Long read: The truth behind Trump’s “biggest oil deal in world history”

Crude oil is India’s Achilles’ heel. Our energy dependence makes the price of oil one of the most critical inputs in our fiscal planning as well as in monetary policy actions. It follows that policymakers would have their eye on everything that happens in the global crude oil market. So, when a US president calls something “the biggest oil deal in world history”, how should one read it? In this investigation for the Guardian, Aram Roston reads it, and reports that the agreement, reached after the US seized Venezuelan president Nicolas Maduro, is almost certainly headed for collapse under a wide array of legal and logistical problems.

Roston begins by noting that Trump has coveted other nations’ oil for decades. Back in 1987 he asked ABC’s Barbara Walters, of Iran, “Why couldn’t we go in and take over some of their oil, which is along the sea?” The idea recurred over the years, from Libya to Iraq: the notion that the US should help itself to oil after a war. This year, Roston writes, he got his chance, and got it at gunpoint. US forces stormed Venezuela in January, seized Maduro, moved him to a holding facility in the US and installed the compliant Delcy Rodriguez. Trump’s message to her, as he told the Atlantic: “If [Rodriguez] doesn’t do what’s right, she is going to pay a very big price, probably bigger than Maduro.”

Then in August came the announcement. The Pentagon’s office of strategic capital (OSC), Trump said, would own a third of Venezuela’s second-biggest private oil firm, North American Blue Energy Partners (Nabep), and the deal would soon help refill a US strategic petroleum reserve that had dropped to a longtime low after the invasion of Iran. According to Roston, the experts and officials who spoke to the Guardian consider almost everything the administration has said about the deal “false and misleading” . Venezuelan law, they point out, allows nothing longer than 25 years, not the century Trump described; the OSC is not authorised to own shares in companies; the deal will not bring new capital into Venezuela’s oil sector; and the crude will not refill the American reserve any time soon. A former US diplomat, John Feeley, sums up the doubt: “The deal is like the big beautiful wall that Mexico will pay for.”

The structure of Venuezuela’s oil industry is where the claims come apart. Within a month of the raid, Exxon’s chief executive Darren Woods had already called the country “uninvestable” because of the “legal and commercial constructs and frameworks in place today”. Trump, two people told the Guardian, wanted “skin in the game”, and the US stake in Nabep became the answer. Yet the ownership is not what was billed. Though the White House and defence department speak of 35%, the Pentagon told Congress it holds only “warrants” – rights to purchase shares rather than the shares themselves. The state department, separately, says it can buy a fifth of Nabep’s oil at cost, below the market price. A Pentagon spokesperson cast all this as a chance to “secure US majority control of more than 65bn barrels of proven oil reserves in Venezuela at zero taxpayer cost”.

The accounts do not line up. The state department insists “This is a private deal with a private company… there was not a political process included in the negotiations” , which sits awkwardly against Trump’s own announcement: “The United States of America has just entered into an Agreement with the Country of Venezuela.” A defence department owning a third of a foreign oil company would have been unthinkable before now, Roston notes; no prior administration ran the Pentagon like a private equity fund buying stakes in overseas firms. The change has been engineered through a 1950s law, the Defense Production Act, under deputy defence secretary Stephen Feinberg, a billionaire who has surrounded himself with alumni of the buyout firm Cerberus. A former official says the law “has turned them into a vehicle for ownership of substantial domestic and international companies”; a former Pentagon official is blunter about who drove it, calling it “absolutely a Feinberg project”. Yet even this workaround has a hole in it: the OSC told Reuters in August that it “does not take equity stakes in private companies”, so the stake is instead to be parked in a separate office, Ibas, whose stated job is only to “strengthen the US Defense Industrial Base”and has nothing to do with oil.

The specialists Roston consulted are, as a result, sceptical the deal can hold together. Ashley Deeks of the University of Virginia law school says “Congress clearly doesn’t believe that it has given the power to OSC to make equity investments.” Phil Gunson of the International Crisis Group, who has been briefed on the problem, says the serious oil companies are steering clear: “They are concerned about the irregularities. They are concerned about the terms of the deal. It’s the opacity of the agreement that has serious investors concerned.” Whether the Pentagon even has the authority to act this way, he adds, is “debatable”. The Venezuelan legal expert Jose Ignacio Hernandez, who says Venezuelan law makes the 100-year claim impossible, is blunter still: “This is all just propaganda. It cannot be implemented…”

At the centre of it sits a single figure: Alejandro Betancourt, 46, the owner of Nabep, a Venezuelan with homes in Spain, the UK and New York, a sunglasses company, and, once, Rudy Giuliani as his lawyer. He has been drawn into a string of investigations tied to Venezuelan corruption allegations over more than a decade – a racketeering suit brought by a former US ambassador; a cousin charged in a $1.2bn money-laundering case; and a Spanish money-laundering inquiry that brought police to his castle. Roston is careful to record that Betancourt has never been charged with or convicted of any crime. Marco Rubio, who credits Betancourt with a “track record” of producing oil, told a Venezuelan interviewer “There was no investigation within our system against him.”Betancourt was brought into the deal through an associate of Rubio’s and, by January, was acting as a go-between with Delcy Rodriguez. A businessman who has spent years on Venezuelan issues offers the following reading of who gains: “The only discernible winner in any of this is Betancourt.”

Roston lets Trump have the last word, and it may capture the enterprise better than any critic could. “It was a war,” the president told the United Nations this week, “but it’s perhaps the biggest deal ever made. To the victor belong the spoils. You’ve all heard that.”

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