The bankers of New York on their way home this evening, while gracing the wonderful bar in Grand Central Station will be crying 200% tariff tears into their Irish whiskey or French Bordeaux. For that is the new level of threat from Donald Trump as he retaliates to the retaliation of the EU’s plan for a 50% tax on imports of US-produced whiskey. And so the circular upping of the ante in a global trade war begins, and the world shivers in its wake. The tears shed by the bankers are not just for the impending price rise in their favourite commuting tipple. Although there is a relief bounce in US bourse futures this morning due to a pivotal announcement by Democrat Chuck Shumer that he would vote for a stopgap which will avoid a shutdown of the US government, the state of stock markets is nightmare reality TV for the US public. The Nasdaq has been in ‘correction’ (down over 10%) for a while, but it was briefly joined there by the S&P yesterday and unbelievably, even the Dow Jones Industrial Index has fallen by 9% after the early 2025 ‘Trump Bump’. The bullet proof length in all that is US exceptionalism encounters doubt and even the easier readings in the US CPI and PPI are cast as warnings of reduced activity rather than harbingers for a possible FED rate cut.

No matter the predictable chess game of prevarication from Vladmir Putin toward the US/Ukraine ceasefire proposal. Shock, horror, and with no apologies for the cynicism, the Russian President said he agreed with the ceasefire in principle but was seeking ‘clarification’. No matter the new US sanctions on Iranian companies and individuals, and increased restrictions on some of Russia’s energy sector in ability to make and receive payments. No matter that the IEA trimmed its 2025 global demand growth by 70kbpd to 1.03mbpd, that supply surplus would be 600kbpd and opining that sanctions will have little effect bearing in mind the increased production capability of the US and others. No matter how Kpler data, via Reuters, shows that OPEC+ members Iraq, Kuwait, Oman, Saudi and the UAE are exporting 5.51mbpd of refined fuels, up 7% year-on-year and being a workaround to crude export quotas. No matter the kaleidoscope of all these oil drivers, our market, along with all other risk centres are at the mercy of the new TV show, and with no apology to the Duchess of Sussex, ‘With love, Donald’.

Trump goes Caracas

Donald Trump’s preference of using tariffs and sanctions to project the power of the United States is playing out with changeable results in Venezuela at present. During the regime of Trump I, there was an attitude of ‘maximum pressure’ that included a campaign of varied sanctions and secondary ones on those that involved themselves in Venezuela’s oil sector. There were financial charges laid against the national oil company Petróleos de Venezuela S.A. (PDVSA), the central bank, the state-owned gold miner and restrictions came upon its ability to raise debt and access international investment markets. Political interference was even overt as the US administration of the time took it upon itself to recognise Venezuelan opposition leader Juan Guaido as the legitimate president of Venezuela.

As much as the US tried to declare the presidency of Nicolas Maduro illegitimate and sanction his country back to the stone age, he (Maduro) showed incredible resilience and remains in power to the present day. What was unforeseen, and underestimated at the time was the appetite for oil from China and a willingness by other US political adversaries such as Iran and Russia to come to the aid of the South American country. According to the Atlantic Council, Russia had long been an investor in Venezuela’s oil production which was rerouted to China at discounted prices as a part of a deal with the Chinese National Petroleum Corporation (CNPC), which also undertook investment into PDVSA and other parts of oil infrastructure. The National Iranian Oil Refining and Distribution Company (NIORDC) was contracted to repair various refineries and also provide condensate needed in the production of the heavy crude oil that is the primary feedstock of Venezuela. Much of these combined services were paid for by swapped crude exports and the workaround of sanctions became complete. 

However, the global political and investment puzzle has vastly changed since 2019, and to speculate on the ability for China, Iran and Russia to reap much reward from involvement in the Venezuelan oil industry must now be reasonable. Russia is compelled to look upon its own oil sector because its protection is paramount as petrodollar income is the main source of investment into the crippling spends on the military following the elongated war in Ukraine. China, a long-term player, will likely remain active in Venezuela but in a trimmed capacity because of its much-reduced need for foreign sources of energy as its economy splutters into a state of lower demand. As for Iran, it has suffered huge proxy destruction at the hands of Israel and is looking down the barrel of sanctions which Donald Trump has promised will reinstate a complete halt to Iranian exports. Such scrutiny of Iran must preclude it from offering oil services abroad and what would it do with Venezuelan oil used to pay in barter?

The shifting tides sees awareness from, and is the reason why Nicolas Maduro is taking a more pragmatic approach in negotiations with Washington. Deportation of Venezuelan citizens from the United States have until recently been non-existent. Last month saw their resumption after President Trump’s envoy Richard Grenell secured the release of 6 American prisoners and a new phase of calmed dialogue broke out in Caracas. Maduro and Grenell also discussed migration and sanctions and as reported on Reuters, Maduro proffered, "President Donald Trump, we have made a first step, hopefully it can continue," Maduro said. "We would like it to continue."
However, this new spirit of hands across the continents was short-lived. Old scars run deep in this current White House and what was presumed to be a likely conciliatory period has been completely thwarted by the permit issued by the United States government allowing the US oil giant Chevron to pump and export Venezuelan oil being terminated at the end of February. Citing Maduro’s refusal to comply with deportations and being under pressure from Venezuela opposition, Mr Trump reacted and as always took great pleasure in casting shade on his predecessor. "We are hereby reversing the concessions that Crooked Joe Biden gave to Nicolas Maduro, of Venezuela, on the oil transaction agreement,". It is worth pointing out the country’s oil production was as high as 2mbpd in January 2017, fell to 400kbpd by the end of Trump’s first presidency (October 2020), only to rise to 900kbpd by the end of Biden’s. It is a heavy blow to Venezuela as it relies for 25% of its oil income on the existing licence. It is not warmly welcomed by Chevron either. The CEO at CERAweek must be diplomatic, but frustration is evident in his quoted caveat on how Chevron would be compliant to a government directive. “Swinging from one extreme to another is not the right policy approach, we have allocated capital that’s out there for decades, and so we really need consistent and durable policy.”

Where the Venezuela issue goes from here is anybody’s sanction guess. At the beginning of the year, the White House, wearing its previously peaceable hat, said it did not seek regime change. Two-months later such mollification sits poorly in its duplicity with Venezuela, Chevron and other foes and allies. As for our oil space perspective, the lost licence will impact around 260kbpd. Losing Venezuela supply adds a layer of intrigue and one that cannot be guarded against until there is an enactment of consistency as requested from the US oil major.

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