The Promise to Take Iran's Oil Keeps Delivering Venezuelan Deals

Seven months into the war with Iran, the part of it most Americans feel is at the fuel pump: diesel near $6.40 a gallon, gasoline up 27.4 percent from a year ago ^[1]. Crude is over $100 ^[2]. Washington's answer, signed on September 10, is a Venezuelan oil deal. The federal government took a 35 percent equity stake in North American Blue Energy Partners, the operator of a 100-year concession across 17 fields (an estimated 65 billion barrels in the ground), along with the right to buy a fifth of the output at production cost ^[3][4]. The papers say what the partnership is for.

This partnership, and the outside investment it will usher in, only accelerates the trajectory we have been on. — North American Blue Energy Partners

Iran appears in that stated purpose exactly once, as the cause of the price. The promise predates the paperwork. In Las Vegas on August 5, five weeks before the September stake was signed, the president turned the Venezuelan spoils into a promise about the next country ^[5]. He built the bookkeeping into the sentence.

In Venezuela, it was a 48-minute war, and we paid for the war with what we've taken out...to the victor belongs the spoils, and we are doing the same thing in the lovely Islamic Republic of Iran. — Donald Trump

The Venezuelan half of that sentence has been busy. In January, after the strike that captured Nicolás Maduro, Washington lifted sanctions on Venezuelan oil, began planning indefinite control of production, and redirected India's crude purchases from Iranian to Venezuelan barrels ^[6]. Last week, Venezuela, which is not a G20 member, was seated at the G20's energy ministerial in Houston to finalize new oil deals ^[4]. Interior Secretary Doug Burgum gave the seating its slogan.

Venezuela attends this forum with the strength of possessing the largest proven crude oil reserves on the planet and a world-class gas potential. — Paula Henao

The commercial string has kept pace. TotalEnergies signed a cooperation agreement with PDVSA, Venezuela's state oil company, in Caracas this weekend, returning years after it exited the country, the latest in a string of foreign partnerships Energy Secretary Chris Wright has priced in the tens of billions ^[7]. The price rise the new partnership was created to calm has already paid the company once: its trading desk came out $500 million ahead betting oil would go up when the market was saying it would go down ^[2]. Chevron has committed $7 billion to roughly double its Venezuelan production ^[8]. Exxon, one of the majors the September stake cut out, is weighing a return, if the contract terms allow the kind of long-term planning its operation in neighboring Guyana is built on ^[9][3]. The Iranian half has produced paper of its own. Since July, the campaign against Iran has run as a naval blockade, aimed at the country's economy rather than its oilfields, cutting its trade by a quarter to a third ^[10]. Through Qatari and Pakistani mediators, Iran set seven conditions this week for ending the war — among them a ceasefire on all fronts, the release of frozen assets and the termination of the American naval blockade ^[11]. The demands ask for three things back: the fighting stopped, the frozen money released, the shipping lane reopened. Not one of the seven touches the oil in the ground: who would pump it, who would sell it, who would own it. Mohsen Rezaei, who heads Iran's Supreme National Security Council, has shut the door behind the list. There will be no talks until the conditions are met, he says, and Iran has described itself as prepared for a decisive war ^[11][12]. President Masoud Pezeshkian nearly got his agreement: a July memorandum to end hostilities, written to repair a collapsing economy. Then Hossein Taeb, a hard-line spymaster, ordered attacks on three commercial vessels in the Strait of Hormuz without government authorization; Washington answered with airstrikes, and the war reopened. The supreme leader's seclusion has left hard-line factions free to act on their own ^[13]. For a spoils doctrine, this is an awkward kind of adversary: one whose government cannot bind its own spymaster. Iran is also writing rules of its own, for the water instead of the oil. A finalized deal with Oman would run a temporary shipping corridor through the strait, its service fees documented with the International Maritime Organization, along with a restricted zone that puts entering ships on an Iranian sanctions list; Washington opposes the deal and wants pre-war navigation back ^[14]. Who manages the corridor is the whole point.

The maps of a new international corridor which lies in Iranian and Omani waters and in which Iran will have management have been agreed and should be signed in the coming days. — Mohsen Rezaei

What has actually passed between the two governments is narrower still. An April framework set out to end what was then a five-week war ^[15]. A June memorandum promised sixty days of free ship passage through the strait, after the fighting had cut Gulf production by fifteen million barrels a day, the largest oil supply disruption on record, and left Hormuz traffic at a tenth of its pre-war level ^[16]. Assets, ceasefires, navigation: every clause aims at putting things back where they were. Washington's own fallback points the same way. A postwar strategy now in draft at the White House, drawn up as the war settles into a stalemate that has depleted American missile stockpiles and raised energy prices worldwide, would contain Iran the classic way, by expanding normalized relations between Israel and its neighbors ^[17]. The president, meanwhile, has never closed an option. In Las Vegas he paired the spoils promise with a stated preference for making a deal, because he did not want to kill people ^[5]. On September 13 he said American forces would eventually leave Iran, unless Washington chose to stay and take its oil the way it took Venezuela's ^[18]. On the 19th, he defended the record fuel prices as the cost of denying oil revenue to "the No. 1 state sponsor of terror," and promised that the pump numbers fall once the midterm votes are counted ^[1]. By that same weekend, he was describing the other door.

I have a big decision coming up. Do I want to go in and annihilate them [the Iranian regime] or do I not? — Donald Trump

Whatever the promise eventually yields from Iran, the Venezuelan half of it is already moving, and it rests on two things the deals themselves do not control. One is the money, which arrives only on conditions. Chevron's $7 billion is not cash from headquarters: Mike Wirth, the chief executive, is spending only what the Venezuelan ventures themselves generate, and he has named the political test that governs the rest ^[8].

We’ll live within the means of those ventures ability to generate cash, not bring in cash from the outside. — Mike Wirth

The other is the power line. The oil all of this is meant to move sits behind a grid that failed the same week the stake was signed: blackouts took out Caracas and ten states on September 8 and 10, leaving more than half the country rationed against a 2,000-megawatt shortfall, and the fix so far is a six-year recovery plan announced with GE Vernova and the state utilities. Until it holds, regulations imposed in June require every oil company in the country to install its own power generation ^[19].