Photograph by Nathaniel St. Clair

Following the dramatic seizure of Venezuelan President Nicolás Maduro on January 3, 2026, Trump’s comments about taking control of Venezuela’s oil industry quickly triggered accusations of “neo-imperialism”. Critics argued that pledges to share profits with Venezuela were little more than cover to protect the interests of America’s major oil companies. Yet despite the allure of Venezuela’s reserves, many of those major oil firms have been notably cautious, citing uncertainty over the country’s political trajectory and the durability of legal and financial protections.

Venezuela sits atop more than 300 billion barrels of proven crude reserves, constituting roughly 17 percent of the global total. This is more than Saudi Arabia’s reserves, which is the world’s most recognizable oil power. The two countries have comparable population sizes, yet Saudi citizens rank among the wealthiest in the world, while Venezuela has become one of the poorest countries in the Americas.

The contrast can be partly explained by geology. Most Venezuelan oil is considered heavy and sour, meaning it is dense and high in sulfur. Extracting, transporting, and refining this oil is more expensive and technically demanding than the Saudis’ light, sweet crude, which flows more easily and requires less processing.

Saudi Arabia’s oil is also easier to access. Much of it lies close to the surface and on land, lowering extraction costs. Venezuela’s deposits are, meanwhile, often deep underground or offshore, complicating extraction and transportation.

Despite these constraints, Venezuela was one of the world’s leading oil producers by the mid-20th century and a major supplier to the United States. Oil revenues supported a relatively prosperous, urbanized society, and following the leverage gained by producer states after the 1973 oil shock, there was both elite and public support for greater national control over the industry. In 1976, the Venezuelan government nationalized the oil industry, creating Petróleos de Venezuela, S.A. (PDVSA).

The nationalization process was orderly, with U.S. and European oil companies compensated and the transition carefully negotiated. For years afterward, PDVSA operated with significant autonomy and technical competence, maintaining ties with foreign firms and continuing to develop its industry.

The politicization of PDVSA, however, proved fatal for it. After a period of market opening in the 1990s, Hugo Chávez was elected as the president of Venezuela in 1998 on a platform built around redistributing oil wealth and reasserting state control over the economy, particularly the oil sector. He quickly consolidated political control over PDVSA, and after a wave of labor strikes in 2002–2003, his government replaced roughly 20,000 experienced workers with political loyalists who often lacked the technical expertise and skills needed to do the job.

From that point, PDVSA increasingly functioned as a fiscal arm of the state. Political decisions overrode commercial logic, and revenues were diverted away from maintenance and reinvestment toward social programs and short-term spending.

Unlike the 1976 nationalization, Chavez’s approach rewrote established agreements, undermining foreign confidence and operations. Western energy companies reduced their exposure or exited altogether, taking capital, technology, and expertise with them. This was especially damaging because U.S. Gulf Coast refineries were uniquely suited to process heavy crude, having adapted to it over decades. American refiners replaced Venezuelan oil with Canadian heavy crude and domestic shale production, weakening Venezuela’s most natural export market.

During the oil boom of the 2000s, this appeared sustainable, with the country’s per capita income rebounding and Chavez’s social programs winning broad popular support. However, the policies also steadily hollowed out the oil industry’s capacity, while hundreds of thousands of the country’s skilled workers emigrated. The “oil strikes” in Venezuela to overthrow Chavez in 2002 and 2003 led to the country facing large layoffs in PDVSA. “This was the beginning of the large brain drain in Venezuela when many highly skilled industry workers left their home country to work for multinational corporations like ExxonMobil and Chevron,” according to the Borgen Project

Political conditions worsened sharply in the 2010s, as Venezuela drifted further toward Moscow and Beijing. After Maduro took office in 2013 following Chavez’s death, the U.S., under former President Obama, began targeting Venezuelan officials with sanctions in 2015. The sanctions later expanded under Trump to reduce PDVSA’s access to financial markets, insurance, spare parts, and technology. Cut off from the West, Venezuela leaned more heavily on Chinaand Russia, often accepting discounted deals that provided short-term liquidity but little long-term investment or capacity expansion.

When oil revenues collapsed mid-decade, the government resorted to money printing to cover deficits, fueling hyperinflation in the late 2010s that wiped out savings, wages and purchasing power. Strict currency controls also required export earnings to be converted at artificial exchange rates and deprived PDVSA of dollars. With demand from China and other countries never replacing that of the United States, Venezuela’s oil industry was effectively cannibalized to sustain the state. “Until 2017–2018, national access to international wealth was subsidized at the expense of PDVSA’s viability. Since then, through monetized credit from the Central Bank and the reorientation of the exchange rate policy, an attempt is being made to save the oil company at the cost of an abrupt internal adjustment,” stated a 2025 study in the journal Resources Policy.

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