The truth behind Donald Trump’s 'biggest oil deal in world history'

 Donald Trump has long coveted the oilfields of other nations and declared an agreement with Venezuela to be “the biggest oil deal in world history”. But the agreement, reached after the US seized Venezuelan president Nicolás Maduro, is almost certainly doomed to collapse amid a wide array of legal and logistical issues, a Guardian investigation has found.

The US president first mused about taking oil from Iran in 1987, when he told ABC’s Barbara Walters that Iranian attacks on American shipping during the Iran-Iraq war required an extreme response. “Why couldn’t we go in and take over some of their oil, which is along the sea?” he asked. Over the ensuing years, he has returned frequently to the idea that the US should seize oil from other countries after military conflict, from Libya to Iraq.

Earlier this year, Trump finally got a chance to enact his plan – at gunpoint. US forces stormed Venezuela in January and seized Maduro, who was quickly shuttled to a federal holding facility in the US and replaced by the compliant Delcy Rodríguez. Trump told the Atlantic in the days following the raid: “If [Rodríguez] doesn’t do what’s right, she is going to pay a very big price, probably bigger than Maduro.”

Then in August, Trump announced that the office of strategic capital (OSC) at the Pentagon, which he has rapidly transformed, would own a third of the second-biggest private Venezuelan oil firm, North American Blue Energy Partners (Nabep). Trump said the deal means he’ll soon refill the US strategic petroleum reserve, which dropped to a longtime low after the US invaded Iran.

But virtually everything Trump and his cabinet have said about the deal is false and misleading, according to the experts and officials who spoke with the Guardian. The Venezuelan law governing oil development does not allow for 100-year deals, or anything longer than 25 years. The OSC isn’t authorized by US law, experts say, to own shares in companies. Moreover, they say, the deal as structured won’t bring new capital to Venezuela’s oil sector.

And contrary to Trump’s claims, the Venezuelan oil will not help refill the US strategic petroleum reserve any time in the near future.

There is also a curious figure at the center of the deal: Alejandro Betancourt López, the affable Venezuelan with a complex background who is becoming a partner of the US government as the owner of Nabep.

Betancourt, 46, went to college in Massachusetts and has homes in Spain, the UK and New York City. He has a history in Venezuela’s energy and oil sector, owns a sunglasses company and once had Rudy Giuliani as his lawyer.

Betancourt, who has been drawn into multiple international investigations in connection with Venezuelan corruption allegations, was brought into the deal by a private associate of Marco Rubio, according to three people who know him. Betancourt has never been charged with or convicted of any crime.

The Guardian has learned that Venezuelan government officials who are now in charge once hired investigators and hackers to dig into the source of Betancourt’s money.

Experts are ultimately skeptical the oil deal can hold together. “The deal is like the big beautiful wall that Mexico will pay for,” said former US diplomat John Feeley.

‘Skin in the game’

It was less than a month after the January US raid that toppled Maduro that Exxon’s CEO, Darren Woods, said the country was “uninvestable” because of the “legal and commercial constructs and frameworks in place today”.

Two people familiar with the process said Trump began looking for a way to make sure the US had “skin in the game” – financial ownership that would put investors at ease. The potential answer became the US stake in Betancourt’s firm, North American Blue Energy Partners.

Though the White House and defense department say it has 35% ownership, the Pentagon told lawmakers on the congressional armed services committee in a written briefing seen by the Guardian it has “warrants” in Nabep: rights to purchase shares, rather than the shares themselves.

The state department, the administration says, will also have a right to buy 20% of all the oil Nabep pumps, at cost – meaning it should be able to buy it cheaper than the market price.

“The Departments of State and War have negotiated a historic opportunity to secure US majority control of more than 65bn barrels of proven oil reserves in Venezuela at zero taxpayer cost,” a Pentagon spokesperson said.

It’s unclear how the US would buy crude oil, or what the process would be. The state department, for its part, insists: “This is a private deal with a private company. It’s not a deal with the interim government of Venezuela and there was not a political process included in the negotiations.”

That appears to be at odds with Trump’s initial announcement, which said: “The United States of America has just entered into an Agreement with the Country of Venezuela.” The administration says a majority of the board of Nabep, which is incorporated in Barbados, will be US citizens.

The Pentagon ownership has been one of the most puzzling parts of the deal, because the idea that the Department of Defense could own more than a third of a Venezuelan oil company, or any oil company, would have been unthinkable in any previous US administration. Prior to Trump, the defense department had never operated like a private equity fund that could directly own percentages of foreign companies.

But the Pentagon has been transformed. The OSC is under the authority of the deputy defense secretary, Stephen Feinberg, a powerful billionaire who wields the real financial power in the Pentagon and has surrounded himself with former employees from the private equity giant Cerberus, as the Guardian has reported. Feinberg installed a former Cerberus employee, David Lorch, as the head of the OSC.

The Trump administration is using a 1950s law called the Defense Production Act to allow the Pentagon to become a kind of giant investment fund. “It has turned them into a vehicle for ownership of substantial domestic and international companies,” said the former official.

A former Pentagon official familiar with the project said Feinberg and Lorch structured the financial end of Trump’s Venezuela deal. “It is absolutely a Feinberg project,” said the former Pentagon official.

However, the law that created the OSC actually didn’t authorize it to make equity investments, and the Pentagon’s spokesperson told Reuters: “The Office of ​Strategic Capital (OSC) ⁠does not take equity stakes in private companies” in August.

“Congress clearly doesn’t believe that it has given the power to OSC to make equity investments,” said Ashley Deeks, the vice-dean of the University of Virginia law school, who has written about US government ownership stakes in companies for the Harvard National Security Journal.

Since the OSC is not authorized to invest in shares of private companies, the Nabep ownership will be held by an entirely different Pentagon office, called Industrial Base Analysis and Sustainment (Ibas), according to the former Pentagon official.

But the mission of Ibas has nothing to do with oil. Its job, as it says on its website, is solely to “strengthen the US Defense Industrial Base”.

That incongruity is just one of the reasons major oil companies and investors privately say they are keeping clear of this deal, said Phil Gunson of the International Crisis Group, who has been briefed on the problem. “They are concerned about the irregularities. They are concerned about the terms of the deal. It’s the opacity of the agreement that has serious investors concerned,” he said.

“Whether the Pentagon has the authority to act in this way is debatable,” he added.

The White House directed questions about whether the OSC is authorized to own shares to the defense department. The department didn’t answer emailed questions about the matter. In a statement, a representative merely repeated some prior claims by the administration: it’s a “historic opportunity”, with control over most of Venezuela’s oil reserves.

The length of the deal also doesn’t appear to be as long as the administration claims. Venezuelan legal expert Jose Ignacio Hernández says Venezuelan law is crystal clear that this is impossible, and Venezuela’s government itself has said the deal is for 25 years, not 100.

“This is all just propaganda,” said Ignacio Hernández. “It cannot be implemented as announced by the administration.”