• Venezuela's Assembly passes reforms opening oil sector to private firms.
• The changes aim to attract foreign investment in the oil industry.
• Revisions come amid reduced U.S. sanctions following regime change.
• New laws allow for independent dispute arbitration and lower tax rates.
• The reforms mark a shift from over two decades of strict state control.

Venezuela's National Assembly has approved a landmark reform of the country's hydrocarbons law, allowing private companies, including foreign firms, increased control in the oil sector, which has been under state control for over 20 years. This legislative change, supported by interim President Delcy Rodríguez, is expected to trigger greater foreign investment in Venezuela's oil industry, which has suffered from years of mismanagement and sanctions. The reform is seen as a response to U.S. pressure, particularly from Donald Trump, to open up Venezuela's vast oil reserves to external capital, marking a notable policy shift away from the previously dominant state-run model governed by Petróleos de Venezuela SA (PDVSA) according to BBC, India Times, and South China Morning Post.

The newly approved law allows private operators to engage directly in oil exploration and production, with taxation changes including a cap on royalties at 30%. Existing contracts with the government can now also involve independent arbitration, reducing the long-standing influence of Venezuelan courts. This provision aims to attract foreign investment by assuring companies they will have recourse to impartial legal channels, a crucial factor given the country's contentious recent history regarding expropriations and nationalization of foreign assets, as noted by Reuters and Los Angeles Times.

Following the approval of this reform, the U.S. has eased some sanctions related to Venezuela's oil exports, reflecting a significant shift in diplomatic and economic relationships after the U.S. military ousted Nicolás Maduro. This strategic pivot aims to revitalize Venezuela’s oil production, which has dramatically declined from over three million barrels per day in the early 2000s to about 1.2 million barrels today. The change provides an opportunity for U.S. oil firms, which had previously exited due to the nationalization policies under Chávez and Maduro, to re-enter the market, with Trump’s administration indicating plans to manage Venezuela's oil revenue for the foreseeable future according to Reuters.

The reformed hydrocarbons law is being positioned as a crucial step to restore Venezuela's oil industry to health, with government officials confident that adopting a more flexible royalty system and allowing extensive roles for private operators will incentivize foreign firms to invest again. The rapid passage of these reforms indicates the urgency felt by the current administration to stabilize an economy in dire straits, burdened by leading economic challenges, political instability, and rampant inflation that has driven millions of citizens to flee, as discussed by BBC, India Times, and Reuters.