NEY YORK: The United States is set to take majority control over a huge amount of Venezuela’s oil wealth in an unprecedented maneuver that officials say would create the world’s second-largest private oil company by reserves and secure American petroleum supplies for decades to come.
President Donald Trump made the announcement about the arrangement in a Truth Social post last Friday night. It represents his latest move to establish US dominance over the Western Hemisphere, countering years of inroads by China, as part of his embrace of the 19th-century Monroe Doctrine.
Working with Venezuela’s interim president, Delcy Rodríguez, a partnership with private business secured majority US control of more than 65 billion barrels of proven reserves in Venezuela, Trump said.
A US official said that the United States will control 55% of the effective output from the joint venture, and will obtain the oil at cost.
The plan represents an unparalleled modern-day intervention into the economy of a South American country Trump once called the 51st US state, harkening back to British control of Iran’s oil fields and the division of Iraqi assets among US and European nations a century ago.
It marks the culmination of a campaign in which the United States captured Venezuela’s president, Nicolas Maduro, in January, seized Venezuelan oil tankers and struck numerous boats allegedly carrying drugs from Venezuela, killing more than 200 people.
It’s also an untested maneuver – one that could be vulnerable to legal challenges and political shifts in Washington. It’s not clear that Trump’s arrangement would be fully embraced by a future American president, or how it might endure any future political upheaval in Venezuela.
“The Trump administration’s reported push to secure a stake in Venezuela’s oil reserves is likely to be counterproductive to long-term investment in the industry, primarily because of the political risk it introduces,” Chris Kennedy, the economic statecraft lead for Bloomberg Economics, wrote in a note.
“Few companies are likely to be willing to make major greenfield investments given the risk that a post-Trump US administration would abandon this effort, or that a new, democratically-elected Venezuelan government wouldn’t honor such a deal.”
The announcement drew an immediate backlash on social media, with some Venezuelans accusing Rodríguez of “giving away” the country’s oil and others questioning the lack of any mention of a democratic transition or a timetable for elections as part of the deal.
The criticism could deepen political risks for Rodríguez, whose popularity has already been slipping in recent polls.
Chevron Corp, the only US company currently producing oil in Venezuela, declined to comment. ExxonMobil Holdings Corp declined to comment.
“Above all, a credible road map to durable political stability is needed to convince oil majors to invest tens of billions, particularly to build expensive upgrader units needed to process ultra-heavy Venezuelan oil,” said Clay Seigle, a senior non-resident scholar at the Centre for Strategic and International Studies.
The venture would have 100-year concessions for oil fields totalling about 65 billion barrels of proven reserves, according to the official.
The new entity will be the second largest corporate holder of proven reserves after Saudi Aramco, the official added.
Bloomberg News reported earlier last Friday that the United States was pursuing a major stake in Venezuelan oil reserves via a potential partnership between the Department of Defence and Alejandro Betancourt, a controversial energy investor who has become a key middleman between the two countries.
Production from the new venture will help supply at-cost oil, go toward filling the US strategic petroleum reserve and help meet the needs of the American military, the US official said.
Rodríguez confirmed the agreement in a statement on Telegram. She called the deal “historic”, while saying oil projects would generate US$209bil in taxes.
She said the accord covers 17 strategic fields holding 65 billion barrels of proven reserves, but didn’t mention the stakes each country would hold.
“This is completely unprecedented,” said Alejandro Velasco, an associate professor at New York University. Venezuela “risks becoming a playground of US capitalism”, Velasco said.
The announcement comes amid a worldwide race to secure oil supplies disrupted by the war in Iran, and as Trump confronts voter anxieties about petrol prices and inflation before the November mid-term elections.
While Venezuela’s crude output has risen this year, the country pumped just 1.16 million barrels a day in July, according to a Bloomberg survey.
That’s less than half the amount it produced a decade ago, a reflection of an earlier exodus by many Western energy companies and years of under-investment and corruption that left the country’s oil sector in tatters.
Trump’s gambit is in keeping with his so-called Donroe Doctrine to extend American influence throughout the Western Hemisphere.
Since US forces overthrew Maduro and Rodríguez took power, Trump has sought to exert leverage over the nation and its vast mineral and oil resources.
He’s boasted frequently that much of the country’s crude – and oil revenues – are flowing to the United States.
The plan also dovetails with Trump’s second-term moves to directly intervene – and take federal government stakes – in commercial ventures aimed at strengthening US supply chains for semiconductors, critical minerals and batteries.
What’s unusual from a historical perspective is that the United States government is taking an equity stake in oil projects, said Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy.
“The United States has never had a state-owned enterprise,” Monaldi said.
Monaldi, one of the world’s foremost experts on Venezuela’s oil sector, stressed that many details of the arrangement remain unclear.
For the plan to work, he said, Chevron and other companies will need to actually sign contracts.
“My suspicion is that the government of the United States wanted to make a big announcement,” he said.
“But it depends – it depends on who signs, if they are actually going to invest and, of course, what type of contracts are we talking about?” — Bloomberg
