Trump's Controversial Quest: Legal Implications of Tapping into Venezuela's Oil Reserves

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Donald Trump’s announcement that the United States is going to “start making money” from Venezuela and take control of the South American nation’s massive oil reserves could potentially amount to a “hostile occupation” of a sovereign country, experts say.

As he confirmed the capture by US forces of the country’s president, Nicolas Maduro, and flagged plans to put Venezuela under temporary American control, Trump also announced he would green-light major US oil companies to move into the country.

“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure,” Trump said.

“We’ll be selling substantial quantities of oil.”

Following Trump’s remarks confirming U.S. intentions, experts have begun scrutinizing the legal aspects of this strategy.

Trump announced plans to efficiently manage the nation’s natural resources, stating that “the world’s leading oil companies” will “invest billions of dollars” in Venezuela and generate revenue from those investments.

Venezuela has the world’s largest oil reserves — with 303 billion barrels or 17 per cent of global reserves — according to the London-based Energy Institute.

However, in recent years, the country’s oil industry has faced challenges, including production. The industry accounts for approximately one per cent of global production.

The US government has not provided any details on how it will implement its plan yet.

One expert remarked to SBS News, “It’s challenging to envision this happening—at least in the immediate future—without some degree of cooperation and positive engagement with the current Venezuelan regime.”

“We’re going to get the oil flowing the way it should be,” he said.

“We’ll be selling large amounts of oil to other countries, many of whom are using it now, but I would say many more will come.”

Raul Sanchez-Urribarri, associate professor of legal studies at La Trobe University, says it’s unclear what this will mean in practice.

Venezuela is indebted to China to the tune of around $10 billion, repaying these loans with crude oil shipped in three massive tankers once jointly owned by Venezuela and China. Last month, Reuters highlighted that China receives 80% of Venezuela’s oil exports.

US oil giants have not confirmed these comments and Chevron — the only US oil company still operating in Venezuela — has said it is focused on the safety and well-being of its employees, as well as the integrity of its assets.

There are also other factors that might impact the US plan to control Venezuela’s oil — including China, the leading destination of Venezuela’s oil in the last decade.

“There are other players as well in all this saga. We’re talking about different countries that have engaged with the oil business in Venezuela,” Sanchez-Urribarri said.

Venezuela owes about $10 billion to China and repays loans with crude oil transported in three very large crude oil carriers previously co-owned by Venezuela and China. Last month, Reuters reported that China imports 80 per cent of Venezuela’s oil exports.

‘Strong evidence of occupation’

Even if the US effectively gains control of Venezuelan oil, concerns remain about whether such a move will comply with international law.

Under international law, when a territory is placed under the authority of a hostile army, it is considered an occupation and it is not related to a specific resource.

But Shannon Brincat, lecturer in politics and international relations from the University of the Sunshine Coast, said there is “no precedent for a state to take control over parts of another, specifically in this case, for one resource for its own use”.

“Foreign management of oil in this case, after regime change, would be potentially, strong evidence of occupation, which incurs a range of duties on that occupying power,” he told SBS News.

“Without the local sovereign’s freely-given consent and authority, that would seem to be a hostile occupation.”

Brincat said that according to international law, the US “would have to use that natural resource for the benefit of Venezuela and Venezuela’s people” and “they could not treat that resource as its own property”.

In his press conference, Trump said the wealth extracted would go “to the people of Venezuela” but also to the US in the form of “reimbursement” for the US takeover.

He also claimed Venezuela had “stolen” the US oil, and that the US built “the whole industry” in Venezuela and “they just took it over like we were nothing”.

Brincat said it’s difficult to assess Trump’s comment.

“It’s a vague suggestion that they had rights to this oil, which I can’t see any legal basis for, other than potentially the joint partnership work with Chevron.”

In November, a US court authorised the sale of the Venezuelan oil company Citgo in the US to pay off billions of dollars in debt.

“There might be contracts around that that they could be using, [like] trade rules around to enforce, but to say the US owns it is stretching plausibility,” Brincat said.

“Obviously, a country’s resources are its own.”

How has oil been managed under Maduro?

Venezuela nationalised its oil industry in the 1970s, creating Petroleos de Venezuela S.A. (PDVSA), which later opened to foreign investment by establishing ventures with companies such as Chevron, China National Petroleum Corporation, ENI, Total, and Russia’s Rosneft.

“Under Maduro, in particular, how they’ve managed the oil production is through centralised control under the state companies … the PDVSA relies on joint ventures with some other companies,” Brincat said.

In recent years, the company has become politicised under the Chavismo brand, a left-wing populist ideology linked to former Venezuelan president Hugo Chavez.

With several investigations, PDVSA has long been accused of corruption.

In 2016, a report by a Venezuelan congressional commission said about US$11 billion ($A16.4 billion) of its funds went missing between 2004-14.

“The Venezuelan government has used … a shadow fleet of tankers, false flagships to transfer oil shipments, often into … China, Malaysia and other parts of Asia,” Brincat said.

While Venezuela has the world’s largest oil reserves, its crude output remains at a fraction of capacity due to mismanagement, lack of investment and sanctions, according to official data.

“We should remember that history shows us that forced regime change does not stabilise oil supply quickly. This is going to be a long-term fix, if anything,” Brincat said.

“The instability caused by regime change like this … And whatever President Trump is trying to set here, sets up a whole range of governance issues as well.”

— With additional reporting by Reuters