Beyond a handful of oil

As the American occupation of Venezuela approaches quite openly, we are once again living and breathing stories of oil seizures.

When we say “story,” it is not exactly a fairy tale: The name at the head of the occupation operation, Donald Trump, states with great clarity that besides excuses like drugs, he wants to seize Venezuela’s oil. By “seizing,” he doesn’t just mean confiscating production; he also wants to prevent Venezuela from selling oil to “US adversaries.”(1)

According to OPEC, Venezuela possesses approximately 17% of global reserves, or 303 billion barrels; this means it ranks ahead of OPEC leader Saudi Arabia. According to the US Department of Energy, these reserves consist mostly of heavy oil in the Orinoco belt in central Venezuela, which makes crude oil production expensive.(2)

The US has the infrastructure suitable for this. Despite being the world’s largest oil producer, the US still imports large quantities of crude oil. Heavy oil is critically important for American refineries, especially those around the Gulf of Mexico. About 70 percent of American crude oil imports are heavy oil, and 60 percent of this comes from Canada, which has a similar “heaviness” to Venezuela.

On the other hand, a meaningful recovery in Venezuela requires time, large-scale infrastructure reconstruction, billions of dollars in capital, and the sustained participation of international oil companies. Since oil monopolies prioritize more competitive and lower-risk projects elsewhere, obtaining this level of commitment is currently quite difficult.(3)

Indeed, energy giants like Exxon and ConocoPhillips, including Chevron which currently holds a license waiver, are hesitant to re-enter Venezuela. For this reason alone, some argue that help should be sought from companies of “allied” countries, such as Eni, which is already operating in Venezuela.

Moreover, American oil monopolies already have drilling projects available in the Americas that can be extracted more cheaply. For instance, both Exxon and Chevron operate in Guyana, where Venezuela has a territorial dispute, and it is estimated that Exxon can produce there at a cost below $35 per barrel (Venezuela produces at $49 in the Orinoco region). Chevron is expected to produce oil in the Permian region for $37 to $44. ConocoPhillips’ investments in Canada project a cost of $42 per barrel. Therefore, reintroducing Venezuelan oil to international markets is not currently capable of causing the kind of price drop Trump claims.

Furthermore, even if progress could be made in “upstream” operations, Venezuela has been stagnating for some time in “midstream” and “downstream” sectors such as refining, transport, and distribution. In the country where refining capacity has remained constant for many years, capacity utilization has also been weak.

So how is it assumed that investment will flow into Venezuela and the oil industry will get back on its feet? Javier Blas from Bloomberg points out that the issue is not just Venezuelan oil, but American hegemony over oil reserves in the entire “Western Hemisphere” via the “Monroe Doctrine,” which was highlighted in the latest National Security Strategy (NSS). According to this calculation, when Canada, Mexico, and all of Latin America are included, the US captures 40 percent of the world’s entire oil production, gaining an invaluable asset against its rivals. It also gains the ability to set prices, a power once held by Arab countries and now by OPEC.

Energy prices are quite important for the predatory capital faction clustered around Trump. Access to new energy sources, including nuclear, is critical for Silicon Valley technology capital, which is investing heavily in data centers that will grow artificial intelligence. In this context, while companies like Microsoft invest in nuclear energy, American oil monopolies known as supermajors have taken action to provide energy to data centers; because natural gas, oil, and coal are still the three raw materials with the largest share in US primary energy production.

In December 2024, executives from Exxon and Chevron separately announced that their companies were preparing to enter the electricity sector. Oil companies, which usually generate electricity only for their own operations, will enter the broader electricity market at a time when demand is rising rapidly.

Rest assured, all of this will be accompanied by the plundering of nickel deposits in Venezuela, which have been found to be quite rich. Indeed, Axios counts AI companies among the winners of the so-called regime change in Venezuela. Venezuela is the richest source of critical minerals used in semiconductors that power AI data centers. According to Axios, if the US can use Venezuela instead of being dependent on China for these materials, it could get a step ahead in the AI race.

In fact, on Sunday aboard Air Force One, Commerce Secretary Howard Lutnick touched upon “mining opportunities” in Venezuela and said, “You have steel, you have minerals, you have all the critical minerals. They have a great history of mining, but that history has rusted.”

On the other hand, there is a not-so-small problem here: Even if the US frees itself from China in the supply of rare earth elements, the refining processes for these materials are done almost entirely in China. The US does not have such expertise, and acquiring it will likely take many years.

