Donald Trump announced the Venezuela oil agreement on Truth Social on Friday night, calling it the biggest oil deal in world history and saying it gave the United States majority control of more than 65 billion barrels of proven reserves at no cost to the American taxpayer. By Saturday afternoon the Pentagon's chief spokesman was telling Reuters that the office named as the vehicle for the deal is not permitted to do what the deal appears to require.
Both statements came from the same administration, roughly eighteen hours apart.
What was announced
Trump said Secretary of State Marco Rubio and Defense Secretary Pete Hegseth negotiated the agreement with Venezuela's interim president Delcy Rodríguez and with private businesses. Rodríguez confirmed it in a statement of her own, putting the scope at 17 strategic fields and projecting $100 billion in private investment and $209 billion in additional tax revenue for Caracas. A field list reviewed by Reuters placed the assets in the Orinoco Belt and around Lake Maracaibo. Rodríguez granted the venture a 100-year development concession.
A US official told Axios that the arrangement is a public-private partnership rather than a purchase, and that Venezuela is handing the United States equity instead of selling it. The same official put the American share at an effective 55 percent of output, split between an ownership stake and rights to buy crude at cost, with the oil going toward refilling the Strategic Petroleum Reserve. Deal points reviewed by the Washington Post described the same split.
The Wall Street Journal reported on Saturday that the specific structure is a 35 percent passive stake in North American Blue Energy Partners, a company associated with the Venezuelan businessman Alejandro Betancourt, plus preferential rights to buy 20 percent of production at cost. Thirty-five and twenty make the 55.
The instrument
The Journal reported that the Pentagon's Office of Strategic Capital plans to structure the investment through penny warrants.
A penny warrant is an option to buy shares at a nominal price, effectively nothing. It hands the holder ownership without the holder writing a cheque for it. This is what allows Trump's claim of "no cost to the taxpayer" to be technically accurate. It is also, in substance, an equity position.
That matters because of what the Pentagon said next. Chief spokesman Sean Parnell, responding to Reuters, said the Office of Strategic Capital does not take equity stakes in private companies, and that its statutory authority is strictly limited to loans, loan guarantees and technical assistance. Parnell included transaction structuring in that last category.
Pentagon officials also told the Washington Post they could not comment on any particular deal under consideration at OSC, while repeating that the office cannot hold an ownership stake in a private company.
Two readings are available. Either the office is arranging a transaction in which some other part of the government holds the warrants, which would make the technical-assistance description accurate and leave open the question of who the shareholder actually is. Or the description of OSC's role in the reporting is wrong. The administration has not published any document setting out the office's authority or its financial role in the venture.
What Congress is doing about this office right now
The Office of Strategic Capital was set up in December 2022 to pull private money toward national-security industries. Its duties were written into law by Section 903 of the 2024 defense authorization act, and the tools it was given were loans, loan guarantees and technical assistance.
Whether the office should also be allowed to buy into companies has been argued over on Capitol Hill all summer. The Senate Armed Services Committee's version of the 2027 National Defense Authorization Act contains Section 1051, titled as an authority for equity investments by the Office of Strategic Capital. It would create a dedicated account in the Treasury, cap individual equity investments at $500 million, and set up an oversight board with mandatory briefings. The committee's initial authorization for the account is $250 million in fiscal 2027, and the text confines spending to critical minerals, materials, chemicals and batteries.
The bill has not passed. The authority it would grant is capped at half a billion dollars, restricted to four industrial categories, and subject to a board that does not yet exist. The Venezuelan venture is projected to draw $100 billion and involves foreign oil.
Senator Elizabeth Warren has been raising conflict-of-interest concerns about the office since 2023. NOTUS reported that the Armed Services Committee killed an amendment to the 2027 bill that would have barred OSC from investing in companies where senior executive-branch officials or their immediate families hold significant stakes.
The Pentagon has already taken more than a billion dollars in equity positions in defense-related firms under existing authorities, including roughly $400 million in a rare-earths producer last July and $1 billion in L3Harris's solid rocket motor business in April. The administration has taken stakes in more than twenty private companies. Those were American firms operating under American law. The Venezuelan venture would put the same instrument to work in a foreign oil field.
The question nobody has answered
Venezuela produces about 1.25 million barrels a day, far below what its reserves would suggest, after years of sanctions, underinvestment and infrastructure collapse. Orinoco crude is heavy. Moving it requires upgraders, pipelines and power generation that mostly do not work.
Someone has to pay for that, and the figure runs to tens of billions. The Washington Post reported it is unclear who. Major oil companies have generally judged the risk too high. Chevron is reported to be close to a large commitment. ExxonMobil and ConocoPhillips have stayed out.
Until that money is committed, nothing comes out of the ground. Rodríguez's projection of $209 billion in tax revenue assumes a level of production that does not exist today and could not exist for several years.
The last time Washington tried to hold foreign oil directly was under Franklin Roosevelt, who set up a state company to acquire overseas reserves and attempted to buy an American firm holding Saudi concessions. It did not work.
What to watch
Whether the administration publishes anything establishing OSC's legal role, or whether the arrangement stays where it is now, described only through anonymous officials and a Truth Social post.
Whether Section 1051 survives the Senate floor in its current form, and whether anyone amends it in light of a deal that dwarfs the ceiling it sets.
Whether Venezuelan officials actually sign the exploration and production agreements Reuters reported were coming this week, and which companies are on the paperwork.
And whether Chevron commits. If the majors stay out, the American stake is a claim on production that nobody is funding.
The deal also lands while Washington is squeezing oil out of the market at the other end of the world, through the naval blockade of Iranian ports and the sanctions campaign around it.
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