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U.S. pressure on Venezuela and Iran continues to increase. What these two countries have in common—oil, gas, and a government opposed to U.S. imperialism—is the key to understanding why. Not because the U.S. needs their oil for consumption, but because it needs it to sustain its financial hegemony.
Trump has recently signaled that land operations against Venezuela are on the table. Of course, officially, they are to combat drug trafficking, but this excuse, as we have previously explained, does not hold up. The goal is regime change. This recent article by the Financial Times is almost an admission.
The piece features Corina Machado saying that thousands of people are joining her “underground movement, and that they are in contact with the Trump administration to orchestrate Maduro’s removal. She goes further to suggest—while evidence points to the contrary—that the army is not behind the president, and that is why he has called on the popular militias.
The calculations about Venezuela, on both sides, are delicate. The Trump administration does not seem eager to intervene militarily in the country, but rather to put enough pressure on it to force regime change. It’s difficult to predict the outcome and, as James Bosworth aptly argues, the online debate is not a reliable place to form an opinion, as it’s extremely polarized.
What seems clear is the regime-change objective: to install a U.S.-friendly government that gives priority access to Venezuela’s vast natural resources, especially oil. Trump claimed, while campaigning, that if he had been president, U.S. companies would already be drilling.
Arguably, the U.S. could achieve this without regime change, as Maduro is more than willing to sell them oil, despite the rhetoric. But that would have meant lifting sanctions on Venezuela’s government and admitting previous mistakes. However, this would have contradicted the Trump administration’s refocus on its “sphere of influence” and renewed interest in making sure Latin American countries understand that the Monroe Doctrine still holds.
The situation with Iran is similar. The U.S. could achieve its objectives, to a degree, without trying to force regime change. The Iranian government has made it abundantly clear that it is willing to collaborate and negotiate. However, the standing U.S. policy on the Middle East, dictated by Israel’s interests, makes those negotiations destined to fail before they even start.
The Israeli lobby has been at work with the U.S. in building up the case for a new attack on Iran. European nations have activated the snapback mechanism under the JCPOA, reimposing UN sanctions on Iran as the agreement’s initial 10-year term expired. Iran had previously warned that its cooperation with the International Atomic Energy Agency would collapse if snapback occurred, signaling a breakdown in the deal’s framework for monitoring nuclear activities.
This means that diplomacy has stalled. Iran’s Supreme Leader declared negotiations pointless, while President Pezeshkian dismissed talks, citing the United States’ unreasonable demands. Meanwhile, the U.S. has bolstered Israel’s missile defense, reportedly deploying four additional THAAD systems on top of the existing six, according to satellite images.
The significant expansion of air defenses underscores the effectiveness of Iran’s missile arsenal and highlights U.S. and Israeli preparations for potential conflict. Trump’s infamous peace plan for Gaza seems designed to allow Israel room to initiate a new attack.
The plan, to which Hamas has not yet responded at the time of writing, rests on the complete submission of the armed group. It establishes a neoliberal international mandate over Gaza and achieves all of Netanyahu’s war objectives, as he has already boasted. Critically, it does so without placing any economic, legal, or military strains on Israel, which would be free to focus all its attention and resources on Iran.
Iran has the third-largest oil reserves and the second-largest gas reserves. If the U.S. were to control Iran and Venezuela’s oil reserves, it would control the first and third-largest oil reserves in the world, while the second and fourth—Saudi Arabia and Canada—are already under its influence. Having control and influence over the four largest oil reserves would allow the U.S. not only to influence prices and distribution, but to dictate in which currency they are paid. And I believe that is the crucial point.
Alistair Crooke points to this, saying that the U.S. is worried about its debt and that operations in the Middle East, especially Iran, and in Latin America are largely to put vast resources under U.S. control. I agree with the general argument but disagree on the particulars.
I don’t think that the U.S. is generally worried about its debt. Technically, the U.S. could print enough dollars to pay it or choose not to and maintain the fiscal deficit. According to Varoufakis, this deficit, which he calls “The Global Minotaur,” is what fueled U.S. hegemony after Nixon ended Bretton Woods.
But the 2008 financial crisis and the 2014 operation in Ukraine that led to the current war with Russia, to mention two symbolic events among many, have altered the system financially and geopolitically. On the one hand, the crash destroyed confidence in the ability of American deficits to stabilize the world economy; on the other, nations have grown tired of U.S. abuse of the system to maintain its hegemony.
This means that other nations are not so willing to hold U.S. dollars as reserve currencies or to use them for trade. When holding reserves, those reserves are generally parked in the U.S. financial system, which strengthens the financial economy and, therefore, the government and military. And while using dollars for international trade, it also gives the U.S.—which has a never-ending supply—the ability to outdo them. Hence, many, especially Russia and China, have called for and are establishing alternatives to the dollar-denominated system.
This is what worries Trump and his administration, and he has made it explicit. If nations stop holding dollars and stop using them for trade, then U.S. power would decrease exponentially. How does Trump think he can stop that from happening? By making other nations need dollars. And what is it that other nations can’t do without at the moment and can’t produce themselves? Oil.
