Halting illicit drug traffic and deposing a dreadful dictator are derivatives.
The principal reason for seizing Venezuelan President Nicholas Maduro in a daring military raid: the riches of the South American country’s oil-producing potential.
“We’re going to be taking a tremendous amount of wealth out of the ground,” President Trump stated at his announcement of the success of the risky mission.
The recipients, he added, will be the people of Venezuela and the United States — for damages “caused us by that country.” Scant details on the cost to American taxpayers to achieve that end.
For sure, there’s a lot at stake. Venezuela sits on the biggest known crude oil reserve in the world, estimated at more than 300 billion gallons. It is also a founding member of OPEC, the group of oil-rich countries that control output to influence prices.
Yet Venezuela’s dependence on its once-thriving industry has floundered under years of corruption, crumbling machinery and lack of infrastructure investment in drilling and refining the tar-like crude.
Today, Venezuela produces about one-third of its past normal output and at discounted prices. This has resulted in closed businesses, feeble health care, large-scale unemployment and plenty of poverty. China is its biggest oil customer.
Trump promises he will turn the country’s fortunes around by returning American petroleum companies to the oil fields they reluctantly departed when socialist Venezuela nationalized its oil industry.
Chevron remains the only U.S. oil company still there, operating under a special arrangement with the Venezuelan government and an exemption from President Trump’s sanctions.
“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spending billions of dollars, fix the badly broken oil infrastructure, and start making money for the country,” asserts Trump.
In the meantime, the U.S. will run Venezuela under the existing socialist government, so long as they adhere to Trump’s orders.
If acting President Delcy Rodriquez, who faithfully served as Maduro’s vice president, and Venezuela’s military resist, then U.S. troops will likely respond. Trump says they will be present to protect American companies during the restoration of the oil infrastructure.
Consider the wisdom of the worst eventuality. A potential bloody battle over oil reserves. It might not last long, given the U.S. military’s superiority, but a foreign war nonetheless. And a further disruption of the oil markets.
“We’re not afraid of boots on the ground … we’re going to make sure that country is run properly,” says Trump. “We’re not doing this in vain.”
Yes, it is closer to home and our hemispheric interest. But it is the same reasoning that led to lost blood and treasure in the Iraq and Afghanistan wars.
No worry, Trump’s advisers counsel. Resurrecting Venezuela’s oil industry with American resources will cure its financial and social ills. And once everything settles down, Trump says he will order democratic elections to choose permanent leaders.
Unanswered is how long it will take to restore Venezuela’s economy and political system. Oil industry analysts say it could take a few years to make the country’s output considerably profitable. And the country’s stability will likely determine how soon U.S. oil companies return.
Chevron is in the best position to ramp up since it still operates in Venezuela, though at a squeezed margin due to excessive fees and taxes. Reducing the heavy hand of the state could incentivize Chevron to upgrade its facilities to increase production.
There’s also the up-and-down tensions of the global oil market. Supply does not always coincide with political desires for demand. High prices are good for producers but bad for consumers, and vice versa.