Washington’s Venezuela Oil Deal Is About Much More Than Crude

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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• The U.S.-Venezuela deal gives NABEP access to 65 billion barrels across 17 fields for up to 100 years, making it an unprecedented oil agreement by scale and duration.
• The deal fits Washington’s push to reassert U.S. energy dominance across the Americas, while reducing Chinese and Russian influence over strategic Venezuelan assets.
• Major legal risks remain, as Venezuela’s constitution could provide grounds for a future government or court to challenge or invalidate the concession.

Washington’s takeover of more than a fifth of Venezuela’s oil reserves in a deal officially signed by U.S. Energy Secretary Chris Wright on 2 September was as unexpected as it was dramatic, with President Donald Trump’s comment a few days earlier that it is “the biggest oil deal in world history” looking justified from several perspectives. From a pure volume standpoint, the deal covers 65 billion barrels of proven crude oil reserves (out of Venezuela’s total 303 billion barrels) across 17 fields. To put that in perspective, it is nearly 1.5 times the size of the U.S.’s entire current territorial reserves of around 46 billion barrels. The length of the concession is massive too, with its 100 years dwarfing the typical 20-to-30-year span of modern oil concessions. Moreover, the private entity driving the deal — North American Blue Energy Partners (NABEP) has instantly become the second-largest private oil company by reserves in the world (after ExxonMobil), with the U.S. Department of War holding a 35% equity stake. In short, then, locking in a fifth of the world’s largest national oil reserves for a century is unprecedented in the modern era. That said, several key questions remain about the workability of the deal and where it fits into Trump’s global oil market order.

The U.S.’s ‘2025 National Security Strategy’ (NSS) officially put Trump’s second presidency vision of the world, and of its energy market, on paper. It explicitly introduces what it calls ‘The Trump Corollary to the Monroe Doctrine’, stating: “After years of neglect, the United States will reassert and enforce the Monroe Doctrine to restore American pre-eminence in the Western Hemisphere, and to protect our homeland and our access to key geographies throughout the region.” It adds: “We will deny non-Hemispheric competitors the ability to position forces or other threatening capabilities, or to own or control strategically vital assets, in our Hemisphere. This ‘Trump Corollary’ to the Monroe Doctrine is a common-sense and potent restoration of American power and priorities, consistent with American security interests.” Back in 1823, when the ‘Monroe Doctrine’ was propounded by U.S. President James Monroe, the aim of the policy was to keep European colonial powers out of the Americas.

This new iteration — termed the ‘Donroe Doctrine’ — means a dramatic shift away from a post-Cold War model of global American dominance into a highly transactional, realpolitik vision of a world effectively carved into three distinct spheres of influence. China would hold the primary role in Asia, while Russia would either dominate or significantly influence Europe, depending on how any future conflict between European NATO members and Moscow unfolds. But, at the top, the U.S. would maintain overall dominance around the globe while also exerting direct influence across the Americas (North and South America). Naturally, as energy underpins the economies — and thus politics — of every country in the world, shifting the centre of dominance in global energy supplies to the Americas is a core part of that aim, but at the same time the U.S. reserves the right to extend its influence in the Middle East or anywhere else it wants, as it sees fit. The practical consequence of this for global oil flows is that the U.S. aims to orchestrate a dramatic ramping up of oil production not just domestically but across key countries in its Americas sphere of influence — most notably Venezuela in the short- to medium-term, but also Argentina, and Brazil — to compensate for losses from the Middle East, as fully examined recently by OilPrice.com.

The broad terms of this huge deal between the U.S. and Venezuela align perfectly with Trump’s vision, with the 31 August White House Fact Sheet echoing many of the same key points. Under the sub-heading ‘Reasserting The Monroe Doctrine & Expelling Foreign Adversaries From Our Hemisphere’, the Fact Sheet states: “The majority of the incremental oil fields to be operated by NABEP were previously controlled or operated by Russian and Chinese firms, or by corrupt cronies of [Nicolás] Maduro and [Hugo] Chavez.” It continues: “These malign foreign actors looted Venezuela’s resources for the benefit of American adversaries like Cuba, Russia and China and failed to invest in Venezuela’s infrastructure or development.” The new deal with Venezuela, it adds, is precisely part of the re-establishment of the Monroe Doctrine, focused on “purging malign influence from our backyard and ensuring American dominance in our hemisphere is never again questioned”. With an eye, perhaps, on future energy security threats resulting from military actions by China — as happened after Russia’s invasion of Ukraine on 24 February 2022 — the Fact Sheet concludes: “By working with both new and old partners, President Trump’s Administration is forging new robust, strategic and defensible supply chains in our hemisphere to support the revitalization of our manufacturing and energy sectors after years of globalist decline.”

That said, there are several potential legal pitfalls that could pose problems for the U.S., particularly if a less compliant political leadership begins to emerge in Venezuela. As it stands, there is strict U.S. oversight over every element in the arrangement, including, for example, veto power over NABEP’s board of directors, allied to the fact that U.S. citizens are legally required to hold a majority of the board seats. In tandem with this, the U.S. Pentagon’s Office of Strategic Capital retains a 35% equity stake in NABEP. Moreover, the U.S. government is guaranteed the right to buy 20% of the pumped crude at cost, with a right of first refusal to purchase the remaining 80%. And funds allocated to Venezuela’s state energy apparatus will move through a U.S.-managed and audited account to prevent domestic corruption. In reality, none of this is out of line with the precedents set by China and Russia in multiple of their ‘co-operation agreements’ with several countries over the years — most notably, with Iran and Iraq, as analysed in my latest book on the new global oil market order. However, there are those who portray the deal in colonialist terms.

Perhaps the major legal problem right now is that Venezuela’s constitution requires National Assembly approval for any long?term concessions over strategic national resources. Worse still from this perspective is that the deal was negotiated by an interim government only whose constitutional legitimacy is already contested. Consequently, any future government can argue that as the interim administration lacked authority, the entire agreement should be declared ultra vires (beyond legal powers) and void. In fact, this could be done even without any change in government, as Venezuela’s Supreme Tribunal of Justice (TSJ) possesses the constitutional mechanisms to challenge, freeze, or entirely invalidate the NABEP concession. Such a challenge could be mounted solely on the basis of the transfer of control over Venezuelan oil reserves to a foreign power, which is also strictly prohibited under the country’s constitution.

Nonetheless, Venezuela’s present interim government, led by President Delcy Rodriguez, appears all in favour of the deal, highlighting that the U.S. targets production of more than 1.5 million bpd from the 17 strategic fields over a 25-year term. This would generate more than US$100 billion in investment and US$209 billion in tax revenue for the Venezuelan state, according to her government’s forecasts. Venezuela’s oil production has risen to around 1.21 million bpd, driven by several new initiatives from U.S. and European firms. Following the announcement of the U.S.-Venezuela megadeal, Italy’s Eni signed a strategic contract with Venezuela’s state-owned PDVSA for operatorship of the Junin 5 oil field in the onshore heavy oil Orinoco Basin. Under the terms of the deal, Eni will have full responsibility for the technical, financial, and commercial management of the site, with the field believed to contain around 35 billion barrels of oil in place. Meanwhile, Chevron said it had agreed updated terms for its joint ventures in Venezuela and plans to invest more than US$7 billion over the next five years, targeting production of about 600,000 bpd.

By Simon Watkins for Oilprice.com

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