What Trump's Venezuela Attack Means for the Global Economic Order

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts, radio, news. We're going to run it, fix it. We'll have elections at the right time. But the main thing you have to fix is a broken country.

1:25I'm Stephanie Flanders, head of government and economics at Bloomberg. and this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next. This week, we're asking what the US operation in Venezuela means for America's economic statecraft and the global economic order. So the US government began the year by seizing and arresting Venezuela's president. His deputy is now formally in charge, but the country, according to President Trump, is going to be run by the US for the foreseeable future.

2:01No boots on the ground, no US casualties to speak of, but some pretty weighty implications for what we thought was the world order and a slew of questions around what happens next. Since this is Trumponomics, we're going to focus on the more economic part of it here, at least initially. Venezuela has the largest proven oil reserves on the planet and President Trump has talked a lot about that. in his comments since the US went in to extract President Maduro at the weekend. We need total access. We need access to the oil and to other things in their country that allow us to rebuild their country.

2:38I'm also meeting with oil companies. Let's go. You know what that's about. 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, the oil infrastructure, and start making money for the country. If the US, in effect, has control of those reserves from now on, what does that mean for oil markets and for America's power? That's my first question, and Javier Blas here in London is the perfect person to answer it. Javier is a Bloomberg opinion columnist covering energy and commodities, and also the co-author of The World for Sale, Money, Power and the Traders Who Barter the Earth's Resources.

3:26Javier, lovely to have you back on the show. Thank you for having me. But listening to the way the president and other administration officials are now talking about US foreign policy, I did also have a broader question about that whole approach, the economic statecraft that emerges out of this operation. Here's White House Deputy Chief of Staff Stephen Miller, for example, on CNN this week. You can talk all you want about international niceties and everything else, but we live in a world, in the real world, that is governed by strength, that is governed by force, that is governed by power. For decades, most of the US foreign policy machinery outside the Pentagon spoke mainly in terms of furthering US interests through global alliances, agreements, rules.

4:14Now those so-called niceties have been stripped away, what will it feel like for the diplomats and others on the inside for US foreign policy to be considered solely in terms of raw power, physical control over resources and territory? Or, some might say, it won't feel so very different because this is what the US has been doing all along, not least in Latin America. Well, Chris Kennedy was on Secretary of State Marco Rubio's policy planning staff until last summer when he joined us. as the lead analyst for economic statecraft at Bloomberg Economics. He was also director for international economics on the US National Security Council under the Biden and Trump administrations.

4:54And he's in the Washington studio today. Chris, thanks for joining us. Thanks for having me, Stephanie.

5:05Javier, you wrote a column that I think a lot of people read at the beginning of this week as we were all sort of thinking about the implications of the operation in Venezuela. The headline was Trump now has his very own oil empire. How big is that empire? We can do the maths and let's focus on current oil production. Let's not talk about the reserves because that's oil that is underground and it may or may not be produced. And starting with the United States, then add Canada, then add the whole of Latin America. And obviously that includes Venezuela from Mexico all the way to Argentina and everyone in between.

5:40And that comes to roughly almost 40 % of the world's oil production. There is a question of what word you want to use to what Washington is doing without oil production. Is it controlling? Is it overseeing it? Is it just simply benefiting from that? But certainly, I think that Trump has put a huge portion of the world's oil current output under the American umbrella. That means the U.S. has a lot more lever to keep oil prices lower than otherwise. And we are seeing that. I mean, one of the reasons that the oil price is around$60 a barrel is because the Americas is booming today with oil. And that's not just the United States itself, but production is rising in Canada, is rising in Brazil, is rising in Guyana, it's rising in Argentina of all places.

6:30So that's one. The second one is that, and it comes alongside lower oil prices, that all of a sudden, typically the risk of an oil spike was in the minds of, I suppose, diplomats like Chris and particularly military planners in the Pentagon. And that was a constraint from the ability to the US to conduct foreign policy. That constraint is now still there, but it's certainly a lot lower than it used to be. And we have seen some examples. You look back to 2025, we have some actions in American military power that really indicate that oil is no longer the constraint they use. One was the bombing of the nuclear facilities in Iran.

7:12The other one is that effectively the White House gave Ukraine the green light to attack Russian oil refineries. Both will not have happened if the Americas, and particularly the United States, let's not forget that of that 40%, half of that is U.S. oil production. if the Americas was not really booming with oil. You've immediately moved on to some of the foreign policy implications. So I'm interested whether Chris Kennedy reads it the same way, just in terms of how effective control, which is not completely changed by Venezuela. As Javier points out, the US already had a lot more kind of room for manoeuvre around oil, thanks to the shale boom, thanks to all these other things.

