Donald Trump and Delcy Rodríguez Oil Deals Reignite Venezuela's Century-Old Debate

The oil agreements announced by United States President Donald Trump and Venezuela's acting president, Delcy Rodríguez, have touched on some of the most sensitive areas of Venezuelan public life: the relationship between oil, the state and citizens. Only fragmentary details of the arrangements have so far emerged. Their existence — apparently long-term agreements of at least 25 years, announced by a foreign head of state with no verifiable details about their potential benefits — has generated widespread unease, compounded by suspicions over how the United States has used Venezuela's national revenues in recent months. That unease has been only partly tempered by the instinct among certain local elites not to antagonise Washington, which some regard as the last remaining hope for a return to democracy. Critically, the agreements have not been submitted to Venezuela's National Assembly, as required by the Constitution.

A century of contested ownership

The debate over the exploitation and use of oil resources in Venezuela is more than a century old, dating to the discovery of the country's first oil fields. Over the decades, a powerful sense of ownership over oil wealth took root in Venezuelan society; in local political debate, commitment to national ownership of crude oil has long been treated as a moral measure of political actors. Some of the most important works of Venezuelan political thought, among them Venezuela, Politics and Oil by Rómulo Betancourt, published in 1956, place oil production and the strategy for its development within a framework of national sovereignty.

The dictatorship of Juan Vicente Gómez, which ran from 1908 to 1935, has been judged harshly by Venezuelan historians for the lenient terms under which it negotiated the country's first oil concessions with foreign companies, to the detriment of the national interest. Under Gómez, multinational oil firms established themselves in Venezuela and sought to remain for as long as possible. Each successive government thereafter sought to strengthen national control over production. The reform-minded administration of Isaías Medina Angarita, which governed from 1941 to 1945, enacted the Hydrocarbons Law, requiring multinational companies to operate under state regulations for the first time; it set royalties at 16 per cent and imposed a 12 per cent tax on profits. Shortly after taking office in 1945, Rómulo Betancourt levied an extraordinary tax on the profits of multinational oil companies, and under the subsequent government of Rómulo Gallegos the so-called fifty-fifty rule was adopted, stipulating that the state could never receive less revenue than the oil companies earned in net profits.

Those measures were repealed by the dictatorship of Marcos Pérez Jiménez, which in the 1950s opened the country to foreign capital with few restrictions. In the 1960s, the first governments of the democratic Punto Fijo era, which lasted from 1958 to 1998, halted the granting of new oil concessions, established the Venezuelan Petroleum Corporation as a regulatory body, and introduced a new framework for dealings with multinational companies through service contracts.

Nationalisation and its legacy

The nationalisation of the oil industry in 1976, under the social democratic government of Carlos Andrés Pérez, heightened public sensitivity to the industry's relationship with foreign capital and solidified a broad consensus in favour of state ownership. Contrary to what some had predicted, Petróleos de Venezuela — PDVSA — managed with considerable efficiency as a state-owned company, became a highly successful model of public sector management. During years of extraordinary prosperity it offered some of the highest salaries in the country, grew to control every stage of production, supplied international markets with crude oil and refined products, and became, according to América Economía magazine, Latin America's most powerful corporation. The nationalisation of oil, gas and iron ranks among the most significant political milestones of twentieth-century Venezuela.

In the 1990s, the Venezuelan state launched the so-called Oil Opening, an ambitious programme aimed at attracting foreign investment and expanding access to international markets. The initiative was only partially implemented and was criticised by the far left as a surrender to foreign interests. At the time, with international oil prices depressed, royalties were extremely low, amounting to just 2 per cent.

After taking office in 1999, Hugo Chávez brought PDVSA into the political arena, triggering a major crisis in 2002 that nearly cost him power. After defeating the opposition, he took political control of the company and intensified both oil nationalism and his anti-American rhetoric, repeatedly accusing the Venezuelan opposition and the United States of seeking to seize the country's oil wealth. Around 2007, he required multinational energy companies to operate through joint ventures in which PDVSA retained a majority stake; royalties were set at 30 per cent and income taxes on profits at 50 per cent. The country received vast sums of money, fuelling rampant corruption. Under Chavismo, PDVSA became an adversarial actor towards United States interests, while its operational and financial performance began to decline.

Oil in the Venezuelan imagination

Oil and the culture surrounding it are deeply embedded in the Venezuelan imagination: in the visual arts, graphic design, public monuments, music and popular storytelling. In 1980, during the golden age of Venezuelan television, José Ignacio Cabrujas and Ibsen Martínez wrote the successful dystopian series El día que se acabó el petróleo (The Day Oil Ran Out). The issue has also featured prominently in the work of major Venezuelan writers including Arturo Uslar Pietri, Miguel Otero Silva and Ramón Díaz Sánchez. Uslar Pietri's essay Sembrar el petróleo (Sowing the Oil) was required reading in Venezuelan schools for several decades. Venezuelan ownership of the country's oil resources is bound up with the nation's very identity. Few proposals have struggled to gain traction in public debate as much as the privatisation of PDVSA, despite the decline of Chavista oil nationalism and the collapse in oil production.