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Unpacking the U.S.–Venezuela Oil Deal | The Cato Weekly Podcast
Host: Laura Bondank-Harmon
Guest: Ian Vásquez, Vice President for International Studies, Cato Institute
[Cold open: narration and news audio clips]
Earlier this year, American troops captured the Venezuelan dictator Nicolás Maduro. The United States military conducted a massive military operation penetrating deep into the Venezuelan capital, Caracas, and arrested the outlaw, dictator, real criminal, Nicolás Maduro. Americans were promised a quick and clean intervention, and many Venezuelans celebrated with the hopes that free elections and democracy might soon follow. Celebrations marking the end of Nicolás Maduro’s rule erupted throughout the weekend for so many Venezuelans. This is a moment they’ve waited for for over 25 years of hardline rule. I think we deserve having freedom with good people. I am profoundly, profoundly confident that we will have an orderly transition. The result of a stable transition will be a proud Venezuela, who is going to be the best ally the United States has ever had in the Americas. Months later, Delcy Rodríguez, who was part of the Maduro regime, is still in power. And the Trump administration has announced an oil deal with Venezuela that will purportedly give the United States rights to 65 billion barrels of Venezuelan oil. The U.S. and Venezuela are signing a new oil partnership. The president just sending this out on social media, saying the United States of America has just entered into an agreement with the country of Venezuela on the biggest oil deal in world history. The U.S. will control 65 billion barrels of Venezuela’s oil reserves. Seventeen oil fields will be developed, giving the U.S. 55 percent ownership. The agreement would last 100 years, but experts say it could be a while before the operation is up and running.
Laura Bondank-Harmon: But who does this deal benefit? And is it even legal? Cato’s Ian Vásquez argues that everything about this agreement is troubling at best. I’m Laura Bondank-Harmon. And this is the Cato Weekly Podcast. Today, I’m joined by Cato’s Ian Vásquez, Vice President for International Studies, Director of the Center for Global Liberty and Prosperity, and the David Bowe Chair. Welcome to the podcast, Ian.
Ian Vásquez: Thank you.
Laura Bondank-Harmon: So tell us a little bit about what the state of things look like in Venezuela right now.
Ian Vásquez: Well, here we are more than nine months after the United States went in and captured the dictator, Nicolás Maduro, and took him out. And yet the socialist dictatorship there is still very much in force. And it’s still very much calling the shots down there, most of them. And yet the United States is more involved in Venezuela than ever before. Not much has actually changed during this period of time. As you can imagine, when the dictator was overthrown by the United States, this was a very popular thing in Venezuela. After all, this has been a brutal 27-year dictatorship in which the country has just become impoverished, with political prisoners. Eight million people have fled the socialist dictatorship to other parts of Latin America, to the United States. They’ve had bouts of high inflation and hyperinflation. The majority of the people are now in poverty. And they’ve had a heck of a time trying to get back their basic rights and democracy. So the plan of the United States to first maintain stability and create stability, and then have some sort of economic recuperation. And then only then lead to a democratic transition has really shown its flaws during this period of time. There’s no economic recovery going on. And the reason that is, is because you have a socialist dictatorship that has done barely anything in terms of reforms. And of course, this is a dictatorship that does not believe in the free market system. So no investor is gonna put in any money into the country, at least not in any significant amounts. And so that has happened. And I think that the concern in the US and Washington was we don’t want to let the democratic opposition, which is a legitimate democratic opposition, come in too fast. Because that’ll create instability and then we’ll be held responsible to it.
Laura Bondank-Harmon: Can you tell us a little bit about who the current ruler is and how she got there?
Ian Vásquez: The current ruler is Delcy Rodríguez, who was the Vice President of Nicolás Maduro, who was deposed by the US government in January.
[Audio clip] Venezuela’s Supreme Court has ordered Vice President Delcy Rodríguez to assume the powers and duties of the acting president. She called the US operation barbaric. Rodriguez has been an influential and reliable regime enforcer for nearly two decades.
Ian Vásquez: I think a lot of us, a lot of Venezuelans, a lot of observers of the situation assumed that now is the time that the United States government will support the democratic opposition that is pro-American, but that didn’t happen. Instead, the Trump administration announced that they would be working directly with the interim dictator as they started running things together. And Delcy Rodríguez is a person who is highly reviled in the country for all of the right reasons. She’s been a long time key person in the dictatorship. One of the people responsible for setting up the repression in the police state there. And yet she has become the head of a regime that the United States has been very supportive of and that the Trump administration has spoken highly about. What has happened in the meantime is that ordinary Venezuelans have become disillusioned, become very frustrated with what they see, which is a worsening economic situation. Inflation rate there is about 400%. Things are not getting better for them. They still see that the repressive apparatus of the state is still there and is still being used. So people are becoming disillusioned with the United States, even though there is an opposition movement there that is very pro-American, very free market, and that actually won an election in 2024, overwhelmingly. It’s also led by María Corina Machado, the Democratic leader of the opposition, who is overwhelmingly the most popular person there. They’re ready to govern and they could go in and do so. Yet the US government has been postponing that. So the situation there is one of frustration growing disillusionment.