7:52Do you agree, Chris, that has affected in a real way what the US feels able to do or comfortable doing, for example, in Iraq. I absolutely agree. So I think if you go back to the conversations around the oil price cap after Russia's invasion of Ukraine a few years ago, we saw there was a real constraint put on the ability of the Biden administration to implement strong sanctions on Russia's oil industry, in part because of concerns over energy prices. Oil prices were much higher at that point. Now we've seen prices come down, but this is part of a longer term trend. For many decades, our foreign policy was very much constrained and even focused on ensuring that we had consistent, reliable access to energy for both us and our allies.

8:39And that has changed. I think that Trump very much understands leverage. I think that this administration very much understands leverage. And so being able to exercise control over an additional large source of production in the Western Hemisphere, of course, that increases leverage. But I think in Venezuela, it's also a unique case because it's very much denying other adversaries access to this oil, which our prior approach to simply sanctioning wasn't really effective at doing. I think Cuba is a very good example of this, heavily reliant on Venezuela, has a long-term agreement with Venezuela to exchange medical and other services for oil.

9:19And now Cuba is really in a tough spot. So it's both the macro side being able to control this resource and not being constrained by potential shocks to oil prices that would have domestic ramifications, but it's also denying adversaries access to what has been a very consistent source of energy. Of course, we've all been sort of thinking about what the meaning of the word run is, you know, when you talk about running empire, it does seem that Secretary of State Rubio has a slightly different sort of spin on it than many others. I wonder whether it's, we could end up thinking that they are running, quote unquote, Venezuela, the way they've been running Mexico in the sense of just using leverage to massively influence the administration there, or you could say running the UK more controversially.

10:03We certainly have enormous influence over UK policy in key areas. But Javier, the piece of this, the immediate piece, and you mentioned in your column, that as well as a game changer, not because of the oil it's producing now, but the oil it could potentially produce in the future, more similar to what it had in the past. So what's the difference in scale and how difficult will it be to ramp up production? Well, let's take first a look at history of what Venezuela has done. It's one of the places that we have been producing oil for a longer period. The oil industry really starts at the beginning of the previous century, and oil production started around 1920 by American and British Dutch companies, both what is today ExxonMobil and Shell.

10:43And the heyday of Venezuela was the 1970, where it produced juice over 3.7 million barrels a day of oil. It was another big recovery in the 1990s, and around the time that Hugo Chavez won the elections in December 1998, Venezuela was producing over 3.5 million barrels a day. Today is less than a million barrels a day. So the potential for increasing production is there. The geology is there. But obviously, going back to that is very difficult. But here is the thing. A lot of people are talking about, oh, we are going to take 10 years to go back to what it used to be, and we will need$100 billion.

11:22And that's true. But at this moment, every oil analyst, when they were penciling their forecast for 2030 Venezuela and oil production, have used a million barrels a day or perhaps even less than that. So any additional barrels that you are putting, they are really tilting the market into potentially surpluses because you are putting more oil coming from Venezuela. And there are some barrels that they can come relatively easy, and I emphasize relatively, and talking about relatively in the oil industry means a lot of effort and a lot of money. But you could increase production by focusing on the conventional oil in Venezuela, whether you could do 200 ,000, 400 ,000 barrels a day incremental over a period of, say, 18 to 24 months.

12:09It's a bit of a question mark, but certainly you could increase production somewhat in the near term. If you want to go back to what Venezuela wants in the 70s or in the late 1990s, that's going to take a lot more effort. But I think that at this point, the biggest obstacle for any oil recovery in Venezuela is not what is underground, but is what is above ground. Executives are going to need to know who is going to be in charge and not what Rubio or Trump is in charge, but who actually in Venezuela is in charge and who is going to be in charge six hours from today, six days from today, six months from today.

12:47And we don't know. I mean, a lot of people I speak to in the oil market have a number of scenarios of how this plays out. We can see any time a coup d 'etat. There are a number of permutations that everyone is looking at. And until we get a bit of clarity on that, we are not going to see much action other than very speculative attempts to raise some money, see if we can grab something, etc., etc. But the oil is there. The geology is there. The reservoirs are there. And some of them are easier than others. There is low-hanging fruit, quick wins, and there are things that will take a lot of effort.

13:21And I'm just trying to get a sense of perspective. when you talk about they're now producing about 1 million, but it was more sort of 3.5 million in the heyday. Saudi production is what, 8 or 9? Yeah, it's about 9. It's a big country. We need to also take in account one thing, and it is we are not back in the 1990s in terms of what the incremental oil demand growth is going to be. This is a limited market. So the oil market doesn't need perhaps 2 or 3 million barrels a day of incremental Venezuelan oil. a few hundred thousand barrels a day of incremental oil from Venezuela over the next 10 years could make a difference of where the price is just because the growth in oil demand over the next few years and particularly the moment that we reach 2029-2030 changed materially from what we have been used to whether you believe peak oil or not on demand growth is going to slow a lot.

