One of the more light-hearted suggestions is that Trump’s grand strategy is significantly shaped by an acquaintance with a certain popular game.
As Robert Colvileremarks: “Lots of people puzzled by what Trump’s up to but it’ll all become clear when he takes Kamchatka”
Oil Empire:
As for the logic of the “Donroe doctrine”, Javier Blas has been in fine form. I think his reading is excessively rationalistic. But it is undeniably a strong take.
Let’s do the math. Start with the oil production of the US and add Canada. Then include Venezuela and the rest of Latin America, from Mexico to Argentina and everywhere else in between: Brazil, Guyana, Colombia. Like it or not, all of them are living under the “Donroe Doctrine” — an increasingly belligerent Washington’s sphere of influence over the Americas. Together they account for nearly 40% of the world’s oil output.
Then it’s a choice of language to describe what the US administration will do with all those barrels. It may try to exert direct control as in Venezuela, or oversee, influence and simply enjoy the benefits of what’s produced. Whatever the word, President Donald Trump now has his very own oil empire. And I’m talking about actual barrels already flowing into the market, not underground reserves that would take time and money to be developed1. With such resources Trump has an economic and geopolitical lever no US president has had since Franklin D. Roosevelt in the 1940s. At home and nearby, his country can tap a vast sea of oil. The implications of getting unfettered access to Venezuela’s reserves, the world’s largest, were immediately apparent to anyone in the energy and commodities business, particularly American foes. Oleg Deripaska, a US-sanctioned Russian oligarch, put it well on Saturday: Washington would have the means to keep the oil price close to $50 a barrel — giving it a winning hand in the future against anyone threatening to push the price higher by curbing supply. The Kremlin envoy Kirill Dmitriev said seizing power in Venezuela offered “huge leverage” over the global energy market. Having de facto control of the Western Hemisphere’s petroleum wealth is a geopolitical game changer. For decades, US military adventurism was constrained by the impact of any war on energy costs. Today the White House has primacy over oil-producing allies and adversaries alike — whether it’s Saudi Arabia or Iran, Nigeria or Russia. The past 18 months have already shown what these new hydrocarbon riches mean for US foreign policy. Trump’s administration has taken once unthinkable steps: from bombing Iranian nuclear facilities to helping Ukraine target Russian oil refineries. Grabbing Nicolas Maduro from his safehouse in the outskirts of Caracas was the most shocking example yet of what happens when oil doesn’t constrain the Pentagon anymore. And seizing Venezuela’s oil gives the US another card: the ability to decline offers for access to petroleum riches. For months the Kremlin has dangled its own reserves as a carrot in talks with the White House. Trump can now tell Vladimir Putin he doesn’t need his Siberian fields. He has more than enough. Don’t give Trump all the credit, or even most of it. He’s in power at the right time. American oil would be booming without him thanks to the riches of US shale, Canadian heavy oil and discoveries in places like Brazil and Guyana. Ex-presidents Joe Biden and Barack Obama benefited, too. What Trump has done is pull all of that petroleum under Washington’s security umbrella.
The Economist is highly skeptical that much extra Venezuelan oil will flow any time soon:
Rystad Energy, a consultancy, estimates that $110bn in capital expenditure on exploration and production alone would be required to bring the country’s output back to where it was 15 years ago—twice the amount America’s oil majors combined invested worldwide in 2024. Mr Trump seems to think those firms would rush to sign big cheques. Chevron, which is already present in Venezuela and exporting some 200,000 b/d to America under a sanctions waiver, may well expand its operations. But others have not forgotten the pains of the past. … Banks and insurers, which would be needed to finance and secure shipments, would be even slower to return. Even if enough oil firms could be convinced to cough up, it is doubtful that Venezuela’s oil industry could keep pace. In recent years it has suffered a huge brain drain. Tens of thousands of skilled workers, from engineers to geologists, have left the country. PDVSA is now largely run by the armed forces. To form viable joint ventures with Western firms, the 70,000-strong company would have to be reformed wholesale. It may not be able to serve as a viable partner for many years. Whatever extra oil Venezuela can pump will flow into a saturated market. The International Energy Agency, an official forecaster, expects global crude supply to outstrip demand until at least the end of the decade, because of strong production in countries like Brazil, Guyana and, indeed, America, as well as tepid growth in demand. Many analysts expect surpluses to lower global oil prices towards $50 a barrel, and possibly below, this year and next—under the breakeven price for most existing Venezuelan fields with decent reserves. New projects are often even less competitive. In its most optimistic scenario, Kpler forecasts that Venezuela’s oil output might rise to between 1.7m and 1.8m b/d by 2028. That could still cause a notable rejigging of trade flows. American refiners are likely to snap up some extra barrels: they imported 500,000 more a day in the early 2010s. Cuba, which has long bought from Venezuela on favourable terms, will turn to Mexico and Russia for help. China’s “teapot” refineries, which used to buy most of Venezuelan supplies at a discount, may be cut out of the trade; perhaps its state-owned oil firms will reduce their local footprint, too. All this could benefit America commercially and geopolitically, but only at the margin. Anything more drastic, such as bringing Venezuelan output back to 2.5m-3m b/d—its level in the late 2010s, and about as much as Kuwait, the world’s eighth-largest producer, pumps today—looks like a long-term project, reckons Jorge León of Rystad Energy.