Laura Bondank-Harmon: What can you tell us about this deal that the United States recently made with Venezuela, this oil deal?
Ian Vásquez: Well, the US came to negotiate an oil deal in secret with the socialist dictatorship. And that agreement hasn’t actually been made public.
[Audio clip] Experts are calling for more transparency after Donald Trump touted a massive long-term oil deal with Venezuela, which he says will more than double American oil reserves. We have extreme lack of transparency. We have a little information around the vetting process of the company that was given access to a fifth of Venezuela’s oil reserves for the next 100 years. The big winners here right now seem to be the Maduro government in Venezuela and, of course, the Trump administration.
Ian Vásquez: So we don’t know a lot of details, but what we do know about it is troubling. And one of the things is that it lacks, it completely lacks legitimacy precisely because it was negotiated with an illegitimate government. And without the participation of the democratic opposition. And so it’s not a popular deal. And it calls into question its very viability because there’s no doubt that in the future, a democratic government will question it and may even repeal it. And so who will actually want to invest under those conditions, which is the very purpose of the oil deal? This oil deal, in addition, creates a company in which the United States government has a 35 percent stake and has the ability to exploit a massive part of the country’s oil reserves.
Laura Bondank-Harmon: How does Delcy Rodríguez being in power affect the oil deal?
Ian Vásquez: Well, she’s not a legitimate leader. And I think that’s the way that the Venezuelans see it. That’s certainly the way that that international markets are going to see this. Any transition to a democracy will imply that a new democratic government will question this deal because it wasn’t legitimate, but they may even repeal it. So it doesn’t create the ideal conditions for investment. And that undermines the very purpose of the deal, which is to draw in large investments. And one of the reasons I think that we haven’t seen that happen is precisely because you are dealing with an illegitimate government and this is an illegitimate deal.
Laura Bondank-Harmon: Now, you mentioned investments and you touched on this a second ago as well. The United States is taking a stake in oil companies. What exactly is happening here?
Ian Vásquez: It is the first known time in U.S. history that the U.S. government will become an investor in an overseas oil deal.
[Audio clip] What it means is we’re going to be able to control the incredible natural resources of Venezuela, which is good for America in a few ways. Everyone said the U.S. would have strict control over the flow of funds coming out of the deal with the North American Blue Energy Partners. The United States announced that it’s going to take a 35 percent stake in an oil company in Venezuela.
Ian Vásquez: So, yes, the U.S. is going to be owner of yet another private sector company. And I just don’t think that it’s a very good idea generally to become involved in state corporatism. That’s not the right formula for creating prosperity. Certainly not, certainly not abroad and certainly not in a country that has been suffering precisely from too much state dominance, including state owned businesses in the oil sector.
Laura Bondank-Harmon: And has the United States ever entered into a deal like this with a foreign enterprise?
Ian Vásquez: Not that I know of.
Laura Bondank-Harmon: Do you know if the U.S. is even allowed to do this?
Ian Vásquez: The legality of this is unclear. First, it’s not obvious under what authority the United States is taking ownership of a company abroad. Apparently, it’s the Pentagon that is doing this. But it’s doubtful that it does have that authority in Venezuela itself. The legality of this deal is questionable. Neither the Constitution nor the law there allows for these kinds of concessions. The administration has said that this is a concession that the oil companies are being granted. But that’s against the constitution of Venezuela and that this is a deal that will last 100 years, which is also not legal in Venezuela. So the very legality of it is questionable. And that’s an issue that goes beyond the basic legitimacy issue.
Laura Bondank-Harmon: You mentioned some concessions. What do typical concessions look like in these types of deals?
Ian Vásquez: Like oil or mining concessions in in most of Latin America are licenses that the government gives for private companies to mine gold or, you know, explore for oil and so on. Because in all of Latin America and Venezuela included, the subsurface wealth is owned by the state. It’s not privately owned. And so concessions are the typical way that kind of exploitation is done. And in Venezuela today, there is a national oil monopoly, which has been in place for the past 50 or so years. And under Venezuelan law and under the Constitution, only it can enter into contracts with any anybody else. And what was set up in the U.S. Venezuela oil deal is not actually a contract with the Venezuelan oil monopoly. It’s a different kind of contract, which the U.S. administration is calling a concession.
