Washington: As far as announcements go, it was pretty low-key. Word came from US President Donald Trump’s Truth Social account just before 7pm on Friday, a time slot typically reserved for bad news you want to bury.
Instead, Trump unveiled an unprecedented deal for the US to take control of 65 billion barrels of Venezuelan oil, in what he billed as the largest such agreement in world history.
“This Historic Transaction MORE THAN DOUBLES American Oil Reserves, greatly increases our Oil Supply, and will substantially lower Gas Prices for all Americans, long into the future, while helping to continue to set Venezuela on a course toward Tremendous Success and Great Prosperity,” he said.
There have been no documents to accompany the announcement, and few details – though Venezuela’s interim president, Delcy Rodriguez, provided some information.
She said the deal called for the development of 17 strategic oil fields, with proven potential of 65 billion barrels. It would involve an investment of $US100 billion ($140 billion), and it would yield “more than $US209 billion” in tax revenue for Venezuela, she said.
With Trump, we are used to brash overselling of achievements and deals. But in this case, the upside for both nations has the capacity to be significant – if it ever comes to fruition.
Venezuela is in a parlous state, and it was so for many years under the dictatorial socialist regime of Nicolás Maduro, who now sits in a New York jail cell on trial for drug trafficking (he and his wife have pleaded not guilty).
Its ability to harvest the world’s largest proven oil reserves, some 303 billion barrels, was badly compromised, though things have started to turn around since Maduro was captured by US forces and Rodriguez was installed.
The beneficiary has been the United States. At a time when it has had to draw down its Strategic Petroleum Reserves to compensate for the supply shock caused by the war in Iran, the US has dramatically increased oil imports from Venezuela.
In December, before Maduro was captured, the US imported 4.26 million barrels of Venezuelan crude oil and petroleum products. By May, that figure had risen to 16.85 million. Venezuela is now the US’s second-largest overseas source of oil, behind only Canada.
But to go beyond that will require significant investment from American oil companies, something they have thus far been reluctant to entertain. However, Chevron, the second-largest US oil firm and the only one with a sizeable presence in Venezuela, is in talks to expand its operations.
Trump’s deal is aimed at beginning this process. A US official said it gave the US 55 per cent of the effective output from a new private joint venture, split between holding company equity and at-cost offtake for the federal government. The venture will become the second-largest private oil company in the world by reserves, after Saudi Aramco.
“As the company scales production, the resulting stable supply of at-cost oil in our hemisphere will go toward filling the US strategic petroleum reserve and fulfilling the supply needs of our great US military,” the official said.
So, this is a long-term play, and it is certainly not one that will lower petrol prices for US motorists now. Enticing billions in investment from US companies also depends on continued stability in Venezuela.
To that end, it remains unclear if and when elections will be held in that country. “They’re not really ready for them yet,” Trump said in July.
Talks in Venezuela – which the US says it is facilitating, not dictating – are led by Jorge Rodriguez, the brother of Delcy Rodriguez and president of the National Assembly, and former politician Dinorah Figuera, a relatively obscure figure representing the opposition.
Politico reported on Sunday that discussions were largely taking place at the JW Marriott hotel in central Caracas, which has acted as ground zero for US activity in the capital since Maduro’s removal. American energy company executives “broker deals in the lobby”, according to Politico.
Trump made no secret from the outset that gaining access to Venezuela’s enormous oil reserves was a top factor, maybe the overriding one, in his decision to kidnap Maduro at the start of the year.
He told reporters he had briefed oil company chiefs in advance, and he said they couldn’t wait to go in and start taking the oil. In theory, sure – but in practice, it is still a huge risk.
And how will this apparent deal be seen by Venezuelans? After all, it’s an agreement struck between the Trump administration and an interim president who serves with Washington’s imprimatur – not a deal made with any legitimately elected government.
Indeed, it underlines that Trump’s priority is to exploit Venezuela’s oil, not to bring democracy to Caracas.
Rafael Ramirez, who was energy minister under former Venezuelan president Hugo Chavez and president of the state-owned oil company PDVSA at the same time, said the deal was “another ambush” by the Americans.
“It will go down in history for being a sellout and for opening the doors to the new colonialism of the United States,” he said on X. “An agreement behind the country’s back, clearly unconstitutional, that cedes control of the territory and the oil to a foreign power.”
Emmanuel Rincón, a Miami-based political consultant focusing on Latin America, said Trump “has handed the anti-imperialist Latin American left a powerful weapon that they will use to win elections for decades”.
Ultimately, both countries have an interest in some kind of deal succeeding. Venezuela needs the money to rebuild its shattered nation. For the US, it creates long-term strategic leverage in the hemisphere and the opportunity to “unlock global oil control from the Middle East”, as one administration source said.
But there are too many questions. Will there be elections, and when? Would a future Venezuelan government uphold the deal? Will the oil companies participate, and under what circumstances? It is an idea, not a reality.
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Michael Koziol is the North America correspondent for The Age and Sydney Morning Herald. He is a former Sydney editor, Sun-Herald deputy editor and a federal political reporter in Canberra.Connect via X or email.From our partners
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