As is often the case, there is a kernel of a shade of truth in the president’s hyperbolic talk on social media.
As is often the case, there is a kernel of a shade of truth in the president’s hyperbolic talk on social media.
L eave it to President Trump to sprinkle lots of crazy on top of legitimate allegations against the Marxist regime of Nicolás Maduro in Venezuela.
In his post on Tuesday evening, the president warned that the mighty “Armada” he has deployed in the Caribbean “will only get bigger, and the shock to them will be like nothing they have ever seen before” unless and until Venezuela and its government “return to the United States of America all of the Oil, Land, and other Assets that they previously stole from us.” According to Trump, “the stolen Oil Fields” are the source of funding for the Maduro regime’s “Drug Terrorism, Human Trafficking, Murder, and Kidnapping.”
Now, much of this is nuts. The president seems to be referring to Venezuelan oil reserves, as well as the territory and other assets involved in extracting and developing them. These cannot have been stolen from our country because they have never belonged to us.
There is a long history of colonialism in Venezuela, but it is mainly a Spanish and French history, and it ended with Venezuelan independence in the first half of the 19th century. In the ensuing two centuries, there has been no shortage of internal violence and upheaval, but Venezuela has been ruled by Venezuelans. And even in the colonial phase, it was not an American colony, such that we would have even a theoretical claim of ownership of some of its territory and natural resources.
Presumably, then, the president is talking about the American oil companies that developed Venezuela’s rich oil resources until a series of Venezuelan regimes first nationalized the oil industry and eventually expropriated the property of American and other corporations.
In the early 20th century, big U.S. oil companies had lucrative concession arrangements with the Venezuelan government. They paid Caracas modest royalties, but it was a very one-sided arrangement. By mid-century, modernizing Venezuela turned to “resource nationalism.” It shortened concessions and imposed higher rates on the companies, and oversight became more intrusive.
Venezuela was one of the founders of the Organization of Petroleum Exporting Countries (OPEC) in 1960. And when prices surged due to the 1973 oil shock (after which those of us of a certain age remember sitting in gas lines as our parents hoped to fill up), Caracas got a true sense of its wealth and potential power. In 1976, the Venezuelan government nationalized the oil industry, creating the state oil company PDVSA (Petróleos de Venezuela, S.A.) and transferring all oil assets to the state. It was, however, a comparatively orderly process, especially compared to nationalizations of major industries elsewhere in the world. Significantly, the U.S. oil companies were compensated.
This brings us to a principle of customary international law which the United States has essentially accepted over the years: permanent sovereignty over natural resources (PSNR).
The idea is that, as far as the rest of the world is concerned, the resources in a nation’s sovereign territory belong to that nation. Hence, it has been the policy of the United States not to dispute a national government’s right to nationalize industry and expropriate property. What the United States does insist on, though, is compensation. And that means fair compensation — the fair market value of what assets are worth when they are seized, as opposed to leftist notions of “fairness” to “developing countries,” on the theory that they have been pillaged by “oppressor” countries, calling for deep discounts and a blind eye toward refusals to pay.
Our government has been supportive of developing nations that have sought autonomy over their major industries — an approach that has made it easier for American companies to work in and profit from that development, and that kept strategically important developing countries aligned with the U.S. during the Cold War. Still, Washington has also pioneered the establishment of international tribunals for resolving compensation issues. The most prominent of these is the International Center for Settlement of Investment Disputes, set up in Washington, D.C., in 1965 as a division of the World Bank. It was created by the ICSID Convention, which the U.S. led and of which, importantly, Venezuela is a member state.
American law also reflects this orientation — defer to sovereignty but demand compensation.
Our courts, for example, follow the “Act of State” doctrine as well as the doctrine of foreign sovereign immunity. Generally, our judiciary will not review the actions taken by sovereign nations within their own territories, even if they may violate international law. That is, a court in the United States will not adjudge as illegal a country’s expropriation of property in its own territory.
Nevertheless, to the extent that a country has entered treaties or other enforceable international arrangements in which it consents to be sued for money damages, our courts do entertain such actions. What’s more, they adhere to “alter ego” principles, which hold that an ostensibly private corporation can be sued if it is a de facto arm of a government that has failed to pay its compensation obligations. A good example: Citgo, a formerly American oil company that, in 1990, became a wholly owned subsidiary of PDVSA, an arm of the Venezuelan regime.
After Venezuela nationalized its oil industry, things ran smoothly for a time, at least relatively speaking. But oil prices collapsed in the Eighties, and Caracas failed to diversify its oil-driven economy. The ensuing squeeze led Venezuela to reopen its oil industry to foreign participation through joint ventures with PDVSA — particularly, such American companies as Exxon, Chevron, and ConocoPhillips.
This mutually profitable resurgence, and, for the most part, PDVSA itself, were destroyed by the revolutionary Marxist regime of Hugo Chavez — the same “Bolivar” regime now run by Maduro, Chavez’s protégé. The regime again fully nationalized the oil industry, only this time in a fervor of radical leftist populism rather than with the technocratic measures of the 1970s nationalization — which, to a degree, had insulated PDVSA from political control, enabling it to flourish.
The Bolivar regime expropriated the property of ConocoPhillips, leading to an astronomical $8.7 billion ICSID judgment against Venezuela. ExxonMobil won a $77 million judgment for the regime’s theft of its assets. (For various reasons, including accommodation of Chavez’s demands and exemptions from U.S. restrictions, Chevron continued to operate in Venezuela and its property was not expropriated). And Crystallex, a Canadian mining company, saw the Chavez regime seize its Las Cristinas gold mine, resulting in a $1.2 billion ICSID judgment — the case that resulted in the freezing of Citgo’s assets, on which all of Venezuela’s major creditors hope to cash in.
The regime that Chavez bequeathed to Maduro never paid what it owes in compensation.
As is often the case, then, there is a kernel of a shade of truth in the president’s crazy talk. No, Venezuela did not steal oil, land, and other assets from America; but it did steal billions of dollars in those resources from American companies and, derivatively in some ways, from American taxpayers. Moreover, the United States in many forms — diplomatic statements, legal briefs, proceedings in the United Nations and other international bodies — has conceded the point that a nation’s resources presumptively belong to that nation, but our government does not recognize the legitimacy of expropriations without just compensation.
Trump is also right that this is part of what makes the Venezuelan regime a destabilizing force in our hemisphere. Although the regime’s Marxist policies have corrupted its oil sector into a shadow of what it once was (and could be again), what comparatively little it still generates does, in fact, fund Maduro’s monstrous activities and repression of the Venezuelan people — from whom he has stolen the last two elections. And Maduro’s regime makes common cause with China, Russia, and Iran (including Hezbollah) — enemies of the United States (although Trump weirdly won’t acknowledge that, even as he threatens the junior partner in the Caribbean).
That said, Venezuela has not attacked the United States, nor even threatened to do so. And while the president has an unseemly obsession with the oil, the American interest is in regional stability and countering our geopolitical rivals.
In sum, there may well be cause to use military force against the Venezuelan regime — certainly the case is stronger than that for the Trump administration’s continued use of lethal force against suspected drug-ferrying boats. But to be constitutionally legitimate and politically prudent, authorization for the use of the military must be sought from Congress. Only by having a congressional debate — a national debate — on the use of force can we be reasonably confident about American unity on the rationale for using force, about what we hope to accomplish, and about what the plan is for the day after Maduro.