Edward Lotterman
President Trump’s attention has passed on from seizing control of Venezuela to seizing control of Greenland and seizing control of Minnesota.
But he took on a big task when he said he was also “president of Venezuela” and saying that our nation was going to run it. The task will be far more complicated than he can imagine. So I suggest he start now.
The longer he delays, the harder gaining control will be. In the meantime, citizens can ponder just why our leader opened such a huge can of worms. Consider the following.
A sordid history
Trump’s decision to “run” another nation in the hemisphere has precedent in history. The U.S. military governed the Dominican Republic for eight years from 1916 into 1924 and again for 17 months in 1965-1966. We ruled adjoining Haiti longer, 15 years from 1919 into 1934. We governed Nicaragua for 21 years, 1912 through 1933. In all we installed dictators who were increasingly inept, corrupt and brutal over long terms and produced stagnant economies. Outside of our announced goals of keeping either the German or British navies from capturing the Panama Canal, we gained nothing. In all cases, we ended up asking, “How do we get the heck out of here?” That will happen again.
Less oil that people think
Venezuela claims some 300 billion barrels of oil reserves. If true, they own about a sixth of all the known reserves on the planet. But while there are generally used terms about “reserves,” there is no standard methodology for estimating them. British Petroleum makes annual tabulations for all countries based on available information. Many other nations issue their own. Accuracy varies with actual data from seismic surveys and test drilling. Most indexes include caveats such as “with current technology” and “at current prices.” Both of these change over time. Lower prices mean lower recoverable reserves.
However, the most important caveat about Venezuela’s 300 billion figure is that it was simply issued when Hugo Chávez still was president. That was an increase from 80 billion beforehand and was due to adding acidic tar-like deposits in the Orinoco Basin.
Venezuelan oil is not that valuable
Even with a still sizable 80 billion barrels, Venezuela’s oil is not as valuable as some think. The problem is that virtually all is graded “heavy” and “sour.” Heavy means it is very thick, some requiring heating to be pumpable. Sour means it contains sulfur compounds that make it acidic, sometimes to the point that all piping and refinery equipment has to be made of stainless steel. That means only a small number of refineries can process it without major upgrades in their facilities.
Yes, decades ago, U.S. refineries did handle larger quantities of Venezuelan crude, but many no longer have that capability. Chevron, the one U.S. company that past administrations allowed to continue operating there, could expand refining as it expands production. But overall, Venezuelan crude is not highly desirable and sells at lower prices than crudes that are “light” and “sweet,” often a fourth less than that from west Texas, North Dakota, Saudi Arabia or Nigeria.
U.S. gas prices will change little
Even though we import some 6 million barrels of crude and refined petroleum a day, and run 17 million barrels through our refineries, we are a net exporter of some 2 million barrels. In other words, we are not a closed market. Our prices vary with world prices. Industry sources say that if we import more from Venezuela we will simply cut imports of heavier grades we buy from Saudi Arabia. Just as federal farm subsidies to growers of internationally-traded corn and soybeans don’t cut the price of vegetable oils on U.S. store shelves, more Venezuelan crude will change little at gas pumps.
Money from Venezuelan oil already has many claimants
The president talks of what can be done with money from the sale of Venezuelan oil as if it is pot of money that can be grabbed without harm to others. He is already setting up accounts in an opaque Qatari bank to be controlled by him. This leads some to wonder if the whole operation is just to shift a flow of money from a small-time grifter to a much larger grifter.
Supposedly it is a way for money to be funneled back to the corrupt and inept still-Chávista government of Venezuela now headed by Vice President Delcy Rodríguez without being attached legally by creditors such as U.S-based Exxon-Mobil. That firm is due at least $1.6 billion for assets expropriated by Chávez in 2007. Laundering the money through Qatar is billed as a way for the money to benefit the Venezuelan people by keeping the government operating and supplying at least minimal health and educational and other services to them. Time will tell.
In any case, some 250,000 to 300,000 barrels of oil a day, about a third of current total output, belong to Chevron. The company and people connected to it have given large amounts to Trump’s campaign and inauguration funds. Chevron is the one company capable of increasing output with current assets, saying it could double its current 300,000 barrels a day. That would increase current total output by a third. But Chevron will not release increased revenues to anyone other than royalties to Venezuela that already apply.
Ramping up oil production take longer than some think
Most of Venezuela’s oil infrastructure is worn out junk after decades of inept administration by Petróleos de Venezuela S.A. or PDVSA, the state-owned oil company, and by decades of sanctions. Existing wells themselves need to be “worked over” to restore output. New wells take time to be sited, drilled, developed and connected to gathering pipelines. Pipelines, storage and loading facilities need to be built along with equipment to process oil for shipping by removing water, sediment and other contaminants. Chevron’s facilities are the only exception. Such infrastructure is complex and cannot simply be purchased from some “oil equipment R Us,” shipped to Venezuela and hooked up like a new clothes washer.
The crucial question is whether new facilities will be operational before the end of Trump’s term in three years. The answer is not much of it. Companies know this.
Others in the hemisphere will suffer
While governments and people of many other nations in the region are glad to see the Chávista-Maduro regime gone, Trump’s aggressive move to assert U.S. hegemony in the hemisphere is not popular. This is realpolitik in action. We have directly intervened militarily, backed military coup d’etats or supported brutal dictators who favored U.S. fruit, oil, sugar and other interests, and politically repressed leftists who might have favored deeper relations with the USSR. I know, I was a pimple-faced clerk in the large U.S. military mission to Brazil 58 years ago. Then its military government was torturing political prisoners with the guidance of U.S. “public safety” advisers working for USAID. Brazil’s past president Dilma Rousseff was one of them, and the brother of current president Luis Ignacio da Silva suffered particularly horrific acts. Similar cases could be found in a dozen other nations.
But it is not just that. There is a 250-year history of Latin Americans asserting their equality as nations and the United States asserting that they are subordinates. No one likes being bullied even if the bully does not beat them up anymore. Other than for some right-wingers like Jair Bolsonaro’s followers in Brazil, Trump is highly unpopular in the region as are his policies.
China will be the net gainer
The upshot is that America First — whether home or abroad — boosts the standing of China, the obvious economic alternative to the USA, just as it undercuts our own. People and governments are wary of China, but it does not threaten them the way the current administration does, and it is far more willing to spend money on infrastructure projects and industrial investments. People and governments see China as a poor second best but resent being forced to kowtow to our president.
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The issue of exactly how Trump plans to “govern” Venezuela and how he expects that dominance to be extended after his term ends is yet another, even larger, can of worms.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.



