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It's now been just over 200 days since the USA struck Venezuela and captured its incumbent president Nicolas Maduro. The operation was met with mixed reactions from the international community, but one of the central justifications for all of this is that Venezuelan oil could pay for everything. Properly accessing the world's largest oil reserves could rebuild the country under a friendly regime, repay its debts to international creditors, provide a lucrative revenue stream for a select group of international oil companies, and also just get more oil out into international markets and western refineries. In the months since, that last point has for unrelated reasons become even more important, obviously. So then, where has that oil actually
gone? The best answer is we do not really know, but we do have some clues. And theoretically, if oil is flowing in one direction, there really should be money flowing in the other direction as well. And a lot of that money that we do know so far has ended up in Qatar of all places. So what is going on here? Why is an otherwise completely unrelated country holding onto this money instead of the treasury of the USA, or Venezuela, or even a private oil company? At least that would make sense, right? Now, the obvious conclusion that a lot of commentators have jumped to is that this is just to make it easier to embezzle this money in a third-party jurisdiction out of the reach of the US or Venezuelan authorities.
Now, the good news is that besides this possibility, there are genuine reasons for this strange offshore banking setup to exist like this. The bad news is that those genuine reasons are probably worse than just regular old embezzlement anyway. It also doesn't stop there either. Part of the plan with Venezuela is that the oil companies will make a major investment of reportedly up to a hundred billion dollars into the country to modernize its infrastructure and enable the extraction of even more oil. But historically speaking, investing in Venezuela has been a terrible idea to the point where part of the reason why they can't even hold onto their own oil revenue is because all of the previous
investors throughout their modern history are still trying to sue them to get their previous investments back. So there is a lot going on here and a lot of questions to answer. So, where is Venezuela's oil actually going? Where is the money from that oil going? Why is Qatar involved in any of this? Why is China so angry? Are the major oil companies really going to invest hundreds of billions of dollars into this country? What happens if and or when government leadership in the USA changes? And finally, is there a realistic way that any of this could actually end well? At this point, just about everyone is using AI. I use it for all sorts of things and most people know that each model is good for different things. But,
swapping from platform to platform can get annoying and very expensive very fast. That was until I started using Merlin AI. It's an all-in-one AI tool. Merlin AI puts ChatGPT, Claude, Gemini, and more in one place so I can pick the best one for the task, whether I'm doing sales, research, or emailing. And if all that wasn't enough, they gave my audience a 60% discount. Let me show you how it works. I click the Merlin AI extension, chat with the webpage to summarize what I'm reading, and turn on deep research to create a clean structured report from multiple sources. It also has image and video generation. If you pay separately,
ChatGPT, Claude, and Gemini are $20 each. Subscribing to all of them can add up really quickly. Merlin AI is cheaper because they buy tokens in bulk, something that most people simply don't have the option to do. Go to checkout and enter the promo code EE8 and the total drops to $96 for the year. That's eight bucks a month. I don't know how long this deal will last, so grab it soon. The link is in the description. Before any of this happened, Venezuela's economy could really only be described as a complete basket case. The country holds the world's largest proven oil reserves, roughly 303 billion barrels according to OPEC figures. Although, independent estimates put the actually
recoverable figure closer to 100 billion barrels, because a lot of that oil is extremely heavy, extremely deep, and extremely expensive to get out of the ground. Either way, even the conservative estimates would make it one of the most resource-wealthy countries on the planet. But, despite all of that, Venezuela had failed to maintain either the physical infrastructure or the technical expertise needed to actually extract this oil at any meaningful scale. At its peak in the late 1990s, the country was producing around 3.5 million barrels per day. By the time the US operation began in January, that figure had fallen to somewhere around 900,000 barrels per day. That is a decline of roughly 75%
in a country that, on paper, should be one of the biggest oil producers on Earth. The reasons for that collapse are well documented, and we have already made a few videos on Venezuela's economic history, so we don't want to repeat too much here. But, the short version is that a combination of heavy international sanctions, the nationalization of foreign oil assets under Hugo Chávez in 2006 and 2007, chronic underinvestment in maintenance, endemic corruption, and the general mismanagement that comes with running a major industrial operation as a political patronage system had collectively driven the industry into the ground. The sanctions in particular had made it nearly impossible for Venezuela to sell its oil on legitimate international markets, which meant that
its largest remaining trade partner was China, which was buying heavily discounted Venezuelan crude through what is politely called the gray market. In practice, that meant a shadow fleet of tankers with opaque ownership would load up Venezuelan crude, spoof their AIS location signals to make it look like they were departing from other countries, and then transship the oil through hubs in places like Malaysia where it would be rebranded and blended in with other crude to hide its true origin before arriving at small, poorly regulated refineries in China's Shandong province. By late 2025, China was taking roughly 80% of Venezuela's total oil exports, which came to about 746,000 barrels per day. But, even that volume