The Orinoco Oil Belt is considered to be the largest hydrocarbon accumulation in the world. It is a massive body of mostly Cenozoic (Miocene) sediments, 650 km X 70 km, that lie on the southern border of the Eastern basin, north of the Orinoco River, Fig. 4. The Belt is estimated to contain about 1.3 trillion barrels of extra-heavy (7-13° API gravity) crude oil with a low average GOR (gas-oil-ratio) of 110 scf/b that together with high viscosities contribute to very low recovery factors. Viscosity at reservoir conditions of the Orinoco’s shallower extra-heavy oils runs up to 5,000 cp, which is syrup-like in viscosity compared to water (1-5 cp) or light (45°API) crudes of 3 cp.
As we all have learned, the issue with Venezuela oil is its viscosity. This video illustration is excellent. The difference that viscosity makes to the economics of oil is huge. This from @Fink_money was excellent on that score.
In the end it may be Guyana that is the key play. Taking out Maduro removes any threat to the giant new discoveries there.
Oil grand strategy is one thing, corporate interest is quite another. Nick Butler is highly and rightly skeptical on that score.
Meanwhile, Delcy Rodriguez who may emerge as the new “dictablanda” in Venezuela is an interesting person in her own right:
Ms. Rodríguez, 56, arrives at the job of Venezuela’s interim leader with credentials of an economic troubleshooter who orchestrated the country’s shift from corrupt socialism to similarly corrupt laissez-faire capitalism. She is the daughter of a Marxist guerrilla who won fame for kidnapping an American businessman. She was educated partly in France, where she specialized in labor law. She held middling government posts in the government of Mr. Maduro’s predecessor, Hugo Chávez, before being promoted to bigger roles with the help of her older brother Jorge Rodríguez, who eventually became Mr. Maduro’s chief political strategist. Ms. Rodríguez managed to stabilize the Venezuelan economy after years of crisis and slowly but steadily grow the country’s oil production amid tightening U.S. sanctions, a feat that earned her even the grudging respect of some American officials. As Ms. Rodríguez consolidated control over economic policy and eliminated rivals, she built bridges with Venezuela’s economic elites, foreign investors and diplomats, to whom she presented herself as a soft-spoken technocrat and a contrast to the burly security officials forming most of the rest of Mr. Maduro’s inner circle. Those alliances have borne fruit in recent months, earning her powerful champions that helped to cement her rise to power. On Saturday, her assumption of power was greeted with cautious optimism by some of Venezuela’s captains of industry, who said in private that she had the skills to create growth, if she could persuade the United States to relax its chokehold on the country’s economy. For all her technocratic leanings, Ms. Rodríguez has never denounced the brutal repression and corruption sustaining Mr. Maduro’s rule, once calling her decision to join the government an act of “personal revenge” for her father’s death in prison in 1976, after being interrogated by intelligence agents from pro-U.S. governments. Ms. Rodríguez’s capacity for negotiating across Venezuela’s ideological chasm could prove useful in easing tensions. Juan Francisco García, a former ruling party lawmaker who has since broken with the government, said he had some apprehensions about her ability to govern but gave her the benefit of the doubt. “History is full of sectors and figures linked to dictators who have, at some point, served as a bridge to stabilize the country and transition to a democratic scenario,” Mr. García said.
Source: By Anatoly KurmanaevTyler PagerSimon Romero and Julie Turkewitz NYT
I am quite partial to the argument that Cuba may be part of the calculation. But these numbers from the Economist brought me up short: “in recent years mismanagement of Venezuela’s petroleum industry and international sanctions caused shipments to Cuba to fall by almost three-quarters, from more than 100,000 barrels per day in 2021—about 80% of its domestic needs—to 16,000 b/d in 2025.” So Cuba is already more or less cut from Venezuelan supply.
I love writing the newsletter. Can’t wait to get back to even more active posting in 2026 when the book is done. In the mean time, if you fancy buying me a coffee once a month, you know what to do. Chartbook will keep on coming in any case.
All the commentary on Venezuela and oil presumes we can continue to consume the same amount of oil or more without bringing human civilisation to an end through climate change. I find this very odd.
Probably a waste of time to try figure out the grand strategy. The Trump presidency is a TV show without much continuity to be expected between each week’s episode. Anybody remember DOGE or the Mar a Lago accord? Even the tariffs are atrophying. Most concerning is the growing fascination with violence, the chances of a violent coup in the US would seem to be rising.
All the commentary on Venezuela and oil presumes we can continue to consume the same amount of oil or more without bringing human civilisation to an end through climate change. I find this very odd.
Probably a waste of time to try figure out the grand strategy. The Trump presidency is a TV show without much continuity to be expected between each week’s episode. Anybody remember DOGE or the Mar a Lago accord? Even the tariffs are atrophying. Most concerning is the growing fascination with violence, the chances of a violent coup in the US would seem to be rising.