The Hole in Donald Trump’s Venezuelan Oil Strategy

Jarrod Agen, the head of President Donald Trump’s National Energy Dominance Council, was in a celebratory mood. Just after one o’clock on April 30th, he landed in Caracas, Venezuela, on the first direct commercial flight to arrive from the United States since 2019. Only a few months before Agen’s trip, the Venezuelan government had accused the U.S. of orchestrating an imperialist scheme to plunder its resources. Now regime officials waited patiently on the tarmac as the plane carrying Agen’s delegation passed under the streams of a water salute and rolled to a stop. The pilots leaned out of the windows of the cockpit, unfurling American and Venezuelan flags for the cameras. Sporting a dark suit and gold-framed aviators, Agen descended the air stairs with a confident smile. “President Trump is a man of action,” he said. “We are moving at Trump speed to get things done.” Since the day that Trump intervened in Venezuela, the President has been blunt about his motives. “We’re in the oil business,” he said, just after announcing the capture of the country’s leader, Nicolás Maduro. Venezuela has some of the world’s largest proven oil reserves, and U.S. companies once ran extensive operations there. But the regime had pushed almost all of these businesses out years ago, and Trump was eager to facilitate their return. “We’re going to have our very large United States oil companies—the biggest anywhere in the world—go in, spend billions of dollars, fix the badly broken infrastructure, and start making money for the country.” The U.S. took control of Venezuela’s oil exports, and officials were dispatched to Caracas to broker deals with the regime. Agen, who had visited Trump in the Oval Office just before his trip, had brought along representatives from oil companies seeking to invest in the country. He planned to meet Venezuela’s interim leader, Delcy Rodríguez, for lunch to discuss some of the deals that his boss was “very excited about.” Before their meeting, he was escorted into a hall where a guestbook lay open to a blank page, a portrait of Maduro wearing the Presidential sash hanging conspicuously above it. Unfazed, Agen bent over to sign the book. “Drill Baby Drill!” he wrote. Venezuela’s oil industry has been under state control for decades. By welcoming foreign investment, Rodríguez was trying to distance herself from her predecessor’s failures. The country had spiraled under Maduro’s leadership: the economy shrank by three-fourths, inflation skyrocketed, and about twenty-five per cent of the population fled Venezuela. “If Rodríguez wants to save the Bolivarian revolution, she has to use this—whatever time frame Rubio and Trump are going to give her—to deliver the goods economically in Venezuela to win back the population,” a former U.S. senior official told me. During her time as the country’s Vice-President, Rodríguez came to oversee the state-run oil company, P.D.V.S.A. Under Maduro, corruption inside the organization was rampant: shell companies linked to the President stole billions of dollars’ worth of exports, and large sums of money vanished from P.D.V.S.A.’s coffers. When Maduro took office, in 2013, Venezuela was producing more than two million barrels of oil per day. But, under his tenure, production tanked: by 2020, Venezuela’s production levels had dipped below four hundred thousand barrels. Rodríguez didn’t root out the organization’s dysfunctions, but, in her dealings with Americans, she succeeded in casting herself as a more reliable interlocutor than those who came before her. Chevron, which has been operating in Venezuela for decades, worked directly with Rodríguez as it increased its production in the country during the Biden Administration. “When P.D.V.S.A. elements tried to run their skimming operations, Chevron would go to Delcy, and she would shut that shit down,” the U.S. official said. “There’s a lot of belief among people in the oil sector that they can do deals with Delcy Rodríguez, and she will deliver on what she says.” Trump has said that he expects to see at least a hundred billion dollars in investments flow into the country. In the months since his Administration rolled back long-standing sanctions, Venezuela’s ten-year sovereign bond has soared, and investors have flocked to Caracas with the zeal of bargain hunters at a flea market. The U.S. has imported roughly a hundred million barrels of oil, worth an estimated eight billion dollars, from the country. “When you lose eighty-five per cent of your G.D.P., there’s a big opportunity,” James Story, a former American Ambassador to Venezuela, said. “That means that there’s nowhere to go but up.” Still, experts have cast doubt on the long-term viability of the Administration’s efforts in Venezuela. “A lot of people are saying that perhaps we did everyone a favor by getting rid of Maduro, because there was a level of pragmatism outside of him, but an inability to act because he made all the decisions,” Story said. “That doesn’t necessarily mean that Delcy is a dyed-in-the-wool capitalist who was just waiting for her moment.” Story noted that Rodríguez’s political ascendancy happened under Maduro. “For thirteen years, she was part of the beggaring of the nation,” he said. “Is she not somehow responsible for the outcome?” Like many observers, Story believes that Venezuela’s oil industry will not recover unless there is a change in leadership. Rodríguez remains deeply unpopular in Venezuela; the opposition figure María Corina Machado still maintains support among huge swaths of the population. “The same institutions—and many of the same individuals—that presided over the country’s economic and institutional collapse remain in power today,” Luis Pacheco, a Venezuelan engineer who spent sixteen years at P.D.V.S.A., said. The Trump Administration’s plan for Venezuela has three phases: stabilization, recovery, and transition. Pacheco insisted that recovery could not take place without transition. Although Secretary of State Marco Rubio has said that the phases might overlap, Trump has shown little interest in promoting an election in Venezuela. “It strains belief to think that those who dismantled the country’s institutional framework will now be the ones to rebuild it,” Pacheco said. When Ricardo Rausseo, a Venezuelan businessman who has been living in Texas for almost eight years, heard that Maduro was gone, he was exultant. An engineer by training, Rausseo had co-founded a contracting business when the Venezuelan oil industry was booming. For years, he oversaw maintenance at the nation’s largest refineries and worked for some of the biggest names in the industry. “Oil runs through my veins,” he told me. “A refinery does for me what a Victoria’s Secret model does for everyone else.” Venezuela mainly produces the type of heavy oil that refineries across the U.S. Gulf Coast are designed to process. In the early twentieth century, when vast deposits of oil were found in the country’s northwest, Dutch, British, and American companies seized on the opportunity to develop and profit from the country’s nascent industry. Before long, Venezuela became one of the world’s leading producers of oil. In 1975, government authorities moved to nationalize the country’s oil industry; P.D.V.S.A. came to oversee every step of the process. When Hugo Chávez was elected, in 1998, oil accounted for most of the country’s export revenue. The socialist President tightened government control over the industry and pushed thousands of employees, including geologists and engineers, out of P.D.V.S.A. Rausseo still remembers the day when officials mandated workers at the company to wear red—the color of Chávez’s party. The regime also exerted near-total control over staffing decisions. “We no longer had the freedom to hire our own people,” Rausseo said. “We had to work through a system they built specifically to reward those who voted for them.” Over time, graft and mismanagement came to hobble the industry.