Laura Bondank-Harmon: When you say it’s not a normal contract, what do you mean?
Ian Vásquez: Well, it’s not a normal contract under Venezuelan law. The contract would have to be with the state owned oil monopoly.
Laura Bondank-Harmon: Oh, and so because it’s with the current regime and not with the state owned oil monopoly, that makes it different.
Ian Vásquez: We think so, but Marco Rubio, the Secretary of State, the other day clarified that this is not a deal with the regime, or at least he claimed that much that instead it’s just a deal with this private oil company in which the U.S. government has taken a 35 percent stake. So there’s still a lot of questions to be asked, and sometimes the answers that are given don’t really clarify until we see the actual agreement. We can’t really be sure of what’s going on there.
Laura Bondank-Harmon: Now, you mentioned that a private company would be overseeing this deal. Can you tell us a little bit about, I guess, do we even know anything about this company?
[Audio clip] The United States just took a stake in Venezuela’s oil, not through Exxon or Chevron, through the Pentagon. The local partner is Alejandro Betancourt, rich off no-bid contracts under Chávez. The journal reports he has faced criminal money laundering investigations in Spain and Switzerland, and the money it’s tracing came out of Venezuela’s state oil company, PDVSA.
Ian Vásquez: This person is well known in Venezuela. Alejandro Betancourt is widely recognized and not just in Venezuela, but widely recognized as highly corrupt. And for that reason, he’s also highly reviled in Venezuela. Many years ago, he had a contract with the socialist regime to redo power plants and to set up some new ones, and it was discovered that he overbilled the government by about three billion dollars. He’s been involved in other types of corruption. He is being investigated and has been investigated in numerous countries around the world for corruption and money laundering and that kind of thing. You know, one of the big problems in Venezuela for the past many years, it’s gotten worse recently, is blackouts. The country suffers from chronic lack of electricity and blackouts. They can last hours, days, or weeks. And that is also in large part a fault of this gentleman, Betancourt, who didn’t do his job. And it’s one of the reasons why he’s also quite hated. That gives you an idea of why this is a deal that Venezuelans really don’t like. And it’s also something that I think a future democratic government simply cannot ignore.
Laura Bondank-Harmon: So a lot of what you’re saying, it just doesn’t add up to me. And I wonder if other Americans would feel the same because looking at it. OK, so we removed Maduro from power because we didn’t like him. It’s a socialist government. We don’t think it was good for Venezuela. But now we have an interim government with a leader who worked with Maduro and we’re doing a deal with somebody who is arguably a criminal who also worked with Maduro. So why are we doing this? Why is the United States making this deal?
Ian Vásquez: That’s a good question. I think a lot of people are asking themselves that question. President Trump has not really spoken much about democracy or rights in Venezuela, but he has talked about oil and oil deals. And I think that what’s happened is that it’s much easier to deal with the dictatorship, especially if you’ve got a gun pointed at its head and people who are pliable and can be bought off to come to some sort of an agreement that gives away a lot of the country’s oil at way below market prices. And I think that’s what’s happened. And unfortunately, it creates an incentive that doesn’t favor democracy. It certainly doesn’t favor the democratic future of Venezuela because it creates the incentives for the United States government to continue to support this dictatorship that it can work with on this type of deal and to postpone moves towards democracy because of the very fact that a democratic government will take a second look at this and may very well undo this deal. So this deal has actually strengthened a socialist dictatorship in Venezuela and weakened a pro-American democratic movement that has the backing of the vast majority of Venezuelans.
Laura Bondank-Harmon: So it’s safe to say most Venezuelans are very unhappy with this deal.
Ian Vásquez: Yes, that’s the case.
Laura Bondank-Harmon: Now, you wrote an article for the Cato website in which you said this deal is a gift to socialists all over the world. Can you elaborate on that quote?
Ian Vásquez: The left, certainly the Marxist left, but the left in Latin America, which has always been very influential in politics and society, has always caricaturized or characterized the United States and capitalism in general as being voracious of the United States just coming in and sacking the country’s wealth and leaving countries impoverished and doing so by force. When in fact, we know that the US as a free society typically is engaged in voluntary trade, free trade, and the types of voluntary market interactions that makes both sides more prosperous. That’s why the US has been traditionally pro-globalization, pro-free trade agreements, and so on. And yet in this episode, what we’ve seen is something that might in the minds of a lot of the left and not just the left, be characterized as the US using its military might to extract resources from another country to make itself rich at the expense of that country. This does look like an imperial resource grab, and I would characterize it in that way precisely because of the way that it has been carried out. And that makes no economic sense because it’s based on zero-sum thinking. We’re not about to run out of oil and really the cheapest, best and most efficient way to get oil from other parts of the world is to trade for that oil, and yet we’ve apparently engaged in a military adventure for oil. So far that seems to be the story, even though there have begun some moves in the direction of democratic negotiations, but I’m not holding my breath that’s going to lead to much.
