It's not about the oil even if it is about the oil

Waging war to earn cash has been the objective of ambitious rulers since antiquity. The early Roman empire was arguably sustained by the booty from its conquests, particularly silver from Macedonia, and the Mongols paid their armies using the loot from captured cities. Russia has seized property from occupied oblasts in Ukraine, passing laws for this purpose.

However, it is quite novel to seek to pay for a war that has not yet happened through spoils one does not yet possess. The USA is currently seeking to do so, following its abduction of the Venezuelan dictator Nicolas Maduro.

Venezuela nationalised much of its oil and gas industry in 1976, and outright expropriated privately held assets under the Chavista regime in the 2000s. This included assets owned by ExxonMobil, Chevron, and ConocoPhillips. The latter lost about $8.5bn of assets to the regime. It repeatedly won international arbitration cases on the topic, but has never been paid back.

It is this refusal to pay the costs of nationalisation through which President Trump and other American officials have explicitly framed their intervention in Venezuela. Maduro’s abduction follows a de facto naval blockade of the country, including the outright seizure of an oil tanker in 2025. The deal Trump has offered the oil majors who have lost out from Venezuela’s historic policy is that if they commit to investing in the country’s dilapidated oil and gas infrastructure they will make back that lost capital and gain more besides.

This implies transferring if not simply the legal right to exploit known oil resources in the country, then outright giving assets owned by Venezuela’s state-owned oil company PVDSA to American majors. This would be expropriation in reverse.

Venezuela currently produces about a million barrels of relatively heavy crude per day, the majority of which goes to China. The US oilfields produce lighter crude which is less suitable for producing heavier fuels such as diesel, meaning that Venezuela’s output has value on the US market despite being harder to process. The US currently buys oil from Venezuela at about $60 per barrel, which reflects the structurally lower global price of oil in the wake of China’s rapid electrification of its economy. If the American majors are given PVDSA’s assets for free, most estimates of the cost of modernising its infrastructure are in the region of $60-100bn. If we generously assume that this can be done overnight and production can be tripled, bringing it closer to pre-2000 norms, then this represents an income stream of about $55bn per year once the cost of production is removed, easily recovering the capital cost.

One assumes this simple calculation is what President Trump is working off when he declares that oil revenues will cover the cost of occupation. However, this presumes that the USA can achieve its strategic objectives through an oil blockade. Transferring ownership of PVDSA assets and their associated income streams would starve the Venezuelan Government of revenue. PVDSA revenues represent about half the budget of the country. The total collapse in public spending handing over PVDSA assets would represent would effectively collapse the country’s economy, as spoils are transferred overseas.

The new President, Delcy Rodrigeuz, is currently seeking to reconcile with the US regime. However, it is hard to see how an unfunded Caracas would be able to guarantee security for US majors building new infrastructure, implying an enduring role for US troops on the ground. This would make the occupation of the country compare much more closely resemble the occupation of Iraq, which conservatively cost the US nearly $800bn. Considerable partisan activity would be expected from Venezuelans not unreasonably objecting to a foreign power removing the country’s wealth. Such partisans would likely be able to draw on support from China, who has overnight seen a significant source of its oil essentially removed. This would push up costs of production considerably, as pipes to the coast from Venezuela’s central oil producing region are repeatedly sabotaged. It is therefore unlikely that the Americans would make a return on invasion, unless they are willing to maintain the occupation for decades.

It is entirely possible that the US has not thought this far ahead, but if it has, it may regard this as a price worth paying for demonstrating that it demands the exclusive right to control resources in its near abroad. Certainly, the President’s references to the Munroe Doctrine indicate that this is the case. It was under this doctrine that the US sided with Venezuela against Britain in a territorial dispute in the 19^th century. If the US is bent on returning the world to that era of great power politics, then Britain should look to comport itself accordingly.