The Trump administration’s decision to park $500 million of Venezuelan oil revenue in Qatar raises fundamental questions about the South American nation’s future after the U.S. captured former President Nicolás Maduro.
Among them: When will a transition of power take place, who will ultimately govern Venezuela and who controls the country’s vast resources?
Right now, the administration is collaborating closely with the remnant of the Maduro regime under the leadership of interim President Delcy Rodriguez.
The problem is that the U.S. does not officially recognize the government that Rodriguez is leading. President Donald Trump during his first term recognized the opposition-led National Assembly elected in 2015 as the only legitimate representative of the Venezuelan people.
Trump issued an executive order on Jan. 9 that requires the proceeds from Venezuela’s oil sales to be held in a U.S. Treasury Department account. The president’s order states that the money is the sovereign property of the government of Venezuela held in custody by the U.S.
But it’s unclear which Venezuelan government the order is referencing.
Once the money arrives in the U.S., it should in theory be under the control of the opposition National Assembly due to Trump’s 2019 recognition, said Scott Anderson, an international law expert who previously served with the State Department and the U.S. Embassy in Baghdad under President Barack Obama.
This poses potential problems for the administration’s cooperation with Rodriguez. She has agreed to ship 50 million barrels of crude oil to the U.S. The Trump administration is controlling the sale of those barrels. Energy Secretary Chris Wright said this arrangement will continue indefinitely to maintain leverage over Caracas to implement reforms.
Democrats, meanwhile, are questioning whether the arrangement is legal.
Dueling governments
Secretary of State Marco Rubio told Congress the decision was made to hold the money in Qatar while the issue of government recognition is resolved. Qatar recognizes the Maduro regime as the legitimate government of Venezuela, allowing the U.S. to avoid the issue in the short term.
“We have an issue we’re working through on recognition,” Rubio told the Senate Foreign Relations Committee on Jan. 28.
“You have to recognize a government, but we don’t recognize this government,” the secretary of state said. “We recognize the 2015 National Assembly, so we have to find some creative way legally to meet that standard.”
A Trump administration official told CNBC that an account has been set up for the government of Venezuela at the Treasury Department and “future revenues derived from the sale of Venezuela natural resources will come into and go out of the account.” The initial $500 million in revenue held in Qatar has since been transferred to Venezuela, the official said.
The Trump administration will probably have to work out an arrangement with the 2015 National Assembly on how the oil money will be spent, said Anderson, who recently published a legal analysis of the plan.
“The Rodriguez government in theory has no voice in how any Venezuelan funds in the United States are spent,” Anderson said.
Rubio told the Senate that the U.S. has established a “respectful and productive” line of communication with Rodriguez. He said U.S. cooperation with Rodriguez is a pragmatic approach to what he described as the “transition and stabilization” phase in Venezuela.
The secretary of state said a written agreement is in place with the Rodriguez government on oil sales.
“We are just acknowledging reality, and that is you have to work with the people that are in charge of the elements of government,” Rubio told Senate.
The U.S. goal is to ultimately transition away from Venezuela’s current system, Rubio said. “This is not the end state that we want,” the secretary of state said.
Democrats question legality
Caracas will submit a budget that the U.S. will review and then waive sanctions to disburse oil revenue for Venezuela from a blocked account, Rubio said. The U.S. will tell Caracas what the funds cannot be used upfront, he said.
An audit process will be set up to make sure the money is spent appropriately, Rubio said. The Export-Import Bank of the United States could play that role though nothing has been finalized, he said.
Rubio described the arrangement as a short-term mechanism and not a permanent solution. “I understand it’s novel, but it’s the best we could come up with in the short term,” he said.
A Trump administration official told CNBC that the U.S. “continues to work toward a long-term solution to ensure oil revenues may flow and be utilized for Venezuela’s people and economic stability.”
Long term, the U.S. plans to help build a normal oil industry in Venezuela where companies move crude directly into the global market without a middleman, Rubio said.
Democrats in Congress are raising questions about the legality of the current arrangement. Rep. Sean Casten, D-Ill., and a dozen other lawmakers warned U.S. oil companies in a Jan. 28 letter that they face legal risks if they participate in Venezuelan oil sales under the current arrangement.
Casten said the Trump administration has not provided Congress with a full explanation of the legal authority it invoked, the International Emergency Economic Powers Act, to cover the oil sales program.
Under IEEPA, the president can confiscate the property of a foreign country only during armed hostilities or in response to an attack on the U.S. Democrats have questioned how IEEPA can apply when Rubio has made clear that the U.S. is not at war with Venezuela.
The secretary of state told the Senate that the U.S. is not confiscating Venezuela’s property.
“The money never enters our hands,” Rubio said. “We only control the disbursement of the money. We don’t control the actual money.”