14:14Okay Chris Javier was saying rightly that it's going to matter an awful lot to these oil companies even though they're getting assurances from the president and one gathers meetings with the energy secretary and other things, it does matter who they think is going to be in charge in a few weeks or a few months or even a year. Do you think any of your former colleagues in the State Department know who's going to be in charge or even what the policy is in Venezuela? I do think that there has been a lot of thought that's gone into post-Maduro Venezuela. But as As Javier pointed out, the situation is very fluid.

14:47And Maduro's deputy, Delce Rodriguez, is in a very tight spot having to placate the United States while managing factions on the ground. Also, as Javier pointed out, it's going to take a lot of investment into Venezuela to really materially change the oil production in the near term. There is some low-hanging fruit, but we're in a very low oil price environment right now. and for these companies to take these sorts of risks in the country, I think they're going to want to have a better sense of where things are. In terms of what the State Department knows, I think it's going to be very challenging.

15:22Clearly, the State Department and the Trump administration have decided that Vice President Delcey, now the acting ruler of Venezuela, is best positioned to ensure the country does not, in the near term, devolve into chaos. I think Trump is counting on leverage, but Rubio has obviously been speaking a lot about this in the past couple days. The blockade will still be in place. There's the threat of additional potential military action if Rodriguez does not follow through on requests from the Trump administration, including going after the drug trafficking, expelling Iranian and Colombian gangs from the country, and allowing infrastructure to come in.

16:02But of course, if we do see something resembling a more stable environment emerge over the next month or so, and perhaps a credible plan for a democratic transition that might whet the appetite for US oil majors to make some more solid commitments. I am interested because you were sitting inside various bits of the foreign policy machinery of the US for so many years. Is the State Department well geared to working with companies to pursue US corporate objectives, which is clearly going to be the case here. You're going to be helping American oil companies find a way into Venezuela, navigate the difficulties.

16:40Is there good machinery for doing that in the State Department or elsewhere? So the State Department has obviously been hit with cuts like the rest of the administration. I will say that what I see in the Trump administration right now is a pretty unified approach to delivering on what the president wants. The objectives are clear at state. Yes, there are certainly leaders with a lot of history working with companies. I think Deputy Secretary Chris Landau is one of those. I think Rubio is certainly in regular conversation with industry. Chris Wright, the Secretary of Energy, comes from that world.

17:19Does the State Department alone have this? No, but we have other agencies that can support the U.S. Export Import Bank. The Development Finance Corporation doesn't necessarily have the resources to really make a huge dent in the oil infrastructure needs. But I do think that this administration is very much in constant contact with industry, which does mark, I think, a substantial departure from the previous administration. Obviously, the priorities were different for that administration. So we'll see. But in the end, these companies are going to have to make their own decisions on how much and where to invest.

17:56And market conditions are going to be one factor. And then, of course, as Javier said, what's happening on the ground in Venezuela is going to be very important to the path of investment that we see over the next 12 to 18 months.

18:20Javier, we were talking earlier, I mean, although it does seem to be all in line with US policy, and that one can say there's a sort of consistency here in the US approach. But one thing that's missing is USAID. Would that be helpful right now? It will be massively helpful. I think that the State Department is going to come to really, not just the State Department, but the whole US government is going to come to miss USAID. Venezuela is a hungry country. It has been a hungry country for a number of years. There are shortages of all kinds of basic staples. And be able to parachute or discharge by port and those famous bags that we have seen other places, mostly in Africa and some places in Asia, the bags full of wheat or American food with American flag on the bags, I think it will go a long way to compensate for the capture of Maduro, even through Maduro loggias.

19:15It's a bad business to try to do anything on a hungry country. We have seen that there are famous says in the commodities industry that revolutions start with the stomach, with an empty stomach. And I think that's the part of the American diplomatic apparatus that I'm missing now the most that could come very handy. Whether the current administration or what we think is the administration of Venezuela will admit and accept that those handouts, it's a question, Marta, I don't know. But I think that it will be good for the U.S. to be able to provide basic aid to the population. Let's not forget that about a third of Venezuela's population has fled the countries.

19:53About 8 million people have left the country over the last few years. It would be good for U.S. farmers as well, or a few of them. And it's always good business for the US farmers, which are facing low prices for the commodities. So it has many wins. And particularly, you are thinking of the midterms, buying from farmers in the Midwest may be one thing that it could facilitate Trump's also electoral objectives. If we broaden it out, again, in the spirit of this sort of accumulative tendency that the administration has expressed, if you're just thinking in terms of valuable commodities in today's world, and then you think of the countries or territories that have been mentioned as possible targets for President Trump, how would you rank them?