The Trump administration is conducting a double policy. On the one hand, it is devaluing the dollar so that industry in the U.S. can prosper. If this happens, it could create excess production and unmet consumption, which would allow them to continue issuing dollars without the risk of excess inflation or crisis at home.
Ironically, this is the same policy that Xu Gao, Chief Economist at Bank of China International, has argued for in a long paper titled “Where Are the Errors in Dalio’s Understanding of National Debt?”. He proposes a Modern Monetary Theory approach to understand and deal with the national economy and debt.
This approach works when a government can enforce the use of a currency within a state. But the U.S. uses its currency as the backbone of its hegemony throughout the world, and for that, you need other nations to need dollars.
Therefore, on the other hand, the U.S. is trying to create demand for the dollar abroad. U.S. assets and digital markets are, some would argue, overvalued. Tesla and AI are good examples. Digital technologies can be replicated. Russia and China have essentially developed different versions of the internet, and other countries are trying to build their own digital ecosystems. The U.S. has long lost the industrial capability that once gave it an edge and while it has plenty of resources, none that can’t be found elsewhere.
But what is it that no one can produce, grow or copy and that everyone needs? Oil. If the U.S. were to control or have influence over the four largest oil reserves in the world it could enforce oil prices in dollars. That would assure a constant demand for its currency. For that, it needs Venezuela’s and Iran’s oil.
This would directly affect China, which is the largest oil importer, affecting its flow of cheap oil, and Russia, Beijing’s main seller, which under sanctions would continue to have to sell its oil at discounted prices. Both things would fit the U.S. aim to weaken Russia and contain China.
This argument could also help explain other U.S. foreign policy decisions, for example the bail out to Javier Milei’s Argentina, which has large untapped oil and gas reserves in the region of Vaca Muerta. The bail out is conditional to Milei winning the next legislative elections which would ensure access to these resources.
Now of course, that this will work out for the U.S. is not a given, in fact, achieving regime change in Venezuela and Iran is unlikely and there are many other oil producers—especially Saudi Arabia—which are falling off U.S. influence. However, and taking into account many caveats, competing interests and the agency of other nations, this simple logic seems to explain some of the major moves of U.S. current foreign policy.
Is it known to what extent the alleged petrodollar was strengthened by the Iraq and Libya wars?
“The Trump administration is conducting a double policy. On the one hand, it is devaluing the dollar so that industry in the U.S. can prosper. If this happens, it could create excess production and unmet consumption, which would allow them to continue issuing dollars without the risk of excess inflation or crisis at home.”
Can someone explain how a weak dollar would allow for excess production and how this would allow for the continued issuing of dollars? Would the more competitive US goods not experience increased demand towards exports which would balance consumption?
The argument goes like this:
1.Dollar weakens –> U.S. products cheaper for foreigners.
2.Foreigners buy more U.S. goods –> U.S. factories produce more than domestic consumers alone would use.
3.Foreigners must pay in dollars –> they need more dollars to trade.
4.That outside demand for dollars soaks up some of the dollars the U.S. issues.
5. Because of that, the U.S. can create more dollars without all of them flooding back into the U.S. economy and raising prices.
The U.S. normally runs a current account deficit (imports more than it exports). That means instead of foreign demand fully balancing U.S. production, the opposite happens, Americans consume more than they produce, financed by sending dollars abroad…. they are forced to soak up consumption to provide dollars.
But there’s a counter argument:
A weaker dollar could, in theory, shrink that deficit by boosting exports and reducing imports. However, in practice, structural factors like high U.S. consumption, the dollar’s reserve-currency role, and global supply chain keep the U.S. in deficit.
So the excess production absorbed abroad scenario that he’s talking about doesn’t match actual U.S. trade patterns. Instead, the persistent deficit shows that foreigners keep accepting U.S. dollars and assets, which lets the U.S. issue more dollars despite not covering imports with exports.
This is not the correct formulation.
The US is exporting demand by running a current account deficit.
It has been common for centuries for countries to do the reverse of what we do, to pursue mercantalist policies, as in export more than they can/do consume domestically. That enables them to have both a moderately high domestic savings rate without that crimping demand and prosperity of its citizens. It also helps support higher levels of investment than could occur otherwise, by among other things having larger markets to serve (see above all China as a demonstration).
The US has been accommodating the desire of the rest of the world to run current account surpluses. We have long been the buyer of the last resort.
> Can someone explain how a weak dollar would allow for excess production …
Yeeeaaaaah … I’m kinda doing the Fry Squint (via knowyourmeme.com) on that bit, myself. US Manufacturing is not something the government can simply turn back on as it were. The US outsourced most of its supply chain to China, so not sure what cheaper exports are going to induce that chain of event.
But hey, let’s take a look:
US Exports! (2024, via tradingeconomics.com)
• #1 Mineral fuels, oils, distillation products
• #2 Machinery, nuclear reactors, boilers
• #3 Electrical, electronic equipment
… but to whom though?
