Introduction to Trump’s Deal with Venezuela
US President Donald Trump announced that he had reached an agreement with Venezuela’s transition authorities to transfer large amounts of oil to the US. In a post on his social media network, Trump wrote that the Latin American nation would "implement" between 30 and 50 million barrels of "sanctioned oil." The Venezuelan government has yet to confirm the deal.
Background on Venezuelan Oil
Venezuelan oil is under US sanctions as Washington accuses the government of ousted leader Nicolas Maduro of corruption, repression, and election fraud. Trump’s deal comes days after the U.S. captured Maduro, the longtime socialist leader who ruled Venezuela for more than a decade. Trump described the agreement as both an economic opportunity for both countries and a humanitarian measure as Venezuelans continue to face severe shortages of food, medicine, and basic supplies due to years of mismanagement and corruption.
How the Deal Will Work
Trump revealed few operational details about the deal, including how long the oil transfer would take place. The oil would most likely come from existing inventories, energy analysts said. But 30 to 50 million barrels is equivalent to one to two months of Venezuelan oil production. Early estimates suggest the oil could be worth up to $2.8 billion at current prices. Venezuela has about a fifth of the world’s oil reserves and was once a leading oil producer. But after years of decline, it now accounts for less than 1% of global production.
Why Venezuelan Oil Matters to the US
The problem is not the quantity, but the compatibility. The majority of U.S. production is light crude oil, while many American refineries are designed to process heavy crude oil into gasoline, diesel, and other products important to the U.S. economy. For decades, Venezuelan oil filled this niche. Today, the U.S. imports heavy crude oil from countries like Canada and Mexico to keep these refineries running efficiently. Converting these refineries, particularly along the Gulf Coast, to run exclusively on light U.S. crude would cost billions and take decades – a risk the oil sector has little appetite for.
Impact on Canada and Mexico
If Trump succeeds in getting Venezuelan oil back into circulation, it would give Washington more influence over Canada, whose oil industry relies on the U.S. market for almost all of its exports. Canada sends about 4 million barrels of oil a day to U.S. refineries, much of it the same type of heavy crude that Venezuela produces. Analysts warn this could weaken Canada’s position in future energy disputes, especially as domestic producers already face tight margins and limited pipeline capacity. Mexico faces similar, if less immediate, impacts. The country exports about 600,000 barrels a day to the US, including heavy crude oil.
Global Implications
The Trump administration informed interim President Delcy Rodriguez that Venezuela should work exclusively with the United States on oil and give priority to American buyers. Washington is also pushing Caracas to distance itself from China, Russia, Iran, and Cuba, which if implemented would mark a major geopolitical shift. If Rodriguez grants Trump’s request, China, which receives more than two-thirds of Venezuela’s oil exports, would lose access to one of its largest sources of discounted crude. Beijing described the US military action in Venezuela as a “typical act of bullying”. Russia and Iran would be brought firmly into Washington’s orbit, while Cuba, which relies heavily on subsidized Venezuelan oil, would be hit hardest and face even greater fuel shortages and economic strain.
