Regime change in Venezuela could unravel an economic lifeline for Iran and Hezbollah

The surprise capture of Venezuelan President Nicolás Maduro on Saturday by the Trump administration and his transfer to custody in New York threaten not only Venezuela’s political stability, but also risk deepening Iran’s economic crisis.

The reason lies less in the volume of trade between Venezuela and Iran that could be disrupted, and more in the potential loss of a critical platform that had been built to circumvent Western sanctions, enabling oil exchanges and logistical operations largely beneath the Western radar. The real damage now facing Tehran, and by extension Hezbollah, which has strengthened an economic network inside Venezuela, will depend on the direction Caracas takes in the post-Maduro period. If Venezuela remains hostile to the West and continues cooperating with Iran, the impact may be limited. If, however, it moves to re-engage with Western economies, one of the fastest, cheapest, and most symbolic steps would be a sharp cooling of relations with Tehran.

Former Venezuelan President Nicolas Maduro in a Brooklyn detention facility

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In macroeconomic terms, non-oil trade between Iran and Venezuela is not particularly large for either country. Iranian media outlets, citing customs data, reported non-oil exports of approximately $118 million in 2023. But financial volume is only one layer of the relationship. More important is Venezuela’s role as a trading laboratory for Iran under severe banking restrictions. Caracas enabled Iran to operate supply chains at a time when conventional financing, insurance, and shipping channels had become prohibitively expensive or outright blocked by Western sanctions.

A distinct energy-based mechanism also developed between the two countries. According to analysis by the U.S. Energy Information Administration (EIA), Venezuela’s partial recovery in export capacity in 2023 was linked, among other factors, to Iranian assistance, alongside the Biden administration’s partial easing of sanctions. The International Energy Agency (IEA) has highlighted Venezuela’s structural dependence on oil dilution in both production and exports, particularly in the Orinoco Belt, the country’s super-heavy crude region. Iran entered this gap, becoming a major supplier of diluents to Venezuela.

To sustain this mechanism, Iran shipped distillates, condensates, and logistical solutions that supported Venezuela’s oil industry. Payments were often arranged not in cash, but through transfers of Venezuelan heavy crude, creating a value-exchange system tailored to the sanctions environment. Recent reports estimate Iranian exports to Venezuela at under 100,000 barrels per day, with volumes falling by roughly 42% in 2023 compared with the previous year. Even so, a ceiling of 100,000 barrels per day, around 36.5 million barrels annually, at prices of $60-80 per barrel translates into a notional value of up to $3 billion per year.

These figures underscore the importance of the arrangement for Tehran. While it may not represent pure net income, the infrastructure enables flexibility in moving oil and petroleum products when alternative routes are constrained. If a new or transitional government in Caracas were to abruptly cut off Iranian supply routes, Venezuela itself could face short-term operational difficulties, at least until Western alternatives were organized.

In the near term, oil markets will price the event primarily around whether Venezuela’s production and export capacity are impaired, and whether changes to the country’s security and governance structures introduce a new risk premium for heavy crude. In the short run, clarity is unlikely, raising the possibility of price volatility.

Over the medium to long term, the outlook is less binary. According to the IEA, Venezuela’s output reached roughly 960,000 barrels per day in 2024, and production capacity briefly exceeded one million barrels per day before recently slowing to around 500,000 barrels per day amid renewed tensions with the United States. If a transitional government acceptable to Washington emerges, leading to sanctions relief and renewed Western investment, the potential exists for a gradual increase in heavy sour crude supply. In such a scenario, market concerns would likely ease. If instead Venezuela descends into prolonged instability, stricter sanctions, and logistical disruption under remnants of the Maduro system, output would fall, pushing prices in the opposite direction.

Hezbollah’s financial backbone does not reside in Venezuela but in Iran. Estimates suggest funding from Tehran accounts for roughly 70% of the organization’s budget. Financing and smuggling networks, including those operating through Venezuela, are believed to channel tens of millions of dollars annually to Hezbollah. A fundamental shift in Caracas would therefore not cause economic collapse for the group, but it would represent an additional blow on top of the damage it has sustained over the past two years.

The significance lies elsewhere: damage to Hezbollah’s supporting infrastructure, including front companies, shipping routes, storage facilities, and financial nodes. Collectively, these networks provide operational flexibility, particularly as internal and external pressure on the Iranian regime intensifies.

Hezbollah’s financial activity in Venezuela under Maduro has been exposed in recent years, including by the U.S. Treasury Department. Past disclosures described financing networks involving Venezuelan-registered companies linked to money-laundering mechanisms surrounding coal trade originating in Colombia. Such cases, likely only part of a broader system, illustrate how Maduro’s Venezuela functioned as a useful node in Hezbollah’s regional economic ecosystem, even if it was never the center of its operations.