Trump, Venezuela, and the Geopolitical Economics of Oil
Venezuela’s oil wealth has long been the central thread running through its fraught relationship with the United States, from early foreign-led extraction through the 1976 nationalisation of the industry. This essay traces that history, from Venezuela’s oil boom and decline through its ties with Cuba, Russia, China and Iran, to the US sanctions that crippled its economy. It then examines Operation Absolute Resolve, the military intervention that removed Maduro from power, weighing its stated justifications against the economic interests that followed. Finally, it draws a comparison with Operation Epic Fury in Iran, highlighting both the parallels and the limits of that comparison.
History of Venezuela’s Oil Economy
The scale of the Venezuelan oil economy during the 20th century was a key factor in building the nation. In 1914, the first drilling for oil was done in Venezuela by the Caribbean Petroleum Company, a subsidiary of Royal Dutch Shell. The rate at which the benefits of the petroleum industry spread through the nation was unprecedented. Refineries, supporting infrastructure, townships and development revolving around petroleum emerged in no time.
While the domestic economy was flourishing, there was a corresponding growth in exports to the world by the 1940s and 1950s. It was during this period that Venezuela gained the title of the world’s largest oil exporter. This growth was also supported by technological developments within the industry, marking it as not just a producing nation but one that pioneered innovation. The petroleum and oil principles practised even today have their roots in the late 20th-century Venezuelan oil industry. During the 1970s, the petroleum industry contributed 30% of the nation’s GDP and dominated almost all of its export earnings.
The downfall of the industry, and subsequently the nation, is historically attributed to political mismanagement; eventually, the house fell, and the ground beneath it was swept by outside forces.
US-Venezuela Relationship
The relationship between the US and Venezuela was cemented in the oil industry due to the model in which the industry functioned. US companies engaged in the exploration and extraction of crude oil ran all business within Venezuelan national territory, and paid the state royalties and taxes. This arrangement gave the government little control at the outset. However, since the revenue generated was significant, it was never questioned until 1976. This year marked a significant shift in the relationship between the two nations, as the Venezuelan government nationalised the oil industry and assumed greater control. This was not done in haste, nor without reason.
In 1932, when the Hoover government placed tariffs on Venezuelan oil to protect domestic US producers, a mistrust amongst Venezuelan leaders about the reliability of the US as a buyer was born. This sentiment grew over decades and ultimately led to the nationalisation of oil in 1976. The economic impact was borne primarily by US and UK oil companies such as Exxon, Chevron and Shell, which together accounted for almost 70% of crude oil production within Venezuela. While these businesses took the brunt, oil production in the country also plummeted.
What followed in the next few years was what has happened in every state with an abundance of resources but a lack of structure to manage them. With the departure of US companies, the infrastructure that ensured smooth business was severely affected. The gains of the oil industry were absorbed by a corrupt political class. Petróleos de Venezuela Sociedad Anónima (PDVSA) was created by the state to manage the entire oil business with full autonomy; however, oil production continued decreasing until 1985. In the late 1980s through to 1999, PDVSA attempted to improve production efficiency and was nearly successful, until the arrival of Hugo Chávez in office.
To drive oil production up, PDVSA had entered into joint ventures with Exxon, Chevron and other foreign companies, attracting investment worth $17 billion into the industry. Chávez, after assuming office, almost dismantled these ventures by allocating greater control to the state.
This act further deepened the complexity of US-Venezuela oil relations.
While the facts above describe the worsening of economic relations between the two states, there emerges a geopolitical power struggle which forms the “why” behind all recent events.
Venezuela and Geopolitical Powers
The relationships that Venezuela cultivated with powers other than the US were a tipping point for the US administration. Venezuela always had a relationship with its Latin American neighbour, Cuba, seen through the bartering of oil for socio-economic benefits. Fidel Castro’s rise to power was supported by Caracas, and this partnership made the duo unwelcome in Washington. Moscow and Chávez also entered into a friendship that granted the Russian state undeniable rights to explore and extract oil in Venezuela. In turn, Caracas was flooded with arms deals from Moscow that helped suppress any uprising from within the country.
China committed multiple billion dollars in loans to Venezuela, repaid through crude shipments, making it Venezuela’s largest financier and oil buyer. In exchange, Chinese state companies gained deep access to the Orinoco Belt’s vast reserves through joint ventures with PDVSA. Beginning with Chávez’s 2001 visit to Tehran, both governments built an alliance grounded in shared hostility to Washington, signing hundreds of agreements. The enduring outcome has been military. Iran transferred drone technology and weapons to Venezuela, cemented by a 20-year defence pact signed in 2022. These strong ties were viewed by the US as a danger in its own backyard, justifying all of its subsequent actions against the country.
Economic Sanctions on Venezuela
While the petroleum industry entered into new ventures and attracted promises of large investment, it still declined as years passed, largely due to the mismanagement inherent in state-controlled behaviour. Any gains from the industry were kept from the people and consumed by corrupt politicians. The weakening of the largest sector in the economy, coupled with widening income decline, pushed the country into high inflation and a severe humanitarian crisis. US administrations across two consecutive decades placed heavy sanctions on Venezuela, citing human rights violations, drug trafficking and financial terrorism.
