Why Trump's Plan for Venezuelan Oil Is Unworkable

A potential second Trump administration's strategy for Venezuela's oil sector appears to fundamentally misread the complex realities on the ground. The ambitious plan to overhaul the nation's energy industry and control its output faces significant obstacles, from geopolitical ties with China to deep-seated technical challenges that simple subsidies cannot solve.

Washington's Demands and a Flawed Vision

The core of the proposed U.S. strategy involves a series of non-negotiable demands directed at Venezuela's interim President, Delcy Rodriguez. These ultimatums include:

• Cracking down on drug trafficking.

• Expelling Iranian and Cuban operatives deemed hostile to Washington.

• Halting all oil sales to U.S. adversaries.

These conditions are unlikely to be met, setting the stage for continued confrontation. The administration's vision for overhauling Venezuela’s oil business seems equally detached from reality. Initial suggestions of a subsidy-funded revival, projected to take less than 18 months, quickly evolved into an admission that "a tremendous amount of money will have to be spent," with the expectation that "the oil companies will spend it."

However, major U.S. energy firms are hesitant to invest billions in a nation facing potential chaos, especially if Washington attempts to install a new government over its 28 million citizens.

The Goal: Controlling PDVSA to Lower Global Oil Prices

The ultimate objective behind this high-stakes plan is to drive global oil prices down to a maximum of $50 per barrel. To achieve this, a Trump administration would theoretically seize total control of Venezuela's state-owned oil company, PDVSA, managing the acquisition and sale of nearly all its production.

U.S. Energy Secretary Chris Wright confirmed this strategy at a Goldman Sachs conference, stating, "We are going to market the crude coming out of Venezuela... we will sell the production that comes out of Venezuela into the marketplace."

This plan effectively involves capturing the revenue from PDVSA's crude sales, with the proceeds theoretically deposited into U.S.-controlled offshore accounts for the "benefit of the Venezuelan people." Unsurprisingly, the government in Caracas is expected to reject what it views as outright theft. This strategy is backed by what Homeland Security Advisor Stephen Miller has described as a "military threat" to maintain control over Venezuela.

The China Factor: More Than Just a Buyer

While the U.S. focuses on control, it overlooks China's deeply entrenched role in Venezuela's energy sector. Although China's daily imports of roughly 746,000 barrels from Venezuela are not irreplaceable—Beijing can easily source oil from Iran, Russia, and Saudi Arabia—its relationship goes far beyond simple trade.

For the past two decades, China has become the operational backbone of Venezuela's oil industry. Its contributions include:

• Refinery technology and heavy crude upgrading systems

• Infrastructure design and control software

• Spare parts logistics and software support

Removing Chinese engineers, technicians, and supply chains would not "liberate" a functioning oil industry. It would leave behind an inert shell. Industry experts estimate that converting Venezuela's Chinese-built oil infrastructure into an American-operated system would take a minimum of three to five years.

Furthermore, Beijing sees the U.S. push in the region as an attempt to force it to purchase energy using petrodollars. This is unlikely to succeed, as China increasingly settles energy transactions with Russia and Gulf nations in petroyuan.

Technical Hurdles and Years of Sanctions

The physical nature of Venezuelan oil presents another major challenge. The country produces superheavy crude, which is as thick as tar and requires specialized processes for extraction. It must be melted to reach the surface and then mixed with a diluent to prevent it from hardening again. For every barrel of oil exported, approximately 0.3 barrels of diluent must be imported.

This technical complexity is compounded by an energy infrastructure that, while shaped by Chinese technology, has been degraded by years of American sanctions. The damage is considered even more severe than that inflicted on Iraq's oil sector in the early 2000s, making any quick revival of production highly improbable.

Financial Speculators Circle the Chaos

While the strategic goals of the U.S. plan face serious questions, the turmoil has created opportunities for financial players. Hedge fund vultures are circling, anticipating massive returns. Paul Singer, whose firm Elliott Management acquired the Houston-based subsidiary of CITGO in November for $5.9 billion—less than a third of its $18 billion market value—is a prominent example. Singer has also been a major donor to MAGA-aligned super PACs, contributing $42 million in 2024.

The broader speculative market is eyeing potential profits of up to $170 billion in Venezuela's debt market, with defaulted PDVSA bonds alone valued at over $60 billion. This financial maneuvering underscores how instability, regardless of policy outcomes, generates immense wealth for a select few. Ultimately, the intricate web of technical, geopolitical, and financial factors makes the situation in Venezuela far more complex than a simple strategy of control can address.