Watching Donald Trump’s press conference at Mar-a-Lago on Saturday, in which he said that the U.S. would “run” Venezuela and seize some of the country’s oil wealth “in the form of reimbursement for the damages caused us by that country,” my mind went back to 2003. In the immediate aftermath of the U.S. invasion of Iraq, I spent several weeks travelling around the country’s oil fields, some of which were still littered with live ordnance, speaking with members of the U.S.-led Task Force Rio—the “Rio” stood for “Restore Iraqi Oil”—and local workers. I also went to Baghdad, where I interviewed officials from the Iraqi oil ministry.
Venezuela isn’t Iraq, of course, and so far, at least, there hasn’t been a U.S. occupation. (Although Trump remarked, “We’re not afraid of boots on the ground.”) Nonetheless, this is the second time in twenty-three years that the United States has deposed the authoritarian leader of an oil-rich nation—the third if you count the NATO strikes on Libya in 2011, which hastened the fall of Muammar Gaddafi. History has some lessons to offer.
Unlike Trump, who is an unashamed petro-imperialist, members of the Bush Administration insisted that their push for regime change in Iraq was unconnected to hydrocarbons—Donald Rumsfeld famously said it had “literally nothing to do with oil”—and that the postwar reconstruction of Iraq’s oil industry was designed purely to help the country. At an oil refinery in Basra, I sat in on a meeting chaired by the American brigadier general who headed up Task Force Rio. An aide to the general gave me a handout, which said, “Who will be running the Iraqi oil industry? Iraqis are responsible for the energy sector.”
Many queried U.S. intentions. Iraq then had the second-largest proven oil reserves of any country in the Middle East, and Bush, shortly after taking office in 2001, had declared an energy crisis. At the time, the United States was importing about half the oil it burned. An energy task force led by Vice-President Dick Cheney, who had previously been the chief executive of the oil-services company Halliburton, issued a report that recommended more investments in renewables, energy-saving technology, and fossil fuels. It also called for more imports from Latin America, including Venezuela, which was already the third-largest foreign supplier to the U.S., after Canada and Saudi Arabia. While barely mentioning Iraq, the report said, “Energy security must be a priority of US trade and foreign policy.”
Today, as a result of the shale-oil revolution—fracking—the United States is the world’s largest oil producer, even larger than Saudi Arabia, and a net exporter of petroleum. But the A.I. buildout is rapidly increasing the demand for power, and the Trump Administration, despite its aversion to renewables, is set on achieving what it termed, in its recently published national-security strategy, “Energy Dominance.” In this context, it’s hardly surprising that Venezuela, which now enjoys the status of the country with the largest proven oil reserves—more than three hundred billion barrels—has attracted Trump’s attention. Most of the Venezuelan oil is situated in the Orinoco Belt, which runs east to west in the north of the country. Many of the crude deposits are in the form of a heavy sludge, which is difficult to extract and refine. But, with expertise and capital, it can be done. Moreover, many U.S. refineries, particularly in the Gulf and on the West Coast, are configured for heavy crude.
Despite this domestic refining capacity, ramping up production in Venezuela will be a mighty task. Like its Iraqi counterpart under Saddam Hussein, the Venezuelan oil industry has suffered from many years of sanctions and chronic underinvestment. Many of its skilled employees have emigrated. Last year, the industry produced about a million barrels a day, roughly a third of its output a quarter of a century ago. On Saturday, Trump said that big U.S. oil companies would “go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country.” It’s not that simple.
One challenge is the scale of investment required: one energy analyst told the Financial Times it would take more than a hundred billion dollars to double Venezuela’s oil output. Another issue is the price of crude, which recently dipped below sixty dollars, reaching a four-year low. At the moment, Chevron is the only major U.S. oil company operating in Venezuela. Shortly before Christmas, it emerged that the Administration had approached other U.S. firms, such as ExxonMobil and ConocoPhillips, to see if they are interested in returning to a country where they operated before the government of Hugo Chávez, Nicolás Maduro’s predecessor, seized their assets. (Lawsuits sparked by that seizure are still ongoing.) Politico reported that some responses to the Administration’s feelers were negative. “Frankly, there’s not a lot of interest from the industry, in light of lower oil prices and more attractive fields globally,” one source told the news site.
The removal of Maduro from power could change the oil companies’ calculations, but the lesson from Iraq is that they need a guarantee of long-term political stability before they will make major investments. In 2003, Iraq’s interim oil minister told me that attracting foreign investments to Iraq’s underdeveloped oil fields was “only a matter of putting in place a system of contracts.” Philip J. Carroll, a Houston oilman whom the White House had appointed as an adviser to the Iraqi oil ministry, was more circumspect. Oil companies “will want to see an Iraqi government and have confidence in it before sinking down large sums of money,” Carroll said. “They will want to know what the world will be like in six or seven years.” This skepticism proved well founded. More than a decade of civil war and violent insurgency deterred foreign companies from returning to Iraq in any substantial way. It’s only in the past couple of years, more than two decades after the invasion, that the likes of Exxon and Chevron have done so.
Right now, Venezuela’s future is opaque: it’s not even clear what sort of government in Caracas the Trump Administration favors for the longer term: A former ally of Maduro? A democratically elected leader? An American viceroy? Whatever happens in the coming weeks and months, though, Venezuelans of all political persuasions will surely oppose anything that smacks of Yankee petro-imperialism, which was something it took the country a long time to escape.
Nearly a hundred years ago, when Standard Oil of New Jersey (a precursor to Exxon), Gulf Oil (which Chevron acquired in 1984), and Royal Dutch/Shell entered Venezuela, the oil companies obtained highly favorable contracts, which required them to pay modest commissions to the host country. In the nineteen-forties, the Venezuelan government insisted on a fifty-fifty split in oil revenues, and in 1960, Venezuela became the only non-Arab founding member of OPEC, which was designed to secure better prices from the Seven Sisters—the big Western oil companies, five of them American, which dominated the industry. In 1976, a government led by Carlos Andrés Pérez, one of the founders of the center-left Accion Democratica Party, nationalized much of the oil industry, creating a state-owned company, Petróleos de Venezuela. From then on, this company, which is commonly referred to as P.D.V.S.A., dominated the industry, although some American companies were subsequently allowed to start new projects, until Chávez’s government seized control of them in 2007.
Many Venezuelans accept that Venezuela now needs to bring in foreign capital to rebuild its oil industry. The democratic opposition has drawn up a plan to do this, with the goal of raising production to four million barrels a day. But, after a quarter of a century of political fracturing, sanctions, and myriad economic deprivations, that isn’t the only task facing the country. It also needs to rebuild its infrastructure, reduce its onerous foreign-debt load, and reassimilate millions of people who have left. “What the U.S. needs to do is to implement a form of a Marshall Plan,” Orlando Ochoa, a Venezuelan economist who teaches at the Universidad Católica Andrés Bello, in Caracas, told the Wall Street Journal over the weekend. “This is about much more than coming into the oil and gas sector just to extract crude from the ground.” Surely, it is. But is there any chance of Donald Trump recognizing this and acting upon it? ♦











