Trump Takes the Oil in Venezuela
The deal recalls the famous Cuba scene in ‘The Godfather Part II.’
By The Editorial Board
A pedestrian walks past a mural featuring oil wells in Caracas on Saturday Pedro Mattey/Associated PressPresident Trump has long said he favors “taking the oil” when the U.S. intervenes overseas, and now he is doing so in extraordinary fashion.
His deal announced late Friday with unelected President Delcy Rodríguez for rights to 65 billion barrels of Venezuelan oil reserves looks less like a normal commercial transaction than it does the famous scene of U.S. businessmen meeting with the Cuban strongman in “The Godfather Part II.”
“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,” Mr. Trump wrote on Truth Social.
He said he’ll use Venezuelan oil to refill the U.S. Strategic Petroleum Reserve that has been extensively tapped by him and Joe Biden.
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Official details of the agreement are scarce, but the facts reported by the Journal over the weekend aren’t cause for enthusiasm.
The U.S. will take a 35% stake in a private company run by Alejandro Betancourt, a Venezuelan businessman close to Ms. Rodríguez.
The Betancourt firm, North American Blue Energy Partners, will be able to develop those 65 billion in reserves, and the U.S. will have preferential rights to 20% of what the firm produces at the cost of production.
The U.S. investor here will be the Pentagon, of all agencies, which will structure the investment through penny warrants that will gain the equity stake without taxpayer cash.
The legal authority for this is far from clear, since the Defense Department is investing in a foreign entity.
Can the Pentagon Office of Strategic Capital take such equity stakes?
Why is the Pentagon even playing in global oil markets when it has enough to do buying new weapons in short supply and reforming its broken procurement process?
The global oil market is under stress from the Iran war, but by and large it does a good job of matching supply and demand.
Venezuela produces only about 1.1 million barrels of oil a day now, and deep wells in Guyana and new investment in Argentine shale (including by U.S. entrepreneur Harold Hamm) are coming in the Americas.
Venezuelan production will take years to ramp up.
Who will finance this oil production and which companies will invest to extract it?
Mr. Trump has been pleading with U.S. oil firms to invest on their own in Venezuela since he snatched President Nicolás Maduro in January.
But most say the government hasn’t provided the right legal or contractual protections.
Chevron is a long-time player in the country.
The politics of all this are even more complicated, to put it mildly.
The U.S. government is essentially getting in bed with a foreign dictator and her favored capitalist.
Any foreign firm that invests will have all three as de facto partners, but Mr. Trump will be out of office in 2029 and the heavy-handed U.S. role might not play well over time in Caracas.
The oil deal will prop up Ms. Rodríguez, at least in the short term, and that may be part of Mr. Trump’s motivation.
She has courted the President to survive in power and to stave off demands from the opposition to establish a process for new elections.
Mr. Trump likes nothing better than a leader, elected or not, who bends to his wishes.
It’s notable that both the Venezuelan opposition and Ms. Rodríguez’s left-wing allies are criticizing the deal.
The Bolivarian left views it as a concession to North American imperialism, and it will play that nationalist card if there is another election.
The democratic opposition views the deal as the act of an illegitimate president who has no right to turn over national resources to a business pal and a foreign government.
It also fears that the deal will make it less likely that Mr. Trump and Secretary of State Marco Rubio will press for new elections.
On that last point the U.S. had been making modest progress, which was slowed by the recent earthquake.
Much still isn’t known, but this all looks like an example of the Trump Administration extending its creeping crony statism beyond U.S. shores.
In the “Godfather” saga, the Cuban dictator got a golden telephone from his visitors but was soon out of power.
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