The economic collapse of Venezuela came from two ends; the mismanagement of systems and infrastructure was one of them, while the pressure from external forces doubled down on the effect.
Oil production fell from around three million barrels per day at the turn of the century to 2.3 million before the crisis began in 2014, a decline driven entirely by domestic factors. However, sanctions dramatically accelerated the downward spiral. In 2017, the US imposed financial sanctions on PDVSA, cutting it off from global markets. In 2019, it froze all PDVSA’s US assets and barred American firms from doing business with it, costing Venezuela around $7 billion immediately. The US Government Accountability Office found these 2019 oil sanctions likely contributed directly to Venezuela’s GDP contracting 35% that year, with oil output collapsing from 1.4 million barrels per day to just 558,000 by 2021. Following US primary sanctions in 2017, oil production fell from 1,500 thousand barrels per day to a low of 337 kbpd in June 2020 after secondary sanctions, with GDP contracting by over 75% between 2014 and 2021. The distinction matters: mismanagement created vulnerability; sanctions weaponised it. No matter who occupied the White House, stopping Venezuela in its tracks has remained on the agenda.
Operation Absolute Resolve
The Trump administration, since its first term, has been sharper in its policies against Venezuela, the trademark aggression the administration has always put forth. The Maduro government in Caracas was under heavy economic fire, with demands that included the conducting of free and fair elections. While the entire first Trump term applied pressure to squeeze Maduro’s government, none of those efforts sustained. Between the first term of the Trump administration and the second, the world went on to see the depths to which the Venezuelan government interfered with the very core of democracy. One such act was the 2024 Venezuelan election, which was genuinely marred by fraud and repression. Machado’s exclusion and the lopsided, implausible official results left little doubt that Maduro’s government rigged the outcome.
In its second term, however, the Trump administration carried out a significant military operation, Operation Absolute Resolve, that changed the political fabric of the nation. The operation involved the bombing of air defences within the country, followed by the capture and transportation of the President of Venezuela and his wife to New York. Prior to the operation, the US military had imposed a naval blockade on the fleets moving Venezuelan oil to the world. What followed was instability within Venezuela and deep uncertainty about what comes next. The stated reasoning for this antagonism is the large volume of drugs flowing into the US from Venezuela and the Maduro government’s denial of rights to its own people.
The US case against Maduro rests on substantive allegations, though interpreting them requires examining both evidence and selectivity. In March 2020, the US Department of Justice charged Nicolás Maduro and fourteen current and former Venezuelan officials with narco-terrorism, alleging they ran a partnership with the FARC that had sent multi-ton shipments of cocaine.
However, the pretext argument gains credibility when considering broader Trump policy. Trump has freed or pardoned other convicted drug dealers, notably the former president of Honduras, convicted of cocaine trafficking. While genuine evidence exists of Venezuelan state involvement in narcotics, the application of drug charges to justify military action, while pardoning similar offences elsewhere, looks selective. The rigging of state elections was also stated as a reason for the military action by the US. Stating that they were guarding the democratic rights of the people. Yet invoking that fraud as grounds for a US military invasion stretches “defending democracy” past any credible limit, since electoral illegitimacy has never been treated as a license for foreign armed intervention elsewhere. Allowing a disputed vote to serve as a pretext for war sets a dangerous precedent, one that could justify military action against any government whose elections a stronger power chooses to declare fraudulent.
The history shared by the two nations does not, however, warrant such action on social, political and humanitarian grounds alone. The ambitions of the Trump administration run deeper, as proven by press briefings following the operation and the energy deal signed thereafter. Trump has stated that the US will run Venezuela for the time being and that US oil companies will begin producing barrels in the country within 18 months. This reveals not merely a justification for the operation, but the starting point of a broader strategy. The ripple effect has fallen most heavily on China, which was the largest importer of Venezuelan oil and used it as a hedge against disruptions from Middle Eastern supply.
Ultimately, the economic calculus behind the intervention appears to outweigh the stated humanitarian and political rationale. Securing long-term control over one of the world’s largest proven oil reserves offers strategic and commercial returns that dwarf the costs of the justifications offered to the public.
Conclusion
The question of whether Operation Absolute Resolve was a standalone event was answered by the US in just 3 months, when Operation Epic Fury was unleashed by the US and Israeli military on February 28th against Iran. While both followed a pattern of leadership removal and military targeting, critical differences reveal limits to the comparison. The Iran conflict involved large-scale strikes targeting military assets, nuclear facilities, and top leadership, with Tehran retaliating by targeting US military facilities and energy infrastructure across the Gulf. While the initial strikes killed senior leaders, the war remains unresolved, with Iran appointing Mojtaba Khamenei as successor and continuing to resist. Venezuela capitulated within days, whereas Iran has been preparing for this for decades, and it shows in their resistance. Here too, reasons for the conflict have been based on humanitarian and social grounds, such as safeguarding democracy, protecting the wider region against terrorism, and so on. Here too, the world’s most precious reserves are being held on a tightly wound rope that could tip either way. Only time will tell whether this current conflict can be brought under control. However, come tomorrow, these times will be looked upon as references for strategic military tactics that either stem from economic gains or cause economic disruptions that nobody asked for.