Why Trump's plan for Venezuelan oil wealth is slippery

Following a US navy operation that resulted in
the seize of Nicolas Maduro, President Donald Trump mentioned Washington desires to allow American oil firms to re-enter Venezuela and exploit its monumental crude oil sources.

Beneath are the primary questions surrounding US curiosity in Venezuelan oil:

How giant are Venezuela’s oil reserves?

Venezuela holds the world’s largest confirmed oil reserves, estimated at 303.221 billion barrels, in accordance with OPEC, of which it’s a member.

This locations it forward of Saudi Arabia, with 267.200 billion barrels, and Iran.

Regardless of this, manufacturing stays severely depressed. Venezuela at the moment produces about 1 million barrels per day (mb/d), down from roughly 3.5 mb/d when Hugo Chavez, Maduro’s predecessor, assumed energy in 1999, in accordance with Peter McNally of world analysis agency Third Bridge.

“Neglect, poor infrastructure, beneath funding, and corruption have diminished the nation’s productive capability,” he mentioned.

US sanctions imposed in 2019 throughout Trump’s first time period additional exacerbated the decline, pushing output to a historic low of 350,000 barrels per day the next 12 months.

How does Venezuela bypass sanctions?

Due to worldwide restrictions, there are only a few consumers of Venezuelan crude. China accounts for about 80 per cent of purchases, in accordance with estimates, with shipments routed via Malaysia.

Round 5 per cent of exports go to Cuba beneath bilateral agreements.

To evade sanctions, Caracas depends upon so-called “ghost tankers” that make use of ways comparable to pretend flags, altered monitoring knowledge, and deceptive delivery routes.

One such vessel, the M/T Skipper, was intercepted by the US Navy as a part of an oil blockade on Venezuela introduced final month. The tanker was carrying multiple million barrels of Venezuelan oil reportedly headed for Cuba.

To keep away from US penalties, consumers make funds utilizing cryptocurrency, together with asset-backed stablecoins, primarily USDT.

What’s the US presence in Venezuela’s oil sector?

A restricted share of Venezuelan oil output
is produced by US vitality big Chevron.

Chevron operates beneath a particular licence from Washington that enables it to proceed its partnership with Venezuela’s state-owned oil firm and export a few of its manufacturing, notably to the US market.

Nonetheless, the agency is barred from transferring money to the Venezuelan state and as an alternative settles taxes and different obligations via crude oil shipments.

Different main US firms lively within the early 2000s, together with ExxonMobil and ConocoPhillips, exited Venezuela in 2007 after rejecting circumstances imposed by Chavez.

These phrases required the state to carry a majority stake in all oil ventures working within the nation.

Why is Trump centered on Venezuelan oil?

“We’ve to be surrounded by protected, safe nations, and we additionally should have vitality, essential,” Trump mentioned on Saturday.

He added that “some huge cash is popping out of the bottom,” asserting that the US can be “repaid for the whole lot” it spent in Venezuela.

Trump believes that “the oil exported beneath embargo by Caracas is oil stolen from the worldwide neighborhood,” John Plassard of Cite Gestion Non-public Financial institution advised AFP.

In response to Plassard, Trump argues that a lot of this oil was extracted utilizing American tools and investments made earlier than Chavez’s nationalisations.

Washington’s broader goal can also be to push again “Chinese language actors from the American continent,” together with limiting China’s affect over the Panama Canal, via which a good portion of Venezuelan oil is transported, Plassard mentioned.

Is Trump’s plan possible?

“Any restoration in manufacturing would require substantial funding given the crumbling infrastructure ensuing from years of mismanagement and underinvestment,” Giovanni Staunovo of UBS advised AFP.

But present circumstances make such investments unattractive. Oil costs are beneath strain from extra provide and declined in 2025 regardless of main headwinds comparable to Trump’s tariff battle and the persevering with battle in Ukraine.

“The US oil majors major duty is in the direction of their shareholders, not the federal government,” Ole Hansen, an analyst at Saxo Financial institution, advised AFP.

“With that in thoughts I doubt we are going to see a rush of curiosity to get again into Venezuela anytime quickly.”

What may this imply for oil costs?

With world markets already nicely provided, analysts recommend that turmoil in Venezuela is unlikely to have a significant impression on oil costs, with solely a modest improve anticipated this week.

“Logistics across the ports could possibly be disrupted, flows erratic,” Plassard mentioned. He added that markets could also be extra involved about Trump’s threats towards Iran, which produces way more oil.

“If Iran ‘violently kills peaceable protesters, which is their customized, the USA of America will come to their rescue’,” Trump wrote on his Reality Social platform on Friday.

“We’re locked and loaded and able to go,” he added, forward of a weekend marked by
lethal clashes between protesters and safety forces in Iran.

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With inputs from AFP