I'm watching Donald TrumpAt the US President's press conference at Mar-a-Lago on Saturday, in which he said the US would “rule” Venezuela and confiscate some of the country's oil wealth “as reparations for what this country has done to us,” I was taken back to 2003. Immediately after the US invasion of Iraq I spent several weeks traveling through the country's oil fields, some of which were still littered with live ammunition, talking with members of the US-led Task Force Rio (Rio stood for “Recover Iraqi Oil”) and local workers. I also traveled to Baghdad, where I interviewed officials from the Iraqi Oil Ministry.
Venezuela is, of course, not Iraq, and at least until now there has been no American occupation. (Though Trump noted, “We're not afraid of boots on the ground.”) Still, this is the second time in twenty-three years that the United States has toppled the authoritarian leader of an oil-rich country—the third time, if you count NATO strikes on Libya in 2011, which hastened the fall of Muammar Gaddafi. History has several lessons to teach.
Unlike Trump, who is a shameless petro-imperialist, members of the Bush administration insisted that their push for regime change in Iraq was not about hydrocarbons (Donald Rumsfeld famously said it had “literally nothing to do with oil”) and that the post-war reconstruction of Iraq's oil industry was designed solely to help the country. At the Basra refinery, I attended a meeting chaired by the American brigadier general who headed the Rio task force. An aide to the general gave me a handout that said, “Who will run the Iraqi oil industry? The Iraqis are in charge of the energy sector.”
Many wondered about US intentions. At the time, Iraq had the second-largest proven oil reserves of any country in the Middle East, and Bush declared an energy crisis shortly after taking office in 2001. At the time, the United States imported about half of the oil it burned. Energy Task Force, led by the Vice President Dick Cheneywho was previously chief executive of oil services company Halliburton, released a report recommending increased investment in renewable energy, energy-saving technologies and fossil fuels. He also called for more imports from Latin America, including Venezuela, which was already the third-largest foreign supplier to the U.S. after Canada and Saudi Arabia. With barely a mention of Iraq, the report says, “Energy security should be a priority of U.S. trade and foreign policy.”
Today, as a result of the shale oil revolution—fracking—the United States is the world's largest oil producer, even larger than Saudi Arabia, and a net oil exporter. But advances in artificial intelligence are rapidly increasing demand for electricity, and the Trump administration, despite its aversion to renewable energy, is determined to achieve what it called “energy dominance” in its recently released national security strategy. In this context, it is not surprising that Trump's attention was drawn to Venezuela, which now enjoys the status of the country with the largest proven oil reserves – more than three hundred billion barrels. Most of Venezuela's oil is located in the Orinoco Belt, which runs east to west in the north of the country. Many crude oil deposits are in the form of heavy sludge that is difficult to extract and process. But with experience and capital it can be done. Moreover, many US refineries, especially in the Gulf and West Coast, are designed to handle heavy oil.
Despite domestic oil refining capacity, ramping up production in Venezuela will not be an easy task. Like its Iraqi counterpart under Saddam Hussein, Venezuela's oil industry has suffered from years of sanctions and chronic underinvestment. Many of its skilled employees emigrated. The industry produced about a million barrels a day last year, about a third of what it produced a quarter-century ago. On Saturday, Trump said big US oil companies would “come in, spend billions of dollars, fix the badly damaged infrastructure, the oil infrastructure, and start making money for the country.” It's not that simple.
One problem is the scale of investment required: one energy analyst told the publication Financial Times It will take more than one hundred billion dollars to double Venezuela's oil production. Another concern is the price of oil, which recently fell below sixty dollars and hit a four-year low. Chevron is currently the only major U.S. oil company operating in Venezuela. Just before Christmas, it emerged that the administration had reached out to other U.S. firms such as ExxonMobil and ConocoPhillips to see if they were interested in returning to the country where they operated before the government of Hugo Chavez, Nicolás Maduro's predecessor, seized their assets. (Legal proceedings stemming from this arrest are still ongoing.) Politician reported that some responses to the administration's requests were negative. “Frankly, there is little interest from the industry given lower oil prices and more attractive fields around the world,” one source told the news site.
