The ongoing U.S. naval blockade of Venezuelan has cost an estimated $700 million and counting with two more oil tankers seized Jan. 7, as President Donald Trump aims to sell more Venezuelan crude oil to American refineries and convince U.S. oil companies to return to embattled nation.
Operating the USS Gerald R. Ford and its aircraft carrier strike group costs more than $9 million per day—adjusted for inflation—since being ordered to Latin American waters in October, according to a prior report from the Center for a New American Security. Those costs do not account for the boat strikes that began in late August—killing more than 100 people thus far—or the Jan. 4 attacks in Venezuela that resulted in the arrests of leader Nicolás Maduro and his wife.
Trump has argued the U.S. does not want a prolonged occupation so long as Maduro’s vice president and now-acting president, Delcy Rodríguez, defers to the U.S. And he is pushing for U.S. oil companies to work in Venezuela to rebuild the dilapidated industry and get oil and dollars flowing again.
The White House did not refute the financial numbers of the blockade nor provide additional information, with spokesperson Anna Kelly saying in a statement that Maduro’s arrest saves American lives, stops the flow of drugs and criminals, initiates a deterrence in the Western Hemisphere, and creates economic opportunities for Venezuelans and Americans.
David Goldwyn, Atlantic Council fellow and State Department special envoy for international energy affairs in the Obama administration, told Fortune that Trump is operating with an “incoherent strategy.”
“A lot has been spent, and little has been gained,” Goldwyn said. “It’s really hard to see what the upside is. Maduro has been removed, but the rest of the regime are all still in place.”
“The prize he’s trying to manufacture of special access to resources for U.S. companies seems to be unwelcome by most.”
Indeed, Trump is scheduled to meet Jan. 9 with oil executives, including leaders from Chevron, Exxon Mobil, and ConocoPhillips. The companies did not respond to requests for comment.
Chevron is the only American oil company operating in Venezuela—under a special license—producing nearly 20% of the country’s oil.
Trump argued the American oil companies are “ready to go in” and spend billions of dollars to rebuild Venezuela’s energy infrastructure and dramatically increase the flow of oil to bring revenues back to Venezuela and the U.S.
But the reality is different. Once a major player churning out nearly 4 million barrels of oil daily, Venezuela’s volumes have plunged from 3.2 million barrels daily in 2000 down to fewer than 1 million barrels today from a combination of mismanagement, underinvestment, and escalating U.S. sanctions. More than doubling Venezuela’s current oil production likely would take until 2030 and cost about $110 billion, said research firm Rystad Energy.
Apart from Chevron, U.S. companies have previously expressed reservations about returning because of the political instability, high costs, and weaker oil prices. ConocoPhillips and Exxon are still owed billions of dollars from Venezuela from the 2007 expropriation of their assets resulting international tribunal rulings.
“We’ve been expropriated from Venezuela two different times. We’d have to see what the economics look like,” Exxon CEO Darren Woods told Bloomberg in November. “We have our history there.”
How Trump plans to profit from Venezuelan oil
In the meantime, Trump said on social media the U.S. will take between 30 million and 50 million barrels of Venezuelan crude over time to sell from the United States. The proceeds would be controlled by the White House, although the details remained vague.
Presumably, more oil would be sold to U.S. refineries that are configured to process the heavy grade of crude that comes from Venezuela, and Venezuelan state oil company PDVSA would receive most of the proceeds.
Depending on the number of barrels—and based on the current benchmark price for oil in the U.S.—that much oil could be worth between $1.6 billion and $2.8 billion.
PDVSA confirmed in a Jan. 7 statement that it is negotiating with the U.S. in a framework similar to those with Chevron and other international companies. “PDVSA ratifies its commitment to continue building alliances that promote national development in favor of the Venezuelan people and that contribute to global energy security.”
The effort implies the U.S. will auction the oil barrels through the U.S. Department of Energy and hold the proceeds in escrow as leverage for Venezuelan cooperation, said Matt Reed, vice president of the geopolitical and energy consultancy Foreign Reports. Most recently, about 80% of Venezuelan oil exports went to China and nearly 15% to the U.S.
“It sounds like a twist on the old, UN ‘oil for food’ program that allowed Iraq to sell oil but only tap revenue for essential goods like food and medicine. The difference this time is that Washington will decide where the oil goes. U.S. refiners will probably get priority depending on Gulf Coast demand,” Reed said. “It’s unclear how or whether the US will profit from this. Rather, Washington is counting on this leverage to twist arms in Caracas.”
As for the Trump oil summit with executives, Reed said, “Washington can offer incentives but only Caracas can convince American firms to take the plunge and invest over the long term.”