Trading Partners! (2023, via statista.com)
• #1 Canada
• #2 Mexico
• #3 China
… well I wonder how this has been affected by tariffs, aaaand the taking of
NordStreamRussia oil off the market in Europe.Maybe Currio has a point. Dollar devaluation makes US energy more affordable to increasingly war-poor Europe. There might actually be a method to this madness.
#asYouWere #drillBabyDrill
I believe Maduro is gone under a year he have being very incompetent to fight against USA sanction, just like Putin he is neoliberal and what’s worce allow opposition to be freely break laws and no punishment. This allow them confidence to fight against Maduro when the time comes .
I think Maduro has failed as well. I wish there were someone else (via #NC – JR? ) better and closer in spirit to Chavez waiting in the wings …
Yea he is nothing like Chavez, I don’t even understand why Chavez pick him. You are right USA don’t even need to take him out they can anytime call for oil from Maduro when USA needs it and Maduro will help out. Venezuela have so much potential where it is but Maduro wasted all those years when USA was concentrate on Iran ,Israel and Ukraine. Nicaragua and Cuba have done so much better with less resources. I maybe wrong here but I think it’s not only that Maduro is neoliberal I also think he don’t have the IQ to fight the sanctions
Putin is not neoliberal, he’s a conservative populist with a mixture of utilitarianism and a holy mission.
The closest Russia had of a neoliberal was Boris Nemtsov, and after he was assassinated they only have “systemic liberals” (economic liberals willing to work within the system, nowadays with at least medium mixture of nationalism – see: Nabiullina) and “opposition liberals” (liberals in constant opposition to whatever Kreml does because of “Western values”).
Putin let’s the systemic liberals run the Central Bank of Russia and the Ministry of Economic Develoment but not independently. For example, Nabiullina does what Putin tells her to do (she owes her career to him and is more of a technocrat than visionary. She graduated as Marxist economist, for crying out loud); only quite recently Putin’s economic advisor was Sergei Glazyev, with a strong influence on economic planning. And Glazyev is about as far from a neoliberal as it’s possible to be – using US terms he’d probably be LaRouchian.
And this explains the difference between “Urope” and Russia. One can follow a plan for effective industrial military development in concordance with strategic concepts achieving goals in few years. The other is only able to throw money at the problem in search of a magical solution. Eurobonds cannot be a strategy.
Urope is a nice term to describe the disease that has taken hold of large part of the European continent, and tries to present itself as Europe itself. It’s like an inbred cousin of Merica.
There is a backdrop to the demand for South American oil that is generally not discussed: over the next few years, the world market for blue-water crude oil tankers will be under-supplied. There are many very old (20+ years) tankers about to go out of service, and not enough new tankers coming online. It is too late to commission new tankers for this near-term market vacuum, and far too late to commission new shipyards which can build new tankers. It is what it is, a near-term market vacuum.
What this means is: to move the existing quantity of oil from oil-producing country to oil-consuming country, the paths between the two countries must shorten! There is not enough “bandwidth” in tanker-miles-per-day to continue pumping the same quantity of oil in Saudi Arabia and shipping it across the Atlantic or Pacific to North America. But if it comes from South America, that’s suddenly feasible- the path is shorter.
To put it another way, in, say 2028, the ratio of South American oil to Saudi oil shipped to America must tilt towards South America away from Saudi Arabia, if we are to continue consuming the same amount of oil.
Another option is to burn less oil. In particular, this means burning less diesel, which is the fuel of almost all industrial operations. Good luck with that; we’ve been trying, and it ain’t easy.
Interesting factor and comparison to the bandwidth of shipping. Never would have thought about this but it would make sense. It’d be nice if instead of doubling down on fossil fuels and starting wars to secure it, we could develop cleaner industry…
Strong words from James Bosworth: “Maduro being an abhorrent and illegitimate dictator.”
Let’s for the sake of argument accept that he’s an illegitimate dictator. If he is abhorrent, what do we call Sisi in Egypt, the crown prince of Saudi Arabia, what’s his name in Azerbaijan, the reformed jihadist in Syria, or hey, Mr. Trump himself?
I legitimately know almost nothing about Venezuela. I just know I don’t want my country to bomb or invade it.
So I am sincerely wondering where does Maduro rank in the universe of evil dictators?
Maduro is not a dictator. He is only referred to as such (in the US/West) because he was not effectively installed by the US, unlike ya boy Sisi (via Politico).
I have come to think of him as more of a putz. In the comment I linked above in response to Yaiyen, I basically made the case that Maduro plays the part in allowing American political theatre to “put on a show” for whichever flavour of administration inhabits the White House – he’s something of a bobolee (via oed.com) to the US; constantly made an example of to show “toughness against authoritarianism” or the “failure of socialism”, but always ready to accept some kind of deal when the US needs more oil (WaPo via archive.is).
Let’s consider that one has the most powerful and moral military in the world – at what point is it a moral responsibility to intervene in another country’s affairs? I would think in the case of the suffering of Palestine, the Holocaust, or any other intentional mass suffering, it could be morally justified. Less than that however I have a hard time justifying action.