Trump’s conditions cast a shadow over the US-Venezuela oil deal

The sweeping oil deal announced by U.S. President Donald Trump to secure access for a century to more than 20% of Venezuela’s oil reserves appears far less ambitious when one digs into the details of how it is supposed to work. The opacity surrounding the announcement has been compounded by conflicting accounts from Washington and Caracas over the duration of the pact, the choice of a highly controversial partner in Venezuelan businessman Alejandro Betancourt, and questions about the billions of dollars in promised investment, all of which have raised doubts about the deal’s viability and even its legality.

Last week, executives from oil companies including Chevron and Italy’s Eni filed through Miraflores, the presidential palace in Caracas, to sign the first agreements. The companies have expanded projects they have been working on for years and adapted their contracts to the new rules established by the United States for Venezuela’s oil sector. The signing of the “historic agreement” between Delcy Rodríguez’s government and the White House on August 28 has not been made public.

Héctor Obregón, president of the state-owned oil company PDVSA, said Monday that the oil agreement is trilateral and renewable for as long as necessary. “The contract has been signed for 25 years, but by mutual agreement it can be renewed for similar periods until it reaches whatever duration is deemed appropriate,” he said in an interview with a local radio station. “Let us hope, for Venezuela’s wellbeing, that oil remains a source of prosperity for the next 100 years,” Obregón added. The official’s qualification highlights some of the obstacles that could complicate the agreement’s implementation.

For some experts, there is a strong element of political theater in the figures touted by Trump: 65 billion barrels of oil, $100 billion in investment, and $209 billion in royalties.

“There were two different announcements. On the one hand, the White House leak to several outlets speaks of 100 years and concessions, access to oil at cost price and the participation of the Pentagon’s Office of Strategic Capital with 35% of NABEP’s shares [Betancourt’s oil company], something the U.S. Congress has already said was not legally possible,” economist Francisco Monaldi points out.

“And then there is what the Venezuelan government says. It is not 100 years but 25. The joint venture or PDVSA can grant a Production Sharing Contract in Hydrocarbons [CPPH] to a company so it operates the field and provides the capital in exchange for part of the production. And the state, via royalties, receives a payment,” he says. “Everything Trump says about the agreement is illegal or unconstitutional. But, at the same time, Venezuela’s anti-blockade law allows anything.”

Without dwelling on the sovereignty debate, the government has placed heavy emphasis on the operation’s potential economic and social benefits. Acting President Delcy Rodríguez has pushed back against dissident Chavista factions, which are urging people to take to the streets and predicting that the agreements will be declared void before long. Elías Jaua, Hugo Chávez’s former vice president, has argued that the pact was imposed under military pressure and is therefore “null and void” under the Vienna Convention.

Rafael Quiróz, an oil economist at the Central University of Venezuela, likewise believes that, from a legal standpoint, the agreement with Washington is “a monstrosity.” He adds: “Not only does it violate the Hydrocarbons Law, it violates the entire Constitution. PDVSA’s assets cannot be transferred. This oil belongs to future generations of Venezuelans. Will this affect our standing within OPEC? The arrangement presents enormous legal vulnerabilities, and we cannot predict higher investment or revenues because we do not know many of the conditions.”

Even the estimate of Venezuela’s reserves has something of a mirage about it.

“[Former president] Hugo Chávez wanted Venezuela to have the world’s largest reserves, and he inflated the figures. Some auditors have put Venezuela’s proven reserves much lower,” Monaldi says. “It’s true that the oil is down there, but it does not meet the conditions required for extraction, and we have never recovered more than 8% of what is claimed to exist.”

He adds: “Chávez signed countless contracts, and none of those projects materialized. The history of the oil industry is full of agreements that are signed but never carried out.”

A large share of the extra-heavy crude in the so-called Boyacá Block will likely remain underground, Monaldi argues, because extracting it requires long-term investment and specialized technology. The expert also notes that the U.S. Strategic Petroleum Reserve cannot be replenished with heavy crude and that the decision to rely on foreign partners has irritated U.S. oil producers. They cannot compete with the below-market prices granted to NABEP under the agreement.

NABEP’s ability to develop the 17 fields it has been awarded is also under scrutiny. The deal undoubtedly strengthens the Venezuelan company’s financing prospects, but the requirement to sell barrels to the United States at cost raises questions about the viability of the promised investments.

Ricardo Hausmann, former planning minister under former president Carlos Andrés Pérez and a professor at Harvard University, wrote on X that the “corrupt and predatory deal” will make Venezuela’s economic recovery “slower, not faster.” Hausmann criticized the decision to give “a minuscule company” — referring to NABEP — “access to enormous resources, even though they do not have the managerial, technological or financial capital to develop them.” He predicts the company will have to seek partners and that potential investors “will be repelled by the predatory conditions the Trump administration has set.”

Others add that they may also be discouraged by the unconventional manner in which the agreement was reached. “For a long-term investor, the deal is problematic because there is no certainty that contracts will be upheld; there is a serious legitimacy issue,” Monaldi says.

Regarding the conditions imposed by Trump, PDVSA president Héctor Obregón clarified on Monday that part of the funds generated by the agreements will be transferred to accounts controlled by the U.S. Treasury Department “to protect them from creditors” seeking repayment of Venezuela’s massive debt, effectively extending Washington’s oversight of Delcy Rodríguez’s government. “But we administer the funds and issue the payment orders,” Obregón said.

Some analysts take a more nuanced view. While acknowledging the agreement’s inconsistencies, they also point to the opportunities that could arise from such a large volume of investment.

“Venezuela has a very significant need for investment in its oil sector,” says Luis Oliveros, dean of economics at Universidad Metropolitana and an oil industry expert. “Under current conditions, it is difficult to create incentives for investors. Venezuela has lost its ability to attract oil investment compared with Guyana, Argentina and Brazil. The country cannot raise capital under circumstances like these, while under sanctions and in default.”

Oliveros does not dispute that the announced oil deal “almost certainly has many aspects that need to be improved,” but he argues that, given the current circumstances, “it would be difficult for the country to hope to secure that volume of investment on better terms.”

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