from launching a lawsuit against Venezuela's PDVSA in a U.S. court last December for not fulfilling a contract. (It has since been settled.)

U.S. legal leverage

Following the May arbitration decision that led to asset seizures in the Caribbean, Venezuela agreed to pay Conoco $2 billion US over 4½ years in a settlement, and Conoco has suspended its confiscation campaign.

The case, however, has made other companies owed money by Venezuela take notice, Gulati said. Lawyers across the U.S. are busy preparing claims against Venezuela on behalf of creditors, he said, fearing they will end up at the back of the line for getting paid if they don't move quickly.

Venezuela's President Nicolas Maduro and his wife, Cilia Flores, have blamed the U.S., Colombia and domestic business owners for sabotaging Venezuela's economy. Maduro recently announced what he says is a plan to tame hyperinflation, which included cutting five zeros from the country's currency. (Ariana Cubillos/Associated Press)

Despite frosty relations between Washington and Caracas, the U.S. remains the largest buyer of Venezuelan crude, purchasing more than 30 per cent of its total exports, according to recent data from Bloomberg. This gives U.S. companies and other creditors significant leverage to sue Venezuela in domestic courts.

"Once litigation starts, it's going to make it infinitely harder for the [Venezuelan] government to do anything," Gulati said.

Domestic production decline

These moves to seize the country's assets are intensifying as Venezuela's oil production — the lifeblood of its economy and government treasury — hits a 50-year low, according to the Centre for Strategic and International Studies.

Mismanagement of oil facilities and an exodus of skilled workers have been blamed for the collapse in production.

Venezuela has long been dependent on imports. But inflation, a lack of foreign currency, chronic insecurity and other problems have virtually destroyed the country's industrial base. (Rodrigo Abd/Associated Press)

Long dependent on imports for food, medicine and industrial equipment, reduced oil production and mismanagement of the country's currency, means the state — which sets prices for basic goods and controls most of the economy — has cut back on buying necessities for domestic consumers.

In essence, Smilde said, bond investors in New York or Moscow are profiting from Venezuela's oil wealth that should be spent on food and medicine for average people.

Government blames 'economic war'

The government, for its part, contends Venezuela's problems are the result of sanctions imposed by the U.S., Canada, and the European Union and an "economic war" waged by domestic business elites. The country's economic problems have been compounded by speculation, the hoarding of basic products and sabotage targeting oil facilities, the government has said.

It has offered new measures, including pegging the country's inflation-ravaged currency, the bolivar, to a new cryptocurrency, the petro, which is allegedly backed by the country's untapped oil reserves.

"We are moving from speculative capitalism — chaotic and criminal — toward an equilibrium economy," Maduro tweeted recently. "We will recover the course of sustained and sustainable growth, to give our people supreme happiness."

Estamos transitando del capitalismo especulativo, caótico y criminal, hacia una economía de equilibrio. Vamos a recuperar el rumbo del crecimiento sostenido y sostenible, para darle a nuestro pueblo la Suprema Felicidad. <a href="https://t.co/cul9WMIsNW">pic.twitter.com/cul9WMIsNW</a> —@NicolasMaduro

According to Venezuelan authorities, U.S. sanctions — long imposed in response to human rights violations and corruption — make it more difficult for the government to negotiate its debt load or restructure its payments to creditors.

'When the money runs out…'

Meanwhile, the exodus of Venezuelans continues as many see no hope of living a decent life in their home country. The UN's migration agency has warned that the human flood is building toward a "crisis moment" comparable to the migrant-crossings in the Mediterranean Sea.

Anti-government protesters work together to aim a giant slingshot at security forces in the capital of Caracas in this May 2017 file photo. (Ariana Cubillos/Associated Press)

As the country's debts mount, oil production falls and pressure builds, analysts expect a bare-knuckle legal brawl through the end of 2018 between creditors over who gets what's left of Venezuela's once-prized assets. Venezuelan government debt is trading at less than 30 cents on the U.S. dollar, meaning investors believe a full-blown default is likely.

"We are going to see an active and conflictive disorderly default as it advances," said Gallegos, the risk consultant. "Bondholders can [then] seize assets owned by the Venezuelan government or any product owned by the Venezuelan government sitting in storage overseas.

"When money runs out, the government threatens people within its folds — including bureaucrats and the military."

With files from Reuters