El petroimperialismo estadounidense en Venezuela

by Kate DeAngelis, international finance deputy director, and Sarah Lutz, senior climate campaigner

After months of saber rattling and attacks on Venezuelan ships, on January 3rd, the Trump Administration bombed the city of Caracas, killing an estimated 75 people and kidnapping Venezuelan President Maduro. The administration’s explanation of its actions varies depending on its audience, but at its core this is clear US imperialism designed to entrench Trump’s power and enrich his cronies. As explicitly outlined by multiple Administration officials, the goal is to control Venezuelan oil revenue and gain leverage over the country. Already, this illegal power play has created opportunities for Big Oil to demand significant concessions in return for their willingness to extract and profit off Venezuela’s resources, which include some of the largest oil deposits in the world.

As the situation in Venezuela develops, the combination of Trumpian corruption and Big Oil self-enrichment could spiral the country into even deeper instability. Big Oil could profit handsomely at the expense of the climate, US taxpayers, and the people of Venezuela.

Bringing the bucks back to US dirty energy refiners

The majority of Venezuelan oil production is heavy crude oil, at its peak accounting for about 7% of the global supply. This heavy oil requires special processing, and as it happens, U.S. refiners along the Gulf Coast are designed to process heavier grades of crude like those produced in Venezuela, as well as Canada, Mexico, and Colombia. These refiners, which include Chevron, Valero, Exxon Mobil, Phillips 66, and Marathon Petroleum, are well positioned to seize a windfall from Trump strong-arming Venezuela.

Chevron and Valero are immediate beneficiaries. Chevron is the sole remaining supermajor oil company left in Venezuela operating under a special license[SL1] . Valero reportedly has an existing off-take agreement with Chevron. These companies have already profited greatly off Venezuelan oil, which they can acquire cheaply and sell at a profit after refining.

“We do have Venezuelan barrels back in the mix, which is helping,” Valero COO Gary Simmons dijo a los inversores in October. The company specifically cited the sanctions-related loss of 200,000 barrels per day from the Gulf Coast market as an economic headwind, made worse by the fact that export volumes of heavy crude from Mexico are also declining. If Trump lifts sanctions, he would immediately boost the margins of refiners across the Gulf Coast.

The CEO of Phillips 66 did not mince words speaking at a January 6^el conference, referring to the Trump Administration’s intervention as an “opportunity for Venezuela to return back into the capitalist fold.” He specifically cited increased exports from Venezuela to the US as competing with Canadian crude and improving refining margins, speculating that it would be “constructive both for our Gulf Coast refining capabilities, as well as our Mid-Continent refineries.”

The CEO of Phillips 66 further cited the possibility of profiting from the sale of diluents like naphtha to Venezuela, which are byproducts of refining and needed to process the country’s extra-heavy crude oil: “And ultimately, there’s going to be more naphtha requirements. We’ve got opportunities to export C5s [diluents] back into Venezuela if that opportunity exists. And longer term, what you see is the potential for growth. Venezuela was producing 3 million barrels a day of heavy crude.”

This was echoed by Secretary of Energy Wright the next day, who stated, “We’re going to have that [diluents] flowing again.” Before US sanctions, Gulf Coast refiners were an important source of diluent to Venezuela, selling the country the very product needed to transport Venezuela’s oil back to their refineries. Inconsistent supplies have threatened to halt Venezuelan oil exports and a DOE factsheet released on January 7th stated the US is “selectively rolling back sanctions to enable the transport and sale of Venezuelan crude,” and that US diluent will flow into Venezuela “as required.”

Another refiner positioned to benefit is Amber Energy, the winner of an auction for Citgo, the seized state-owned refiner of Venezuela. Backed by MAGA hedge fund billionaire Paul Singer, the $5.9 billion bid was lower than the nearest competitor. This may leave a political ally of the president in control of two refineries along the Gulf Coast designed to process Venezuelan heavy crude. Recently, Citgo has had to source its oil from comparatively more expensive but stable sources, such as Colombia and Canada. If sanctions are lifted or production increases, Citgo’s Gulf Coast assets will cease to be dependent on this more expensive heavy crude and benefit again from cheaper Venezuelan crude.

