Venezuelan oil and the global oil supply chain

It actually happened. The US pulled off another movie-like heist. Except this time, what was stolen was no priceless object, an ancient heirloom or even the long-lost holy grail. It was a South American dictator and his wife.

 

Right after one dictator was removed from power, Venezuela and its economy are somehow still in the hands of a leader the Venezuelans did not elect. The only difference is that this current administration of the South American country now has additions from the US and has charged the deposed Maduro with drug trafficking.

 

But there are similarities as well. Just like Maduro, Trump has not indicated when he is planning on relinquishing his power to bring back democracy to Venezuela. The old cabal is also still in power, except now it has overlords from the US such as Secretary of State Marco Rubio and the CIA director John Ratcliffe.

 

The official leadership of the country has passed on to Maduro’s vice president, Delcy Rodriguez—a dictator’s vice president. Her brother, Jorge Rodriguez, leads the legislature. The feared interior minister, Diosdado Cabello, a man accused of suppressing opposition voices in the country with an iron fist, is also still in office. This is a man that has a $25 million reward for his capture (a bounty placed on him by the US) and now suddenly, he has the Washington administration’s blessing to continue in his role. The same can be said about the defence minister of Venezuela, Vladimir Padrino, who has a $15 million reward for his capture. Both these bounties are under the US narcotics rewards programme. So we must ask; how has the US’ stated goal of deposing a drug trafficker/dictator has been achieved?

 

 

 

Getting things squared up might not be smooth sailing, however. The Venezuelan oil industry is in shambles. Trump met with representatives of the US industry last week to work out a long-term plan to raise $100 billion in the bid to boost oil production in Venezuela. His first order of business would be to get exports up and running for Venezuelan oil once again, after which investment into the industry would lead to increased output.

 

But this is easier said than done. The meeting did not provide any concrete investment for Trump’s plan, as he had undoubtedly hoped for. His reaction to the Exxon CEO, threatening to block his company from investing in the South American country when the latter called the Venezuelan oil sector “uninvestable” is a tell-tale sign of a frustrated leader. The US oil majors are wary of investing in Venezuela due to potential legal trouble, compliance risks and more. Add that to the fact that a lot of them have already invested millions in the Chinese oil sector, also shows that Trump’s wish of dusting off the lumbering oil industry of Venezuela and making millions off it might just be a pipe dream for now.

 

While Trump clearly wants a US-focused business model, Dutch-based trader Vitol and Singapore-based Trafigura have already become the first movers in the market by securing business after the ouster of Maduro and before any US companies have stepped in. However, the US is seeking to finalise a $2 billion deal with Venezuela to buy up to 50 million barrels. These barrels have been stuck in limbo on ships and storage tanks due to the Trump blockade roughly a month ago. But this is obviously only the tip of the iceberg. Venezuelan oil reserves are estimated to be around 300 billion barrels and account for over 17% of the global oil reserves.

 

 

As it stands, those stalled imports for over a month have led to an economic crisis in the country, because it relies heavily on these oil exports. But when the Trump administration states that all proceeds from the oil sales will be managed “for the benefit of the American people and the Venezuelan people at the discretion of the US government,” what does that even mean? How much of a cut will the US take for marketing and sale of Venezuelan oil? Since there is no democratic rule and little accountability, how much of any of the money injected into the Venezuelan economy through the oil exports trickle down and help alleviate the problems of those facing the brunt of inflation and more than a decade of mismanaging the economy?

 

What is clear from Trump’s meeting with oil honchos of the US is that there is definitely an intention to set up shop in Venezuela, and Washington is not really asking for permission. But how long will this shop stay open? What kind of cut will the US take? Imperialist powers often have a habit of taking more than giving back.

 

 

Understand this; the US will not just claim ownership over Venezuelan oil. Capitalist imperialism is a little more subtle. It relies on service agreements, production sharing and using the costs of investments as a basis to take a bigger share of any profits from oil exports. Look at what happened in Iraq after the 2003 invasion. It is not yet clear how long the US will continue to operate in Venezuela.

 

 

I expect that there will be a transition of power at some point in the next year or later. But regardless of who comes to power, they will support the US presence in the country. Notice how Machado, who was declared the winner in the 2024 elections according to most independent sources, has not been considered by the US for engagement on the future of the country. This is surprising, considering she extended an olive branch to Trump in the shape of her Nobel peace prize—a clear attempt at massaging the ego of a vain leader.

 

But the US’ lack of engagement is by design. It wants all opposition to be completely pliant before they hand over the reins and start taking the old regime apart.

 

Even after a transition has taken place, the US will continue to operate in Venezuela. This will be through mostly private entities, who will gain unfettered access to the oil industry. US actors will have no realistic competition from their Venezuelan counterparts, policymaking in the country will ensure this.

 

 

This can go two ways. The US can get what it wants sooner rather than later. It can start up its oil exports and set up agreements with Venezuelan companies and partnerships and try getting a cut for its own companies wherever possible and benefit off the inflow as much as possible. Once this system has been established it will most likely start transition towards some sort of democratic order. Elections will be called for, and whoever comes into power will do so with Washington’s blessings. Eventually there will be public calls for the US to back off and it will do so, but the American companies that have made inroads into the Venezuelan economy will continue to operate there and reap the benefits.

 

The other more likely scenario is that nothing will be simple, and the US will drown in its attempts to stabilise the oil industry. The US companies have already expressed an unwillingness to invest in the sector. The US will reform laws, grant protections and hang more carrots to make sure they change their mind. Some of them will. And then the rest of the process will be the same as the other scenario, except that the US might tire of its attempts early and give up before doing anything concrete in Venezuela, both for itself and the people of Venezuela.

 

Either way, President Trump will continue to claim this as a victory. He will term this a victory in the drug wars, even though no drugs have been seized or displayed for the public to see, no evidence has been provided and no concrete action has been taken.

 

And once the people in both the US and Venezuela will start kicking up a fuss, Trump will move on to his next target, which might be Greenland or Colombia, or even Iran. The imperialist machine will keep churning. And the world will watch and suffer as we move from one distraction to the next.