Venezuela’s state-run oil company is cutting production as a U.S. military quarantine cuts deeply into the country’s fuel storage capacity, underscoring the massive economic leverage that the Trump administration wields over new leaders in Caracas.
How the administration plans to use that leverage moving forward is one of the key questions hanging over U.S. policy in Venezuela — though analysts stress that fixing the outdated, under-performing oil industry in the South American nation will take years of sustained commitment from Washington.
Monday’s reports of production cuts from Venezuela’s government-run PDVSA oil company came on the same day that the country’s former leader, Nicolas Maduro, appeared in federal court in New York City to face narco-terrorism and other charges after he was captured by American Special Forces in a daring weekend raid in Caracas.
In the days since that raid, the Trump administration has made clear that it intends to take a direct role in overseeing the oil sector in Venezuela, which, despite having the world’s largest proven oil reserves at over 300 billion barrels, has seen its production plummet in recent years due to mismanagement, crumbling energy infrastructure and a slate of tough U.S. economic sanctions.
American oversight of Venezuela’s oil sector could potentially give Washington a powerful new tool with which to advance its own interests in the Western Hemisphere and beyond.
But analysts caution that there are still many unanswered questions about the administration’s long-term plan for Venezuela’s oil and the role U.S. companies will play. And, politics and security issues aside, specialists say that it will take at least several years and tens of billions of dollars in investments to rebuild the country’s badly degraded energy infrastructure.
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“The U.S. has a lot of leverage, but has a choice of whether and how to use it,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security who specializes in the intersection of economic and security issues.
“In order to actually have U.S. companies go in, there would have to be both predictability on the domestic governance structure and royalties … as well as some clarity with whatever is going to happen with the regime,” she said in an interview. “For major increases [in oil production], we’re talking about years and definitely tens of billions of dollars.”
The administration has indicated it intends to open up Venezuela’s energy resources to U.S. companies, some of which have the kind of refining capacity needed to handle the heavy crude produced in Venezuela. Only one American company, Chevron, currently operates in Venezuela under a special U.S. license and as part of a joint venture with PDVSA.
The Venezuelan state-run oil company is cutting its crude oil production because the country is running out of storage capacity, Reuters reported, a direct result of the U.S. blockade on oil exports.
Oil exports fund more than half of Venezuela’s annual federal budget, meaning a continued blockade will have devastating economic impacts for the country. Still, there are signs that Venezuela may try to circumvent that blockade. At least 16 Venezuelan oil tankers appear to have attempted to evade the U.S. quarantine and sail on to their destinations, the New York Times reported Monday.
On the governance side, the Trump administration clearly intends to use its power over Venezuelan oil to influence the tack taken by Delcy Rodríguez, who was formally sworn in Monday as the country’s interim president.
Secretary of State Marco Rubio said Sunday that U.S. influence over the country’s oil sector is what the Trump administration means when it says it plans to “run” Venezuela in the short term.
“What we are running is the direction that this is going to move moving forward, and that is we have leverage. This leverage we are using and we intend to use. We started using [it] already,” he told ABC’s “This Week” program. “You can see where they are running out of storage capacity. In a few weeks they’re going to have to start pumping oil unless they make changes.”
The U.S. could use its leverage to pressure the country to clamp down on drug trafficking and illegal immigration, or to stop its purchases of arms from Russia and its economic cooperation with communist China.
The administration also could use its leverage in Venezuela to impact the politics elsewhere in the region, such as in Cuba, which relies heavily on Venezuelan oil. About 4% of Venezuela’s oil exports went to Cuba in 2023, according to U.S. government data.
Venezuela currently produces only about 1 million barrels per day, comprising less than 1% of total global output.
China is by far Venezuela’s biggest customer, accounting for more than two-thirds of Venezuelan oil exports, recent data show.
But as an overall share of China’s oil imports, Venezuela is a small-time player, providing about 470,000 barrels per day. That pales in comparison to China’s imports from Russia — about 2.2 million barrels per day — as well as Beijing’s imports from Middle Eastern nations and other suppliers.
But that doesn’t mean there aren’t immediate impacts on China’s geopolitical calculus stemming from the U.S. capture of Mr. Maduro and its direct role in Venezuela’s future.
“What’s more important for China is what this symbolizes and signifies for broader Chinese investment in the Western hemisphere,” Ms. Ziemba said.