was still tiny compared to what Venezuela's reserves could theoretically support. And the prices China was paying were at deep discounts of sometimes $20 or more per barrel below international benchmarks. So, that was the baseline. A country with more oil underground than anyone else on Earth producing a fraction of what it used to, selling most of it at a steep discount through an illegal supply chain to a single buyer. then everything changed when the USA attacked. On January 3rd of this year, US special forces carried out what was called Operation Absolute Resolve, capturing Maduro and his wife at their compound in Caracas, and flying them to New York to face drug trafficking charges. With Maduro out of the picture,
control of the government fell to his vice president, Delcy Rodriguez, who has since been working closely with Washington, either by choice or by pressure, depending on who you ask. Before this, the US government didn't even officially recognize the government of Venezuela as legitimate, which made diplomacy a little bit difficult. Now, plan, or at least the stated economic plan, was fairly straightforward. The USA would come in, begin reinstalling democratic systems through a phase transition of stabilization, recovery, and eventually free elections, and use the oil wealth of Venezuela to pay for the whole nation-building exercise. It would also cut China off from this supply, and Beijing couldn't officially be too angry
about that, because technically, they never officially bought this oil in the first place. It was all done in the gray market. China did respond with some general statements about the USA being out of line and engaging in hegemonic behavior, but that was really the extent of it. Now, to be fair, Venezuelan crude was only about 2% of China's total oil imports, so this was not an existential supply issue for them, but it was still a hit alongside other energy disruptions to a country that is highly energy dependent, so it certainly wasn't welcomed either. Anyway, for the US plan, the first step was to unsanction the country so that it could actually legally sell this oil on international markets. The next step was to line up
companies to actually handle the trade. And the ones selected were, to put it mildly, a little bit unusual. The two firms that received OFAC licenses to handle Venezuelan crude exports were Trafigura and Vitol, two of the world's largest commodity trading houses. Now, these are enormous companies. Vitol alone trades roughly 8 million barrels of oil per day globally, but they are also firms that have historically operated in some of the more opaque corners of the global energy market. Vitol paid over $160 million in 2020 to settle bribery charges in Brazil, Ecuador, and Mexico. Trafigura was involved in a toxic waste dumping scandal in Ivory Coast and has faced allegations of sanctions evasion in multiple jurisdictions. The choice to
route a nation's entire oil revenue through two firms with this kind of track record, rather than through established national oil companies or transparent government channels, raised some eyebrows. But beyond the trading houses, the bigger part of the plan required major international oil companies to invest heavily into Venezuela to repair and modernize the extraction infrastructure that had been so badly neglected. The figure being discussed was reportedly up to $100 billion. The oil companies were understandably not exactly lining up to write those checks. They reportedly weren't even consulted before this plan was put into action, but more importantly, they had made major investments into Venezuela
before and then watched all of those investments get taken from them. When the Chavez government nationalized the oil industry in 2006 and 2007, it effectively seized the assets of companies like ExxonMobil and ConocoPhillips. The tens of billions of dollars they had previously poured into machinery, training, and infrastructure was simply taken. ConocoPhillips alone spent nearly two decades in international arbitration trying to recover its losses, eventually winning an award of over $8.5 billion from the World Bank's arbitration tribunal, which with interest has now ballooned past $12 billion. They have also secured a separate $2 billion award from the International Chamber of Commerce. And ConocoPhillips is far from the only creditor in the
queue. Total claims from judgment creditors, including Crystallex and others, run to roughly $20 billion, much of it tied up in the ongoing court-mandated auction of Citgo, Venezuela's US-based refining subsidiary. So, when you ask these companies to invest another $100 billion into the same country, the response is, broadly speaking, fool me once. There are also no guarantees that the current arrangement with the USA will last. If either the US or Venezuelan government changes, the next administration could reverse everything. That is a lot of money to put into a highly risky international prospect with no structural guarantee that it won't just get taken again. So, this brings us to one of the stranger parts of this whole
arrangement. These nationalizations and outstanding debts are actually part of the reason why Venezuela or the US Treasury can't directly hold onto these oil revenues in the first place. Venezuela owes a lot of money to a lot of international groups from outstanding loans to reimbursement orders from the nationalizations we just talked about. If Venezuela actually officially held these oil revenues, there are a lot of groups with legitimate legal claims to that money before any of it could be spent on nation building. The same would be true if the money was held in the US Treasury. If the Treasury was sitting on Venezuelan oil revenue, creditors like
ConocoPhillips could and almost certainly would pursue those funds through international courts. Unlike Venezuela, the United States actually has good legal standing internationally that it needs to maintain, which means it could realistically be compelled to hand over that cash. So, the solution was to set up something like a trust fund in Qatar as a neutral third party. Around $500 million from the first oil sales were deposited into this Qatari bank account. When the Venezuelan government needs money to operate, it asks the US government and they provide an allowance out of this account. Now, by February, Energy Secretary Chris Wright announced that oil sales had topped $1 billion and that going forward revenue would be
