U.S. Intervention in Venezuela: What Happens Next?

What does it mean for the United States to “control” Venezuelan oil? While the image of President Trump making decisions about investments, output, export seems implicit in some of the recent rhetoric, practically speaking “U.S. control of Venezuelan oil” would mean one of two things (or both). First, it could mean that U.S. companies are directly involved in producing and selling Venezuelan oil (as the result of a contract with the Venezuelan government). Alternatively (or in addition), it could mean having a friendly government in place who would cede to U.S. demands or pressure over its oil policy.  

There certainly would be economic value and positive energy security implications in both instances for the United States. But they would be less direct or even consequential than many imagine. In both cases, if Venezuela is producing more oil for global markets, then the U.S. (and other consumers) would benefit from a lower price. Depending on the state of the market and the extent of the price drop, there could however be some unintended secondary consequences – including that U.S. companies could elect to produce less oil in the United States, particularly given how sensitive shale oil production is to price. Moreover, having more “U.S.-aligned” oil on the global market could dilute the influence of OPEC and U.S. adversaries that might seek to influence oil markets in ways that run counter to U.S. interests.

These are not impacts to be sneezed at, but they are a far cry from Washington sitting on an oil empire and manipulating global oil markets directly. Even if U.S. companies are overwhelming the producers of Venezuelan oil, these companies are not national oil companies, but private entities responsible to their shareholders, not the U.S. government. While the U.S. government can affect the environment in which they produce through regulations, sanctions, and other tools, it cannot dictate production policy to address markets for political or geopolitical purposes.  One might remember the conversations and speculation after the brief COVID oil glut of 2020 that Saudi Arabia, Russia, and the United States might be a new trio collectively controlling oil markets – which sounded enticing until it was evident that unlike the Saudi or Russian governments, Washington lacked the ability to direct the activities of private U.S. companies. 

In the second scenario, if a substantial increase in oil production is coupled with a Venezuelan government closely aligned with the United States, but still operating its oil fields largely through its national oil company, PDVSA, Washington may exert influence on price in other ways. Washington could pressure, cajole, entice Caracas to make certain production and export decisions much as it has done to Riyadh in past decades. This could be meaningful in undercutting the influence of OPEC by diversifying the sources of global supply and adding more supply to the global market when OPEC may seek to do the opposite. (Venezuela would almost certainly need to leave OPEC, having been one of the organization’s founding members.) But in order for Caracas to act as a real alternative to Riyadh, Venezuela will need to develop sizable spare capacity – the ability to quickly produce oil that is held in reserve until needed. Given the state of Venezuela’s industry today, and the desperate basic needs for Venezuela today, it will be a long time before Venezuela is willing to spend the money to develop the ability to produce oil, and then forego it until a crisis. 

Besides influencing the price of global markets (indirectly, not directly), Venezuela produced under the U.S. orbit would help reinforce the petrodollar and therefore dollar dominance as well. 

Geopolitically, having Venezuelan oil outside the orbit of America’s adversaries is positive in many ways – but not necessarily a direct geopolitical cudgel to be wielded by Washington. Lower prices could hurt Russia and Iran (but help China), heavy Venezuelan crude could displace some Russian Urals crude, and an important link between China and Venezuela would be effective severed, weakening China’s strategy for influence in Latin America. Countries hostile to the United States in the region – such as Cuba and Nicaragua – who have received free or discounted oil will be weakened without such Venezuelan largess.

For those of us who were concerned about what foreign policy might look like in a second Trump term, there was always one aspect of his worldview that provided some modest reassurance: his relative reluctance regarding the use of force... it was a short-lived predisposition. On Saturday, Mr. Trump dispatched U.S. forces to bust into the compound of the Venezuelan dictator Nicolás Maduro, capture him and his wife, and swiftly remove them to the United States.

The raid was the exclamation point on a year in which the self-proclaimed “president of peace” ordered military action against seven countries, some of which the United States had never before waged war against — Iran, Nigeria and Venezuela. It ended any pretense that he would wield responsibly the presidency’s most consequential prerogative.

We support the judicious use of force when it is necessary to keep the country safe, it has the informed consent of the American people and all other options have been exhausted. Mr. Trump is demonstrating a profoundly different and dangerous approach. He is willing to use force — and risk the lives of American soldiers — for increasingly flamboyant expressions of strength abroad.

These high-risk actions seem designed more for ephemeral gain than long-term strategic advantage. There is a real risk of more to come. Mr. Trump’s appetite for military action seems to grow with the eating. For a commander in chief with three years left in office, his newfound fondness for military force is ominous.

This quote is an excerpt from an opinion piece published by The New York Times, co-written with Jon Finer. Read the piece in full here. 

What this demonstrates is the U.S. has an extraordinary military stick—and that it’s willing to use it. That’s what many countries are thinking about today: Colombia, Cuba, Mexico; Denmark with Greenland; maybe even Canada. Any country that is not asking what capabilities it has to stand up to a bully is sleeping.

This quote is an excerpt from an interview conducted with CNBC. Watch here in full. 

Beijing will be torn between two readings of the Venezuela case.  One version will be that if  the US can act at will in its own sphere of influence, then so can Beijing. (Chinese thinkers have been writing about Xin Mengluozhuyi – “New Monroe-ism”  - for decades.) 

Yet some Chinese analysts will now have to rethink an idea long held in Beijing – the idea that the Trump administration is an isolationist one first and foremost. They will be particularly interested in the world-view of Secretary of State Marco Rubio, who is regarded as a more traditional Republican hawk in Beijing, and has recently praised American bonds with its Asian partners. The US is not just a Caribbean power, but a Pacific one too, and the latter definition means that Japan, Korea or Taiwan could yet be defined as part of a wider American “backyard" and that intervention there is by no means off the table.

The removal of Maduro and the attempt to coerce Venezuela into further concessions is another example of the Trump administration’s predatory approach to foreign policy. 

It was not about narcotics, because Venezuela is not a major source of drug shipments to the US and Trump has pardoned other convicted narcotics traffickers. It was not about security, because Venezuela was a weak state that posed no threat to US interests. It’s not even about oil: although President Trump may think there’s lots of money to be made there, Venezuelan oil is expensive to extract and refine and many billions of dollars of investment are needed to increase production. Instead, this act is really about signaling U.S. dominance in the Western hemisphere and coercing other states into doing Washington’s bidding. Trying to dominate the region via military force alone hasn’t worked in the past and is unlikely to work today. 

Instead of stable hegemony and regional prosperity, the more likely result is rising anti-Americanism and regional instability.

The U.S. attack on Venezuela has led some to speculate that China might feel emboldened to accelerate a Taiwan invasion, arguing that if the United States can sidestep international law, Beijing can too. However, this speculation misunderstands Chinese strategic thinking. Beijing frames Taiwan as a purely domestic issue, not an international dispute. In its conception, the Taiwan question is a decision for the Chinese people alone, an internal matter, not a matter of international law. Indeed, Beijing views Taiwan as a civil dispute over sovereignty, while it portrays the U.S. strike on Venezuela as external interference in another state’s internal affairs. [Interestingly, some Taiwanese officials have even suggested that Trump’s capture of Maduro could actually deter Beijing, because it demonstrates Washington’s willingness to use military force in defense of its own perceived interests even if the two situations differ considerably.] Looking at the overall picture, China probably does not see U.S. actions in Venezuela as a precedent that justifies accelerated action on Taiwan.