From kidnapping a president to an oil mega-deal: US gains influence in Venezuela

“The largest oil deal in world history. Energy dominance for the next century. And all of it at no cost whatsoever to the United States.” The White House has announced with great fanfare an agreement with Venezuela that is set to secure American prosperity for many years to come. An agreement that would more than double US oil wealth. But also an agreement that began with the US kidnapping of Venezuela’s then-president.

"President Donald J. Trump announces a historic oil agreement that will secure United States energy dominance and drive Venezuela’s economic recovery," the White House statement says.

The US perspective

According to the White House, the agreement gives the United States majority control over more than 65 billion barrels of proven Venezuelan oil reserves. By comparison, current proven reserves in the United States amount to around 46 billion barrels, according to the US administration. The agreement’s key partner is the newly established private company North American Blue Energy Partners (NABEP), which has received 100-year concessions from Venezuela’s transitional authorities for 17 oil fields containing the stated reserves.

The agreement also includes a direct equity stake for the US government. NABEP is to transfer a 35% stake in its parent company free of charge to the Office of Strategic Capital at the US Department of War. According to Washington’s own estimates, it would thus gain a stake that could eventually be worth hundreds of billions of dollars, including entitlement to dividends.

Another important component of the agreement is securing supplies of Venezuelan oil for the United States. The US Department of State has obtained the right to purchase, at production cost, a guaranteed 20% of output from current and future fields operated by NABEP. The remaining 80% of production is subject to the United States’ right of first refusal, which it may exercise primarily in emergencies. The White House presents this mechanism as a way to ensure long-term access to cheap oil and potentially replenish US strategic petroleum reserves.

According to the published terms, US control does not apply solely to its ownership stake. Washington is also to have veto rights over the appointment of NABEP board members, and a majority of them must be US citizens. The company is also to use US auditors, lawyers and advisers, while the agreement is governed by US law and subject to the jurisdiction of US courts.

Venezuela’s perspective

The plan also envisages an extensive rebuilding of Venezuela’s oil industry. According to the White House, NABEP intends to invest up to $100 billion in new production and related infrastructure in the coming years. The US administration expects this capital to help substantially increase Venezuelan output while creating thousands of jobs and supporting broader economic activity in the country. Venezuela’s interim president, Delcy Rodríguez, said the arrangement benefits all parties.

"In return, Venezuela gains production, jobs, infrastructure investment, higher revenues for the state and production chains for national industry. The benefits are countless," Rodríguez said.

The agreement is also expected to benefit Venezuela itself. According to Washington, as NABEP gradually ramps up production, the company could pay around $200 billion in royalties and taxes over the first 25 years. These funds are expected to represent a significant source of financing for the country’s reconstruction and social development.

Real-world impacts

The entire model is part of the Trump administration’s much broader geopolitical strategy. The White House has openly declared that it wants to push Chinese and Russian companies, as well as other actors associated with the previous regime, out of Venezuela’s energy sector. It therefore presents the agreement not only as an economic transaction, but also as part of a return to the Monroe Doctrine and an effort to reassert US influence in the Western Hemisphere.

However, questions have been raised not only about the structure of the agreement itself, but also about its real economic impact. Francisco Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute, described the agreement as “highly unusual” compared with previous contracts in the sector. Moreover, he says that most of the projected fields have not yet been developed, and bringing them into production will require extensive investment and several years.

Finally, Venezuela’s oil reserves consist of so-called “heavy, sour” crude, which is more difficult to refine and is used to produce diesel and asphalt, while the US typically produces “light, sweet” crude, which is suitable for making gasoline.

Monaldi is even more critical of the expected effect on US prices.  In his view, Venezuela could add around 200,000 to 300,000 barrels per day next year, a relatively small volume compared with the scale of current disruptions to global supplies.

"In the short term, it will therefore not lead to lower oil or gasoline prices," Monaldi warned.

Monaldi also stressed that the transparency of the entire agreement will be crucial to its long-term survival. In his view, if it is an opaque contract that does not demonstrably benefit Venezuela itself, it could become the subject of political opposition and renegotiation in the future.