redirected into a US Treasury Department account rather than the Qatar arrangement. In theory, it is a somewhat inelegant solution to get around some very real legal problems that come with doing business with Venezuela. But, even granting that, the arrangement has been plagued by a catastrophic lack of transparency. Members of Congress, including both Democrats and Republicans, have pressed the State Department and the Government Accountability Office for documents and audits on this account with limited success. Nobody in Congress seems to know exactly how much money has been collected, at what prices the oil is being sold, or how in the future this money is going to go back to Venezuela. So, even if this money is not being
stolen, it's still getting routed around the world to keep a chronically unstable economy on an allowance that it's not allowed to hold onto itself because there are so many groups that it still owes money to. In a little bit of good old-fashioned skimming could almost be seen as preferable. So, where did the rest of the money go? Most of the oil has been sold to US and Spanish refineries, and by tracking AIS data from the ships carrying these cargoes, analysts estimate that roughly 100 million barrels have been sold in the first 6 months worth approximately $8 billion at current market rates. By April of 2026, Venezuelan crude exports were averaging around 1.23 million barrels per day, which is actually the
highest level recorded in more than 7 years and a significant step up from where the country was before the intervention. But outside of the money that went into the Qatar account and whatever has since been moved into the US Treasury arrangement, the rest of the revenue is largely unaccounted for. Even the $8 billion figure is just an estimate based on the current market rate of Venezuelan crude, and the actual sale prices may be quite different because one of the biggest problems with Venezuelan oil, even in legitimate markets, is that it is really not great oil. Oil is typically defined by its sulfur content, its impurities, and its weight. The industry uses a measure called API gravity, where
lighter, easier to refine crude score higher. Venezuela's benchmark crude, Merey 16, has an API gravity of around 16 degrees, a sulfur content of roughly 2.5 to 3.4%, and high concentrations of heavy metals like vanadium and nickel. In plain terms, it is heavy, it is sour, and it is full of impurities, which is why it trades at a discount of anywhere from $6 to per barrel below Brent crude under normal conditions, and that discount has at times widened to over $20 per barrel during periods of heightened sanctions risk. So, the actual revenue from these oil sales is almost certainly lower than the headline estimates because nobody is paying full price for this crude. So, is there any way this ends well?
The country has been blessed with natural resources, which, all other things being equal, should make it one of the richest countries on Earth. Its neighbor Guyana has literally become the fastest-growing economy on the planet after discovering oil reserves in 2015 that are far less abundant than what Venezuela is sitting on. Guyana's GDP has increased roughly 500% in less than a decade, and it is now producing over 900,000 barrels per day, which is roughly in line with what Venezuela was managing before the intervention, despite having a fraction of the reserves. The difference, of course, is that Guyana attracted reliable international investment, primarily from ExxonMobil, and built out its industry
under stable institutional conditions. Anybody that wants to do business with Venezuela simply does not have that kind of confidence in the country's ability to maintain a stable economy or stable relationships with its partners. If the US can actually follow through on its stated plan, line up free and fair elections through the phase transition, and whichever government takes power can establish the kind of institutions that give investors confidence, then there is something to be said for this being an imperfect process that still ends in good results. But, that is a long way away. Maria Corina Machado, Venezuela's most popular opposition politician, has indicated that elections could be held
within 9 to 10 months, but the US has been signaling that it expects a much longer transition timeline. In the short term, Venezuela's oil exports are still very limited as it rebuilds its infrastructure, and they are not nearly enough to plug the gap in global oil supplies left by the disruptions in the Strait of Hormuz. But, the trend is moving in the right direction. Exports have gone from under a million barrels per day to over 1.2 million in the space of a few months. Independent analysis suggests the country could sustainably reach 1.5 to 2 million barrels per day within 3 to 5 years if investment actually materializes. Long term, the heavy crude that Venezuela produces is
actually a surprisingly good fit for the highly technical refineries on the US Gulf Coast. Starting in the 1990s, American refiners spent billions building out coker units and deep conversion capacity specifically designed to process dense high sulfur crude from producers like Venezuela, Mexico, and Ecuador. Valero Energy alone has said it can run 300,000 barrels per day of Venezuelan crude through its existing coking capacity. So, there is a genuine long-term case for this arrangement bolstering US energy security. But, again, only if this can be maintained for long enough for Venezuela to build up its supplies, attract the investment it desperately needs, and then sustain that over the long term. That is a lot of ifs for a country with this track record. For
Venezuelan people, the previous system was clearly not working. Support for trying something different is generally there because at least this is attempting something, even if nobody is entirely sure what the end result looks like. Now, unfortunately, history might suggest that this is overly optimistic because it is not really on their side. We have made a few videos on Venezuela before, and their previous attempts at big sweeping change have mostly just made things worse. You should be able to click to that on your screen now. Thanks for watching, mate. Bye.