Trump met with oil executives at the White House on January 9th to pressure them to invest in Venezuelan oil infrastructure. Many of these attendees represented companies that import substantial amounts of heavy crude oil to process in refineries along the Gulf Coast and other parts of the US. The following table demonstrates their imports of heavy sour crude oil:

Even without increased oil extraction in Venezuela, heavy oil refineries will benefit greatly from Trump’s seizure of Venezuelan oil. Crude imported from Venezuela has been cheaper than its counterparts from Canada and Mexico, and Trump plans to immediately bring up to 50 million barrels into the market and “continue indefinitely”. Even if the Trump officials’ claims that this oil will be sold at “market rates” are true, there will still be a market impact as more Venezuelan oil inflates the supply of crude oil in US markets. Already, the price of Canadian crude oil has abandonó significantly.

While Trump is calling for increased oil extraction in Venezuela to be siphoned towards US refineries, comunidades in the Gulf Coast are demanding less. The Gulf Coast is home to the infamous Cancer Alley, an 85-mile stretch of land along the Mississippi River with an exorbitantly high concentration of fossil fuel and petrochemical plants. A quarter of the US’s petrochemical products are produced in Cancer Alley, and the pollution from these plants and refineries has created a heavy toll on the health and welfare of local communities, including a cancer rate more than seven times the national average.

Luring Big Oil back to Venezuela: Public risk and private profit

The biggest obstacle to the massive oil industry investment in Venezuela sought by Trump is the oil industry itself. At a time of surplus in the global oil market, major investments in politically risky countries are unappealing. Chevron, which never left Venezuela, is best positioned of all the supermajor oil companies to expand its footprint there. Recent terms of Chevron’s authorization to import Venezuelan oil into the US prohibited them from making cash payments to the Venezuelan government, meaning that the company paid its taxes and royalties in-kind (with barrels of oil). This has reduced their crude export capacity to about half of its extraction in Venezuela.

Speculating before Maduro’s ouster, the analysts at JP Morgan estimated that a new regime in Venezuela could increase production to 1.2 million barrels per day by giving Chevron free rein and ensuring a stable supply of imported crude oil diluents. But increasing production amid the country’s aging and poorly maintained infrastructure will be expensive. The analysts at Rystad project that simply maintaining current production would cost $53 billion over the next 15 years, while increasing production to 3 million barrels per day from 1.1 million would cost $183 billion. This high price tag has oil executives hesitant to commit to heavy investments in Venezuela without major Trump-backed concessions.

Trump’s desperation to spin his illegal power grab as a ‘win’ gives oil executives a strong bargaining position. Anonymous sources in the oil industry have reportedly floated the idea of subsidies for investment in Venezuela, including public-private partnerships, contracts guaranteeing profit, and a guarantee for the physical security of investment. In other words, the massive cost of expanding Venezuelan oil extraction could land on U.S. taxpayers. These giveaways would add to the $35 billion in annual federal subsidies already enjoyed by the fossil fuel industry.

Additional potential vehicles for fossil fuel investment are public financiers like the U.S. Export-Import Bank (EXIM) and the U.S. International Development Finance Corporation (DFC). Both EXIM and DFC are currently barred from supporting projects in Venezuela. However, imaginative interpretation of EXIM’s Country Limitation Schedule caveats and an act of Congress, respectively, could open these institutions to provide billions for Venezuela’s oil and mining industries.

The new leadership at EXIM and DFC will likely jump at the chance to subsidize the oil industry in Venezuela. The recently confirmed head of EXIM fijado in November that he plans for EXIM to spend $100 billion on gas, mining, and nuclear deals. Both agencies have poured billions of dollars into fossil fuel projects over the past decade and have shown interest in continuing this support. This means that at the same time the Trump Administration is denying funds for needed services like food stamps, child care, and health care, the administration wants to use taxpayer funds to allow oil companies to bring in even greater profits.[SL2] 

Collecting up Big Oil’s old debts

The Trump Administration could play a large role in securing debts that Conoco and Exxon have been trying for years to collect.