20:36How does Greenland look versus Cuba, if we're really thinking in those terms? You are thinking only in terms of natural resources or commodities. I mean, Greenland doesn't rank unless you are in the business of buying a lot of ice and snow. I remember you pointing this out to people previously. There are not that many. Yes, there are some deposits of red earth that will require quite a lot of investment, but they are not that material in the great scheme of things. I mean, you are after red earth, you are much better just trying to develop the resources that are already in the United States, in Canada, on red earth, and in Australia.

21:09Cuba has some natural resources, used to have a booming sugar industry. It has some nickel, which is also valuable today. And nickel is one of the biggest producers. Yeah, it used to be a big producer. has come down significantly just because mismanagement, etc. But I don't think that either Greenland or Cuba are interesting from a natural resources perspective. Chris, I mean, obviously the Secretary of State does have a particular interest in Cuba, and there's a sense that he's been very influential in this policy. But it's also true that the way he describes the policy and the way that the President describes the policy is pretty different.

21:46I'm fascinated given that you were sitting in his State Department for a while, how you view his influence right now, because he really does seem to be saying things that are slightly different from the president. It's been striking to me watching how Rubio has evolved over the past year in this administration. I remember meeting with some European diplomats during the transition last winter, who had been at a briefing from a MAGA-aligned think tank and were told that Rubio would last a couple months and he was only appointed to free up his Senate seat for somebody who would be more aligned with the president.

22:20Now, obviously, that has not come to fruition. I think Rubio has been very effective. He's executed on the president's agenda. He's proven himself to be loyal. He hasn't embarrassed the president. And there's been a lot of missteps from other cabinet secretaries. But I think more importantly, he hasn't really made news. He hasn't taken the spotlight away. And I think that he's been able to consolidate control over a lot of the foreign policy vision of this administration, the national security strategy, which was released in early December, Western Hemisphere front and center. That's obviously been a focus of Marco Rubio's career from the time he was in the Senate.

22:56He's Cuban, and he's had a very close connection. He has a strong understanding of Latin America. He may not be the sort of insider still with Trump, but he's also made some really good and strategic alliances with people like Stephen Miller, and been able to frame his policy preferences in the context of things like immigration and cracking down on drug trafficking. And I think that's been quite effective in helping to direct the focus of this administration. So I see a lot of fingerprints from Rubio on the actions so far. And to Trump's language versus actions, I have to always remind myself every morning to not take them literally.

23:36I think if you look at this operation, it has and is being framed by other administration officials as a law enforcement operation. You know, they used FBI officials to come and arrest Maduro. It's similar to the arrest of Noriega in 1989. In many ways, I think you could point to the invasion of Iraq in the early 2000s as much more of a departure from the rules-based order as compared to this operation in Venezuela. And Rubio has been very careful in the way he's been describing this. And for that reason, Bloomberg on our geoeconomics team, we don't think we're necessarily going to see a move to one of these other countries that has been mentioned, whether it's Greenland, Colombia, Cuba, Iran, Mexico, the list is probably growing as we're speaking.

24:22In the case of Cuba, though, I think Rubio certainly has his eyes set on Cuba, and he would love to see regime change in Cuba. I think he's cautious, though. And right now, the trajectory in Cuba, as Javier can probably speak to, is not great. Cuba was heavily dependent on Venezuelan oil, not just for energy, but diverting some of that oil for hard currency to China. And so they're in a very tough spot. Cuba's other traditional allies don't appear to be stepping up in any real way at the moment. And I think what we're going to see from this administration, well, nothing is certain, but a wait and see for a little bit.

24:58And that makes sense. They have their hands full. Venezuela is going to be a real challenge over the next couple of months. Okay, so I'm going to channel the more political parts of the administration now and think about whether we think in 10 months time that this operation has helped or hurt the president in terms of his midterm prospects. And it seems to me that there's kind of two big things that would come out of that. My first question to you, Chris, is what are the chances that he can keep this, quote unquote, control over Venezuela, this operation virtual? Because one gets the sense that what would be costly to him is this sense of a foreign entanglement, which was a quagmire that was involving casualties, boots on the ground.

25:44If it's just asserting control with very little physical manifestation in the country, then that seems, you know, for his base, that would seem to be much safer. Do you think he can keep this virtual? I don't know, but I think there's other options. I mean, Eric Prince, for instance, has talked a lot about Venezuela, and he's close with certain individuals in the administration. Blackwater. That's right, yeah. And so there are other private military contractor options. I think that would be really challenging in terms of the view of the U.S. among other parts of the world and in the region especially.