War Signals, Quiet Channels, and Venezuela’s Discounted Barrels

This article was first published on Oilprice.com.

In a recent post on Truth Social, U.S. President Donald Trump threatened Venezuela to take back ‘prisoners and people from mental institutions,’ or else ‘the price you will pay will be incalculable.’ This was announced right when the U.S. military was deploying an array of Navy and Air Force units in the Eastern Caribbean, and even elite Special Operations forces, making the threat real.

The deployment is accompanied by a key narrative element. Since late July, administration officials have been promoting the idea that Venezuela is ruled by a ‘criminal organisation’ known as the ‘Cartel de los Soles’, with Nicolás Maduro at its head. Many analysts are thus seeing through the ‘counter-narcotics’ rhetoric, concluding that this is a campaign to drive Maduro out of power.

The U.S. military has since bombed and destroyed three boats, alleged to be carrying drugs from Venezuela—although the statement on the third strike shied away from mentioning the country, given rising questions over the legality of such actions. In any case, while the Navy surrounds Venezuela’s coasts, destroying speedboats could be equivalent to shooting in the air during a heist.

At Guacamaya we recently published articles finding that the ‘Cartel de los Soles’ story is no more than a political narrative, ignoring the realities of drug trafficking, and that it is being promoted by certain political and economic interests to push for regime change in Venezuela. Others have also analysed how the use of the terms ‘Tren de Aragua’ and ‘Cartel de los Soles’ has risen and fallen based on their political convenience.

President Trump’s messaging has consistently focused on fentanyl—which causes 70% of overdose deaths in the United States—instead of Colombian cocaine. And in any case, just 5% of the latter transits through Venezuela, according to none other than the DEA. What Venezuela does indeed have is 300 billion barrels of oil, 220 trillion cubic feet of gas, and significant deposits of gold, iron, tin, bauxite, coltan, and rare minerals. Meanwhile, Caracas has been a close ally of Havana, meaning it is in the sights of South Florida’s Cuban-American political community, with Secretary of State and National Security Advisor Marco Rubio at its head.

Are we then to expect a further escalation of conflict between the United States and Venezuela? How likely is it that there will be an all-out war? Or are the two sides ready to negotiate? Then, what would either of these options mean for energy markets?

Actually, there are some signals that both the White House and the Palace of Miraflores are open to talk. The Truth Social post creates a doubt. One can understand that it refers to President Trump’s claim that Maduro purposefully sent thousands of criminals into the United States. But if Venezuela accepts all deportees, would regime change plans be shelved?

Soon after the publication, on the very same day, Reuters said that it had seen a letter in which Maduro offered Trump to engage in direct talks via Presidential Envoy for Special Missions Richard Grenell. The letter’s date was September 6, probably reflecting that some officials tried to hide it.

A key question remains. The United States is already sending two flights full of Venezuelan migrants home every week. By mid-September, this means 54 flights and 10,000 deportees, according to a source in the State Department with information on the matter. So, is the solution as simple as ramping up the pace of deportation flights?

Likewise, regarding drug trafficking, would it be enough for Maduro to commit to combating the transit of cocaine? If Trump only worries about fentanyl, eradicating it will be all the easier.

Besides immigration and drug trafficking—real and alleged—energy is the key topic in discussions between Washington, DC and Caracas. If they go back to the negotiation table, one can be sure that oil and gas will be on the agenda.

The sanctions waiver for Chevron to continue operating in Venezuela is still active. Local sources estimate that it is shipping an average of 80,000 barrels per day to the United States, well below a high of 300,000 bpd last year, under the previous license.

The main argument behind the special authorisation is that the corporation needs to recoup its debts. But this results in an awkward favouritism. On one hand, other oil firms in the U.S. and Europe are wondering what the argument is for leaving them out. Simultaneously, there are various types of creditors of Venezuela, including bondholders and arbitration award claimants. The first group are owed $70 billion—not including bonds held by Venezuelan entities—while the second are requesting at least $23 billion. Both are mostly comprised of U.S. and European companies and financial institutions.

Another argument is that the Chevron license will allow the United States to keep a foothold in Venezuela and combat Beijing’s influence in the region. But the current sanctions framework is resulting in China taking 85% of oil exports, at a discount. We are also seeing private Chinese companies sign contracts to extract crude, including China Concord Petroleum, Anhui Guangda Mining Investment, and Kerui Petroleum; all while North American and European investors are barred by the Department of the Treasury’s sanctions.

Iran’s dark fleet is also back, providing much-needed diluents, after having stayed out of the picture while Chevron and other Western companies had licenses until late May this year. Historically, the U.S. and Venezuela had a symbiotic relationship; the first sold light petroleum products to make the second’s extra-heavy crude exportable, which then ended up in the Gulf Coast refineries.

The still active Chevron license leaves an open question mark. Is the White House gearing up to escalate tensions, and risk losing its last foothold in Venezuela? Or, perhaps, will it use negotiations to expand its economic beachhead and demand better conditions for American businesses? President Trump has already sought to extract deals for critical minerals and energy with countries like Ukraine, the Democratic Republic of Congo, Syria, and Saudi Arabia.