Undermining the rule of law and a relatively free market will have long-term ramifications.
Undermining the rule of law and a relatively free market will have long-term ramifications.
Author’s note: This is the third of a three-part series on President Trump’s de facto seizure of Venezuelan oil reserves. See parts one and two.
I n the first two installments of this series, we looked at the background of the Trump administration’s dealings with the Venezuelan regime and the dubious legal justifications for the president’s invasion of Venezuela and attempt to effectively nullify the billions of dollars in judgments owed by the regime to American oil companies because of its expropriation of their production infrastructure and other assets. Now let’s turn to the most recent developments.
On August 28, the Trump administration announced that the Pentagon is taking a 35 percent stake in a foreign company — North American Blue Energy Partners (NABEP) — to which Delcy Rodríguez’s regime has ceded authority to develop 17 Venezuelan oil fields with 65 billion barrels’ worth of proven oil reserves. (See our editorial.) The deal would also give the United States a preferential right to purchase 20 percent of the oil output from the venture at cost — which explains (sorta) the president’s assertion of a controlling U.S. interest in the venture (i.e., 35 percent of NABEP plus 20 percent of the oil at no mark-up, which has been reported as a combined 55 percent, even though that’s really adding apples and oranges). Rodríguez, by contrast, insists that Venezuela retains “ownership and sovereignty” over its oil reserves; she also contradicts Trump’s claim that the regime granted NABEP a 100-year lease to exploit the oil fields at issue, maintaining that the agreement is for 25 years.
In light of the White House’s “fact sheet,” describing the president’s determination to strike back at “corrupt cronies of Maduro and Chavez,” it’s worth dwelling for a moment on the administration’s key partner in this venture. NABEP, the second-largest private oil producer in Venezuela, is controlled by Alejandro Betancourt López. He is a 46-year-old Caracas-born billionaire who got rich through the graces of . . . Hugo Chávez, who awarded his firm no-bid power-plant contracts. Betancourt is thus known as one of the bolichicos — the Chávez cronies who cashed in as the corrupt regime cozied up to China and Russia.
Betancourt began dabbling in oil late in the Chávez tenure through a joint venture with PDVSA (the state entity through which Venezuela nationalized the oil industry). He has since been pursued, first by Spanish and then by Swiss authorities, on money-laundering and extortion allegations. These have resulted in Betancourt’s being arrested twice by authorities in Britain, while he was residing there. So far, however, there have been no formal charges.
During the first Trump administration, Betancourt detected that the wind was blowing against Maduro (who’d taken over the Venezuelan regime when Chávez died in 2013). While consulting with the first Trump administration, he covertly aligned with the pro-democracy opposition and sought to forge alliances between anti-Maduro activists and the Venezuelan military. But the effort to oust Maduro failed in 2019, at which point Maduro turned on Betancourt — who fled the country as the regime seized his assets.
Remarkably, Betancourt managed to revive his tie with Delcy Rodríguez, Maduro’s vice president. By 2023, she’d persuaded Maduro to bring Betancourt back into the fold on the condition that he sever ties with the regime’s opposition. But, as Axios reports, Betancourt continued consulting with the Trump administration as the U.S. president demanded that Maduro leave Venezuela. Betancourt appears to have influenced Rodríguez to cooperate with Trump, rather than resist the administration’s plans for a post-Maduro order. Meantime, it’s been reported that the Trump Justice Department leaned on Switzerland to suspend its investigation of Betancourt.
The central role of Betancourt is not the only eyebrow raiser here.
Formally, NABEP is not a Venezuelan company; it is headquartered in Barbados while operating in Caracas. Under the deal announced by the administration, the U.S. government’s 35 percent stake is not in NABEP but in its “parent company.” What company is that? Where is it located? Is it an American company? Not clear. While I’ve been scouring reporting, the NABEP parent company doesn’t seem to be identified anyplace as of this writing. Yet it is through this parent entity that the administration claims it will be able to control NABEP’s board of directors, ensure that a majority of them are American citizens, and mandate that NABEP’s operations are “governed by U.S. law and . . . subject to the jurisdiction of U.S. courts,” as the White House “fact sheet” represents.
More curious: The Pentagon has no legal authority to take a stake in a foreign oil company. In 2023, Congress statutorily established the Defense Department’s Office of Strategic Capital. OSC is supposed to provide “capital assistance” in the form of loans for critical technologies and assets related to American military capabilities. Obviously, the armed forces need oil just like everything else does, but even if we thus stretch the concept of military capabilities to include hydrocarbons (and oil is not listed in the “covered technology categories” in the relevant statute — Section 149[h]), Congress’s law does not authorize the Defense Department to buy oil companies or stakes in them, much less foreign oil companies.
Undoubtedly aware of this, the administration says the OSC investment in NABEP will be done by the issuance of warrants. This is a fig leaf to deny that the equity stake is an equity stake. The warrants, technically, function as an option to convert the warrants into an ownership stake. Of course, if the administration did not already have a functioning ownership stake, it would have no capability to make good on its representation that NABEP will be governed by American law. Still, the warrants allow for the pretense that the Defense Department is not the 35 percent owner of what it will run as a 35 percent owner — just an option holder that could passively hold or even sell its warrants without ever exercising them.
This, in turn, is why Trump can say that our country is somehow — through an arm’s-length financial transaction, not a bullying seizure — acquiring control and (eventually) guaranteed access to limitless supplies of cheap oil with no expenditure of taxpayer funds. What Betancourt and NABEP want in exchange for control is U.S. government influence and protection. The company needs to raise funding to make good on its pledge to invest a huge sum — $100 billion — needed to get moribund Venezuelan production flowing. That will take many years because, as a result of corruption, mismanagement, and deterioration of infrastructure, the country currently produces only 1 million barrels per day (around 1 percent of global supply). And given the mercurial nature of Venezuelan politics and the short window remaining for the Trump administration, it is no sure thing that NABEP will have that kind of time.
Nevertheless, the Trump administration is betting that even though it has no legal authority to take a stake, the structure of its deal allows it to claim (a) it has not taken a stake, and (b) even if it has taken a stake, doing so has not caused the kind of concrete and particularized injury that would give a private party standing to complain about the illegality in court. Unlike the president’s illegal imposition of IEEPA tariffs, no victims will be directly hurt by the Defense Department’s NABEP investment. American oil companies may claim they are being derivatively undercut by the government’s stake in a foreign competitor, but such harm is hard to quantify, so the administration will counter that this is speculative — and, at any rate (as we’ve seen), the IEEPA and Dames & Moore give the president a wide berth.
To be clear, I am not intimating that President Trump is without sound geopolitical calculations here. To develop a friendly, cooperative relationship with Venezuela, an important, energy-rich country in our own hemisphere (just like Canada, right?) would be a coup. To supplant the Chinese and Russian interests previously courted by Chávez and Maduro with American producers would benefit the security and prosperity of both the United States and Venezuela. And if, over the next decade or more, Venezuela can convert its oil-reserve resources into oil-production wealth that assures American access to abundant supplies, that would be the signature achievement of Trump’s two terms in office. It’s understandable why the president is working this so hard.
That said, undermining the rule of law and a relatively free market — one the government polices against fraud but does not seek to control as a domineering participant — will prove to be a signature failure with long-term ramifications. Since the conclusion of World War II, the United States has been the global superpower that makes rogue nations think twice about aggressively seizing the territory or resources of other nations. If we no longer hold that line or, worse, become one of the rogues, the future is dark.