Laura Bondank-Harmon: Who was getting Venezuela’s oil before the US stepped in?
Ian Vásquez: Well, first of all, Venezuela, before Hugo Chávez took power in the late 90s and early 2000s, was producing about more than 3 million barrels of oil a day. Cuba was really the biggest beneficiary of that oil under a very unusual arrangement in which the Cuban dictatorship provided advice, especially in terms of intelligence and security to the Venezuelan dictatorship in exchange for oil and oil subsidies. And that’s really what kept the Cuban regime afloat. But since Venezuela was also a socialist country and it started to run into its own economic problems, it had to start cutting back severely on the oil subsidy to Cuba and both dictatorships, both communist dictatorships, were getting into economic trouble in that way. In the meantime, during the whole Chavista, Hugo Chávez dictatorship that has continued to this day, China was giving massive amounts of loans, gave at least $60 billion in loans to Venezuela in exchange for oil. But it got burned. It got completely burned in Venezuela and it still owed at least some $15 billion because Venezuela simply couldn’t perform. And so much of the oil that did get exported in recent years was to China in the form of payments, but it really didn’t make up for the huge losses China has taken.
Laura Bondank-Harmon: So when you say China got burned, is that just because they just didn’t get the value of their loan back?
Ian Vásquez: That’s right. They lost money. They lost money and they made a big bet on the Venezuelan dictatorship and it didn’t turn out for them. I hope the United States isn’t falling into that trap.
Laura Bondank-Harmon: Do you think there is a way that this deal can be conducted to protect both America’s interests and Venezuela’s interests?
Ian Vásquez: The irony of what’s going on in Venezuela is that you had a military intervention from the United States in which the U.S. promised to have a transition to democracy. And a lot of the times when the U.S. has had military adventures, it’s been a mess. It’s put the United States in a position of trying to figure out who it can work with and if there is even anybody that’s good to work with that would be free market oriented or pro-American and so on. And even if they found somebody, maybe they weren’t supported by the population, Venezuela really is an unusual case because you have an opposition led by María Corina Machado, who won the Nobel Peace Prize in December, who for the first time in over 20 years was able to organize the opposition effectively on an explicitly free market, pro-American agenda to win her opposition movement, to win the 2024 presidential elections. Of course, the regime didn’t allow it and it engaged in probably the largest electoral fraud in all of Latin American history. And so you have a opposition that has widespread legitimacy that has said, we will privatize the state owned oil company, we will open up the oil sector completely to international investment, especially to U.S. oil companies, and we will guarantee property rights. That is not what the current regime is saying. It doesn’t even believe in those things. And so the U.S. actually has, it still has, the opportunity to work with the most ideal group of people who have promised widespread reforms in the economy and in the state, create a democracy that has widespread legitimacy to achieve what traditionally the United States has looked for in other countries. This does not actually require the heavy U.S. involvement. It doesn’t require the United States to pick who the legitimate leader is, the Venezuelans already did that. And so what the U.S. has done by supporting the dictatorship instead of supporting the opposition so far is to potentially blow a golden opportunity, at least so far we can say that they have postponed things and made things worse.
Laura Bondank-Harmon: How would you propose we fix this oil deal?
Ian Vásquez: The real solution is to move toward a democratic transition on a much faster basis and to let María Corina Machado go back to Venezuela. And on previous occasions, she has been prevented by the United States from going back and set an election date so that a new government can start and to do that as soon as possible. You know, when the communist regimes were collapsing in Eastern Europe in the late 80s and so on, election dates were set pretty quickly and it didn’t create chaos. I think that Venezuela is much more today like Eastern Europe was in 1989 than what Iraq was in 2003.
Laura Bondank-Harmon: Thank you so much, Ian. This conversation has been very informative.
Ian Vásquez: Thank you.
Laura Bondank-Harmon: And thank you all for listening to the Cato Weekly Podcast. If you enjoyed today’s episode, please subscribe and leave a review wherever you get your podcasts. To learn more about the ideas and research discussed in this episode, visit Cato.org. The Cato Weekly Podcast is a production of the Cato Institute, dedicated to advancing liberty, limited government, free markets, and peace. Join us next time for more insights and conversations on the issues shaping our world.