But beyond this, the financialization of both its oil and Venezuela’s debts seems much more appetizing, and this is where the main significance of Trump’s thuggery lies. Indeed, it appears that Wall Street had its eye on the “wealth” opportunities that regime change would create even before Maduro was abducted. According to Bloomberg, weeks before the invasion, Citigroup analysts predicted gains of up to 60% in the country’s bonds if Maduro were removed from office. At crowded conferences and seminars, other strategists voiced their opinions on the potential profit the new regime could offer holders of the country’s $60 billion in bonds. As pressure on Maduro mounted, traders flocked to bonds, sparking a rally:

“Investors, including American energy and shipping tycoon Harry Sargeant III, lobbied the Trump administration to create a more favorable business environment in Venezuela, highlighting the advantages for the US. Paul Singer’s Elliott Investment Management, along with a consortium of other investors, had been fighting for years for Venezuela’s most valuable foreign asset.”

In public markets, bondholders made gains of about $4 billion in a single day and saw hope for a restructuring that would yield further profits. According to the report, for private equity firms and energy investors, Donald Trump promised an even bigger prize by “pledging that the US would spend billions of dollars to fix Venezuela’s broken oil infrastructure.”

Among these promises, of course, are the receivables of companies nationalized during the Chavez era. ConocoPhillips has been trying to get approximately $12 billion in compensation for its seized assets for years. Hedge funds are looking for ways to invest in billions of dollars of financial claims linked to Venezuela. Venezuela is also considered indebted to many major companies after nationalizing assets in 2007. Following the 2017 default, the prospect of the country’s long-delayed debt restructuring is making the palms of private equity firms that buy and sell debt itch. Although Venezuela’s sovereign bond market is relatively popular, the opening of receivables and arbitration claims to financial markets is significant for American capital. This capital faction, however, sees the possibility of reviving Venezuela’s oil industry as an opportunity to pressure Venezuela to pay the debts of those who are creditors, particularly of the state oil company PDVSA.(4) After years of fruitless efforts to extract cash from the Maduro government, many companies have sold these international arbitration cases to specialized investors, including hedge funds.

Ben Cleary, partner and director at the $4 billion Tribeca Investment Partners, is sending a team of investors to Caracas to meet with potential partners and examine potential assets. US-based advisory firm Signum Global Advisors, which took investors to Ukraine last year as part of reconstruction efforts, is also planning a trip to Venezuela at the end of March. The group will consist of about 20 participants, comprised of multinational corporations and money managers.

Indeed, Bloomberg points out how Wall Street and private equity have become intertwined to reshape Venezuela through Trump’s aggressive move based on the claim of oil seizure. For example, a fund manager suggests that everything in Venezuela will depend on what kind of investments are made in the oil sector.

I would also like to remind you that asset managers invest heavily in oil monopolies. Just as the oil commodity itself is a financial product, oil monopolies are intertwined with financial markets. While asset managers like Brookfield and Blackstone are already investing in energy assets, sovereign wealth funds like the Saudi Public Investment Fund and the Abu Dhabi Investment Authority have been looking for ways to channel their billions of dollars of investments into South America for years.

The financialization of sovereign debt linked to oil seizure and the rush of private equity means the “Ukrainization” of Venezuela; that is, transforming it into a colony of transnational (but in this instance, American) capital. In any case, there really is an “oil excuse” at play. But it is not as it is assumed to be.

(1) Economists Asdrubal Oliveros and Juan Palacios, in their book Sanctions in Venezuela, found that from 2023 to 2024, exports to the US, Spain, and India increased at the expense of China and Malaysia. In 2023, the first group received 34% of Venezuelan crude oil exports, while the second group received 51.6%. In 2024, these ratios were nearly reversed, becoming 56.2% and 26.8%, respectively.

(2) According to Bloomberg’s analysis, most Venezuelan crude oil is high-sulfur and heavy, meaning it is costly and technically difficult to transport and refine compared to light and sweet quality oil. To facilitate the transport and processing of this type of crude oil, it usually needs to be mixed with a diluent (such as condensate or naphtha). Furthermore, special refining equipment is necessary to refine this type of crude oil. Consequently, such heavy and sour crude oil trades at a significant discount compared to international benchmark prices. Additionally, the production of naphtha used in transporting heavy oil is heavily dependent on Russia, and as long as sanctions persist, making progress in naphtha imports seems unlikely. Last December, a tanker carrying naphtha from Russia to Venezuela turned back due to the Trump blockade.

(3) According to POLITICO, Rystad Energy stated in a client note that “approximately $53 billion in oil and gas upstream and infrastructure investment is required over the next 15 years to keep Venezuela’s crude oil production steady at 1.1 million barrels per day”: “Going above the 1.4 million [barrels per day] level is possible, but this will require steady investment of $8-9 billion annually from 2026 to 2040, in addition to ‘maintenance’ capital requirements.”

(4) Defaulted bonds issued by Venezuela and the state oil company Petróleos de Venezuela continued their gains on Tuesday following an increase of up to 35% on Monday. According to data compiled by Bloomberg based on the latest investor filings, holders of these bonds include some of the world’s largest asset managers, such as Fidelity Investments, BlackRock, and T. Rowe Price Group.