Republic Risk: The Devil's Bargain

The United States wants to lower oil prices globally, but has only boosted it through foreign policy miscues. What's next? How about a bargain with the Maduro government in Venezuela?

Dear Fellow Expat:

It’s nice to find your voice after a few weeks.

Yesterday, I was on a roll with the twin news that 1) Janet Yellen says we have enough money to support two wars and 2) the U.S. will turn its attention to negotiating with Venezuela to ease oil sanctions in the country.

The tradeoff on the latter goes as follows.

Venezuela will allow a “fairer” election and open itself up to international observers (sorry, it hurts to laugh this hard before 9 a.m.).

Yes, that same socialist dictatorship that collapsed the economy under the weight of ineptitude. That one… which imprisoned political opponents… that one.

They’re going to allow a freer election and threat to their power. Sure… sure.

Plus, they want to create a fund overseen by the United Nations to address the nation’s humanitarian crisis. We can just assume that the money will be stolen… based on the performance of previous UN funds.

Venezuela’s energy infrastructure is in disarray since it threw out everyone who knew how to produce oil and put political supporters in charge. The most oil-rich nation in the world ended up with electricity blackouts. How Marxist of them.

Snark aside, the real focus here is on Chevron (CVX), which has been increasing its production in Venezuela since the U.S. started to allow it to operate there again in 2022. The problem is that the only person who has won since the Biden Administration started to loosen the reigns on Chevron in Venezuela has been its dictator, Nicolas Maduro.

Chevron alone has improved the exchange rate in the country, according to Hart Energy. In quoting  Luis Vicente Leon of polling firm Datanalysis:

“The so-called “efecto Chevron” or Chevron effect is arguably one of the few positive signs the Venezuelan oil sector has received since U.S. sanctions on the oil industry were imposed in 2019.”

The Council of Foreign Relations warns that loosening the sanctions has already emboldened Maduro: “The results are now clear: the political situation is worse, the repression is tougher, and there is zero possibility of free elections in 2024,” the CFR wrote.

So, let’s double down, says the Yale Lawyers advising the President?

CFR notes that the Administration’s approach is nearly identical to Obama’s approach to Cuba. The U.S. lifted sanctions on Cuba and got zero in return.

So what the heck is going on here?

Do I really need to tell you what is driving this? Follow the money.

Now, let’s not throw everything on the Biden administration and the Yale Lawyers.

Yes, we’re tapping out our Strategic Petroleum Reserve (SPR), and we might even try to buy Venezuelan crude to fill up the coffers (would you put that past them?)

However, Chevron has been engaging in a massive lobbying campaign to seek permission to move back into Venezuela in 2022. OpenSecrets covered the story. The company spent millions in 2021 and 2022 on lobbying various issues, including Venezuela, and pumped $7.4 million into the campaign cycle.

It’s not just the good old-fashioned hard lobbying.

There’s the softer influence peddling as well - the advocacy side with which I’m familiar. While in D.C., I worked for a political advocacy shop in the energy sector. One of the things that you always do when aiming to get into bed with bad market actors is pivot the conversation to something positive. And they’re doing this now…

Just think about how much good Chevon could do for the people of Venezuela - the same ones that are fleeing the country right now from a dictator.

That’s where articles like this come into play.

“reflecting on 100 years of progress in Venezuela.”

I hate to be skeptical, but I used to write articles like this for clients like Chevron… until I quit because I was writing articles like this for clients like Chevron…

Just look at all the good that Chevron has done in Venezuela… and will do again… if you just let it resume work with one of the most brutal governments in the Western Hemisphere…

But… it’s not just Chevron that’s throwing money around Washington, D.C.

The Trump administration cracked down on Venezuela in 2019, putting us into the position where we are today. Between 2019 and 2022, Venezuelan special interest spent at least $8.4 million attempting to influence and lobby U.S. operations, according to OpenSecrets’ analysis of FARA filings.

The primary target: Pushing back against oil sanctions.

And at least $3.5 million of that money came from state-owned PDVSA and Citgo.

It’s America: Everything is for sale.

[I remind traders and investors that Chevron (CVX) has experienced several run-ins this last year with the $150 support level. If you want to trade Chevron, consider this…