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US President Donald Trump hasn’t won the energy war in Venezuela yet. The White House this week released the first details of the deal Trump announced Friday between Washington and Caracas: The Pentagon will take an equity stake in the Venezuelan oil producer NABEP, which will then assume responsibility for what the administration said will be the world’s second-largest privately held oil reserve. In theory, the deal manifests Trump’s long-stated aim in Venezuela: For the US to take significant control over the country’s oil, and use it to feed US refineries and undermine Middle East competitors. But the deal carries the seeds of its own undoing. “In order to unlock the level of investment that Venezuela needs, there has to be an improvement in the rule of law, so that you can have guarantees that are not provided by a foreign government,” Luisa Palacios, the former chairwoman of Citgo, the refiner that was majority-owned by Venezuela and is undergoing a court-order sale to US investors, told me. “I’m not sure how this deal moves forward any of the conditions relevant to mobilize resources.” The deal is the culmination of a slow-burn, US-led overhaul of Venezuela’s oil industry underway since former leader Nicolás Maduro was arrested in January. NABEP was previously partially owned by US oil magnate Harry Sargeant III, who had been an important conduit between Maduro and Washington, but who came under intense pressure from the Trump administration to drop his assets there, which he finally did this month. Now the company is controlled by the family of Alejandro Betancourt López, a longtime player in Venezuela’s energy sector who was under investigation by Swiss authorities for possible financial crimes, but whom Secretary of State Marco Rubio helped return home to lead the country’s new oil regime. There’s little doubt that a renewed wave of oil is coming from Venezuela. Exports jumped 30% in August from the previous month. And the flow from the 17 fields assigned to NABEP could double by 2030 just from boosting production at existing sites, according to Rystad. Betancourt and others involved in these projects, which the White House said include wells previously owned by China and Russia, will pocket a windfall. Meanwhile, more investment is incoming for the rest of Venezuela’s oil patch: Energy Secretary Chris Wright is in Caracas today to oversee new investment agreements involving Chevron, GE Vernova, and others. Still, NABEP’s preferential access to capital and permitting authority will essentially pit future Western investors against the US government, a potential deterrent (not to mention the strange fact that the US government is now, to a degree, betting against US-based drillers). And some oil executives, energy lawyers, and members of the Venezuelan public are raising alarms about the deal’s legality and Betancourt’s involvement. Reaching the tens of millions of barrels and hundreds of millions of dollars promised by the NABEP agreement will require a multi-decade operation, and partnerships with US and European energy companies. But if it looks corrupt — something that Congressional Democrats have promised to investigate if returned to the majority — it won’t survive that long. “It’s a repackaging of what started off as a crony thing to make it look like something strategic,” Elias Ferrer, founder of Caracas-based business intelligence firm Orinoco Research, told me. “The real problem is that it’s a game where only a handful are invited [to take part], as opposed to having an open bidding process.” The history of oil overflows with examples of imperialistic overreach being confronted, eventually, by populist backlash, leftist governments, and asset seizures. ExxonMobil and ConocoPhillips have been after the billions they lost to that process in Venezuela for 20 years. There’s a window now to bring Venezuela’s oil fields back to their former glory, even as global oil demand moves inexorably toward decline — The Wall Street Journal reported that NABEP has plans to set up more than 50 new drilling rigs in the next few years. But translating that into a durable benefit for the Venezuelan and American people will require a commitment to democracy, not just cash. “From this deal it’s clear they want to move faster, but I don’t think you can,” Palacios said. “You actually have to build up the institutions and the scaffolding to really recover the oil industry. I don’t think there are shortcuts.”
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