Venezuela's Oil, Washington's Terms

The US-Venezuela oil agreement has drawn criticism from an unexpected quarter. Opposition leader María Corina Machado has argued that the government in Caracas lacks the legitimacy to sign such a deal.

These are surprising words from a woman long supported by the Americans, one who has never had a bad word to say about Washington. When she won the Nobel Peace Prize last year, she dedicated it to Donald Trump without hesitation. Her criticism now looks like an attempt to break free of the secondary role into which the US president has cast her.

Since the January military intervention and the kidnapping of President Nicolás Maduro, Trump has sided with figures from the Maduro regime, led by interim President Delcy Rodríguez, rather than with the opposition that had long stood against it.

Yet the agreement is so lopsided, so clearly stacked against Venezuela, that even Machado, herself closely aligned with US interests, can afford to reject it, not least because she holds no position in government. Governments beholden to Washington, after all, are in no position to turn down such agreements with the Americans, a truth that applies as much in Baghdad as it does in Caracas.

Washington's Bet on a Venezuelan Oligarch

Venezuela, home to the world's largest oil reserves, is granting the Americans long-term control over one-fifth of them. The remaining reserves cannot currently be extracted at all. The Americans will buy one-fifth of that production at cost, effectively tax-free. For the remaining 80% of output, the United States holds the right of first refusal and, under certain circumstances, the right to veto other buyers, such as China.

North American Blue Energy Partners (NABEP) will manage this new wealth on Washington's behalf. The company was founded two years ago in Barbados by Alejandro Betancourt. Under the administrations of Hugo Chávez and Maduro, the Venezuelan oligarch earned several billion dollars, though courts in Spain and Switzerland are now investigating him for money laundering. He must have done something right to earn such political favor.

Betancourt appears to have read the situation correctly and has placed himself at the disposal of the new rulers. He remains with the company, but control is passing to the Americans, and the US Department of Defense is receiving a 35% stake free of charge. For context, the department maintains a special division that manages stakes in strategic companies. In recent months, Washington has pressed its European partners to have their courts leave America's new friend alone.

Just as Trump bet politically on Rodríguez rather than on opposition leader Machado, so too with oil: he relies more on a local Maduro-aligned oligarch than on his own oil companies.

What is the appeal for him? First, men like Betancourt know the local terrain and control it completely. Second, Trump does not have to negotiate with them, because he has them by the throat. He can send both the interim president and the oligarch to prison, or have them eliminated, at will. That reality shapes the nature of the US-Venezuelan "agreements".

Another factor was at play in Venezuelan oil, too. Aside from Chevron, American companies were not exactly lining up to get involved, put off by the volatile politics and the poor technical state of the sector.

The Americans face a considerable challenge with Venezuelan oil. After decades of US sanctions, the sector is so dilapidated that it will take billions in investment and several years before the tens of billions of barrels of crude sitting underground become a marketable commodity.

Moreover, processing heavy Venezuelan crude requires costlier, more complex technology than the light crude from the Persian Gulf for which most refineries are built. In other words, the Venezuela agreement will do nothing to lower oil and gasoline prices, which have been driven up by the war with Iran. That does not, however, change its character as a modern-day resource grab, or its long-term strategic importance to the US.

However exceptional Trump's "century-long" agreement with Rodríguez may be, the Venezuelan government describes it as running only 25 years, and the seizure of foreign oil following unilateral US military action is not entirely without precedent.

An Old Playbook, Tested in Iraq

More than 20 years ago, the Americans made a similar claim: that they were liberating the Iraqi people from a hated dictator threatening the world with chemical weapons. The pretext of chemical weapons was every bit as hollow as the pretext of liberation. After its supposed liberation, Iraq lost its economic sovereignty, and there is little sign the Americans intend to give it back.

Once again, oil sits at the heart of the matter. Oil revenues account for as much as 90% of the Iraqi state budget. Those revenues are deposited in an account the Central Bank of Iraq holds at the Federal Reserve Bank of New York. In other words, the disbursement of Iraq's own budget has sat under American control for more than 20 years.

The Iraqi government learned six years ago that this is no mere technicality. At the time, Baghdad proposed that the remaining US troops leave the country too. Washington's response was blunt: while it respected Iraqi sovereignty, pressing that point too forcefully would complicate the withdrawal of Iraqi dollars from the US bank. The debate over US troops ended there.

In Baghdad today, decisions are made neither about the presence of foreign troops nor about who leads the Iraqi government. When Shiite parties agreed at the start of the year that former Prime Minister Nouri al-Maliki should return to power, President Trump threatened harsh measures. Al-Maliki was too close to Iran for his taste, or perhaps Israel's. Baghdad chose someone else instead.

There are clear limits to what a dependent government can get away with, and those limits are drawn in Washington, regardless of whether Biden or Trump occupies the White House. The current US president simply lays bare, through his blunt and transactional methods, what is usually concealed behind closed-door maneuvering and rhetoric about human rights, democracy, and a rules-based international order.