Conoco has won over $10 billion in judgments against Venezuela dating from the 2007 expropriation. Analysts from JP Morgan note that the company recovered roughly $800 million and stands to gain another $1.3 billion from the court-ordered sale of Citgo (see above). But the remaining $8.5 billion from a judgment from the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) is seen as a greater enforcement challenge.

Exxon Mobil is reportedly attempting to claim approximately $20 mil millones from Venezuela, of which about $1 billion has been paid. According to the New York Times, another $1.4 billion was annulled by ICSID, but Exxon has filed a new claim to restore the award.

These oil majors have been fighting with the Venezuelan government in court for years, and Trump seems to have taken up their cause by inaccurately accusing Venezuela of ‘stealing our oil’ and promising oil companies reimbursement. For their part, Exxon and Conoco each contributed $1 millón to the Trump inauguration fund and Conoco’s CEO Ryan Lance has already contributed over $100,000 since Trump’s reelection, predominantly to GOP political committees. These donations could be a pittance compared to what their companies stand to collect if Trump decides to pressure Venezuela into rapidly repaying the settlements to oil majors.

Although Trump has been wishy-washy on whether or how US funds would directly backstop oil investments, he has consistently promised some form of reimbursement for their ‘efforts’ in Venezuela. Anonymous industry sources have leaked that this unknown reimbursement to oil companies is reportedly being offered as leverage to encourage oil companies to invest heavily in Venezuelan oil infrastructure. The Trump Administration also appears to have very recently cooled to the idea of forcing debt repayment – with Secretary Wright calling it a “longer term issue” and Trump telling oil executives, “We’re not going to look at what people lost in the past, because that was their fault.” However, this sentiment could change very quickly if oil majors continue to pressure Trump to offer up debt payment as a carrot for returning to Venezuela.

Trump is desperate for oil majors to jump on the bandwagon. While he is attempting to bully them to stay at the bargaining table – including by issuing a questionable Orden Ejecutiva intended to prevent oil majors from pursuing restitution through US courts on Venezuelan oil revenues collected by the US and threatening to exclude Exxon from Venezuela after its CEO called the country “uninvestable” – the fact remains that oil majors have immense power to demand their terms. This has severe implications for both US taxpayers who might be forced to foot the bill for public money backing private oil gain and for Venezuelans who must pick up the pieces as the US seizes the country’s oil revenue.

What does this Petro-Imperalism add up to?

Not one for subtlety, Trump is attempting to brand his version of petro-imperialism as the ‘Donroe Doctrine’ and has threatened [SL3] to next turn his sights to Cuba, Colombia, and Greenland. Meanwhile, Trump officials are gleefully bragging about how US control over Venezuelan oil revenue grants them immense leverage over the country.

But the Trump Administration has significantly less leverage over oil companies – which are free to demand exorbitant concessions in repayment for cooperating with Trump’s goals. This has harsh implications for people on the receiving end of this unabashed US imperialism. In Venezuela’s case, oil revenue funds over half of the government’s budget. Although Trump has made nebulous assurances that US-controlled oil revenues will be used to promote stability in the country, Trump’s “plan” does not chart a real path towards tangible benefits for Venezuelans. His goals for the country hinge on US extraction of Venezuelan resources, and he is willing to use the revenue that funds Venezuela’s government and economy as leverage.

As all countries of this planet face a climate emergency, and all countries must equitably phase out of fossil fuels commensurate with science and justice, the US’s military incursion into Venezuela for its oil must be condemned. Venezuelans have the right to self-determination, to democracy, and to make their own decisions about their country. Trump’s reckless and dangerous petro-imperialism has positioned oil companies to win big and created consequences that will be paid for many times over by Venezuelans, Americans, and the peoples of any other country targeted by Trump.