The not entirely unprecedented action of the United States in Venezuela has definitively confirmed the thesis about the power and size of states, which today constitute decisive elements of the macro-processes shaping international relations. The explanations for this development can be found on several levels.
The first reason is the official one – drug trafficking into the United States, a problem that the U.S. itself has been highlighting for several years not only to Venezuela, but also to Mexico, Colombia, and other Latin American countries.
The end of cheap oil for China?
The second reason lies in the strategic dimension of global geopolitics and the new security strategy that openly invokes the Monroe Doctrine—today referred to as the Donroe (Trump) Doctrine. In other words, “America for Americans,” a sphere of influence under U.S. dominance.
This has major geopolitical implications, particularly for countries such as Iran (currently shaken by protests) and Taiwan. The U.S. intervention in Venezuela threatens to shut down a channel through which Iran and Venezuela circumvented sanctions, engaged in opaque financial mechanisms, and conducted barter trade. For China, this potentially signals the end of cheap oil imports, which represented the largest share of Venezuelan exports.
In the event of a genuine political transition in Venezuela, the United States would, with a single move, strike Russia (militarily and politically), China (economically and in terms of investment), Iran, and Cuba—while also sending a globally powerful symbolic message through the projection of American military strength.
For the European Union, the question of Greenland is also emerging on the horizon. Trump speaks a lot and enthusiastically, and taking him completely seriously is sometimes difficult. Nevertheless, his statements should now be taken at face value and acted upon accordingly. It is better to remain pleasantly surprised than unpleasantly caught off guard.
“Drill, baby, drill”
The third—and perhaps most fundamental—reason is oil. Under Trump’s favored slogan, “drill, baby, drill,” the United States has become a global oil producer. However, several U.S. refineries are specifically designed to process heavy crude oil, which is primarily found in Canada, Russia, and Venezuela (the latter holding the world’s largest proven oil reserves).
Although Chevron is currently the only oil company still operating in Venezuela, other U.S. oil giants have shown limited enthusiasm. It appears that, just days after the intervention, Trump is considering offering them state subsidies to support their presence in the country. These companies still hold claims related to nationalized assets in Venezuela, and it seems that unless the situation becomes clearer—and above all more stable—they will enter such an undertaking only reluctantly.
After all, a massive presence of oil companies requires not only stability, but also enormous investments and time. It should nevertheless be emphasized that the United States is (for now) not occupying the 30-million-strong Venezuela, and the situation could very well remain on its previous trajectory. However, if a gradual transformation were to occur and oil production were to increase, this would lead to lower prices and generate demand for investment and capital in a new market.
Dedollarization of Venezuelan oil sales
The fourth reason for the intervention emerges from concerns related to the U.S. dollar and signals of its circumvention in oil trade. This factor, however, appears more preventive than a response to an acute problem.
While payments in non-dollar currencies pose a risk to U.S. monetary dominance, Trump already declared last year that if the BRICS countries were to create a new currency or support an alternative to the U.S. dollar, they would face a 100% tariff on their exports to the United States.
Reuters estimates that up to 20% of global oil trade is currently priced in currencies other than the dollar, such as the euro or the Chinese yuan. JP Morgan has also pointed out that, in the past, there was a significantly stronger correlation between a rising dollar and falling oil prices. Due to a combination of factors, the strength of the petrodollar has therefore declined.
Although Venezuela possesses enormous oil reserves, it currently produces only around 1% of global oil output. As a result, the risk of a significant disruption—or dedollarization—of Venezuelan oil sales remains low, suggesting that this move is more likely a preventive step within a broader strategy to reinforce the petrodollar.
Author: Filip Šandor, analyst and co-founder of EXPORT ANALYTICA, for SITA
