Trump drinks Venezuela’s milkshake

A new U.S. and Venezuela oil deal

0:00This is Planet Money from NPR.

0:06It's been one week since President Trump got on Truth Social and announced that the United States of America had just entered into an agreement with the country of Venezuela on the biggest oil deal in world history. All caps. This announcement was a little vague on the details, but more have come out since. According to the White House, the U.S. government, through the Pentagon, might be buying a stake in a Venezuelan oil company. The Venezuelan government is going to give that company the exclusive right for 100 years to extract oil from 17 of its oil fields.

0:43And the U.S. will get a bunch of that oil for cheap. So, yeah. Eight months after Trump ordered the capture of the leader of Venezuela and told oil execs, we're going to be extracting numbers in terms of oil like few people have seen, the U.S. government is apparently in the oil biz. We didn't know what to make of this. Venezuela, as we've talked about on the show before, has been blessed with one of the biggest reserves of oil in the world. Despite that, it is a poor country, and its oil industry is just barely sputtering along right now.

1:21Part of that has to do with politics, from American meddling to corrupt leadership. And part of it has to do with an idea we've covered before, the paradox of plenty. What happens when a country's whole economy is based on riches from one resource? But part of it, the part we're going to focus on today because it's relevant to Trump's announcement, has to do with foreigners. Who gets to tap into the country's massive oil reserves? Because for the last century, Venezuela has been wrestling with this other paradox.

1:55We're going to call it the can't live with them, can't live without them paradox. You know how sometimes you need help, but you don't like it when you get it? But that has been the story of Venezuela's oil industry and outsiders. They have this long history of opening up to foreign investment and then shutting down again. Opening up and shutting down again. Earlier this week, I called up a guy who witnessed this back and forth from the inside. Hello. Hi. His name? Jose Angel Pereira Remvec. His oil pedigree?

2:26Strong. I am the third generation. His grandparents worked in Venezuela's oil industry at its founding, when foreigners all but ran the show. His parents were part of its nationalization. Jose himself found his true love because of Venezuelan oil. He and his wife, Mervis, were in a chorus run by the state oil company. She was a meso-soprano. I was a bariton. And we met there. Young kids. You met in the state oil company's chorus? Yes. Yes. Yes.

2:58Give me a song. Give me a few notes. Ferre ya ca, ferre ya ca. Oh, sure. And as Jose has been following the news out of Venezuela this week, he has been thinking about the lessons he and his family have learned. As they've watched Venezuela open its vast reserves of oil to foreigners and then decide to shut them out. In particular, Jose himself had a front row seat to one moment in the 90s when, just like now, Venezuela's oil industry was faltering.

3:31And just like now, they opened up their previously nationalized oil industry to foreigners. It was called, well, I'm going to need some help. Apertura petrolera. Opening. Apertura, like the aperture of a camera? Apertura is opening, yes. Jose kind of led the charge of the Apertura, the last time Venezuela opened its doors to foreign investment in their oil sector. Me and my wife. You and your wife worked for the first project of the Apertura?

4:02The very first. The very first project, yes. So you're the perfect person to talk to about this. I was the guy that started all of this. Hello and welcome to Planet Money. I'm Nick Fountain. And I'm Erica Barris. There's been a lot of coverage of this evolving deal between the U.S. and Venezuela. Some great stuff from our colleagues here at NPR about what the U.S. hopes to get from this and whether it'll work. The climate impacts. Today on the show, what does this mean for Venezuela? We're going to hear one take.

4:33The take of a Venezuelan oil man who's been through all this before. Everybody's saying this deal is probably terrible for the Venezuelan people. Do you agree with that? No. Let me tell you, I'm an oil and gas guy that knows the industry inside. Yeah. Jose, he's both optimistic and wary. Because he's seen it all. When Venezuela invited foreigners in, he was there to greet them. And when Venezuela wanted them out, well, that's how he ended up in a jail cell.

5:06All right. So what does Jose think about this news coming out of Venezuela? In a bit, we're going to hear his take. Why he thinks this deal between the U.S., this private Venezuelan company, and the Venezuelan government could help a lot of people. And where he thinks this all might go wrong. Based on his experiences. His generational experiences. Remember, he's a third-generation Venezuelan oil man.

5:37And from each of those generations, you can get these picture-perfect little snapshots of the long, drama-filled history of Venezuela's oil. From a time when foreigners reigned, to the nationalization, and back and forth again.

Three generations of Venezuelan oil

5:50Snapshot number one, a century ago. His grandparents meet cute. His grandpa, a Dutch drilling engineer, part of the original wave of foreign investment in, and exploitation of, Venezuela's oil. His grandma, a Venezuelan nurse in a hospital run by an oil company. How they met is that he got in an accident. And they put him in the ER, and she saw, you know, a blonde, blue-eyed guy. Very cute.

6:20And they got connected. This, of course, was the first era of Venezuelan oil. Foreign control. Which, eventually, Venezuelans got tired of. Because too little money from their labor and their resources were going to them. Right. Which brings us to snapshot number two. Now it's 1967. And this photo is of Jose's parents. Both oil workers. With suitcases. They're moving to Tulsa, Oklahoma. With cute little five-year-old Jose and his two sisters.

6:51As part of a bigger plan. Before Venezuela could nationalize their oil industry, they needed trained up Venezuelan oil engineers. So, he says, Venezuela's oil minister sent Jose's family and a bunch of others to train at the University of Tulsa to study at their world-class petroleum engineering program. Ten Venezuelan families in the 60s in the U.S. was very, very uncommon, let me tell you. My best friend was an American.

7:21Well, we played cowboys and Indians. And can you imagine who played the Indians? Yeah. Seven years later, snapshot number three. It's Jose and his family again. But he's a teenager now. It's the late 70s and they're back in Venezuela. His parents are working for a new nationalized oil company. Actually, everyone is. Venezuela has taken control of the oil and eventually creates one state-run company to own everything. Petrolios de Venezuela, or PDVSA.

7:52Though, there are still tons of American workers around. In fact, Jose and his family are living in this weird company town that looks like Texas. Picture it. It's Texas, but in the middle of nowhere. An oil field in Venezuela. That was like a copy-paste of the U.S. We have golf course. We have bowling. We have pools, theaters. You know, we celebrated 4th of July. We celebrated Thanksgiving. We did Halloween. We did many American things.

8:23A decade later, Jose and that mezzo-soprano he married from the youth chorus, they're grown. They have their own jobs with a nationalized oil company. And for them, everything is great. Except after years of high oil prices and ballooning budgets and payrolls, the price of oil has dropped. Venezuela is starting to neglect its oil fields. Yeah, so maybe another snapshot. Idle drilling rigs and pump jacks. Jose says he was there to see it. And from it, he took a very important lesson.

8:53The oil and gas is an industry where you always have to be investing. Always be investing. ABI. If you don't, he says, your oil fields stop being as productive. Any oil field can have around 10% to 11% yearly that they decline. So if you don't do nothing in 10 years, your production is zero. So Pedreza didn't have money to do that. And that's why the genius guys of that time created the apertura.

9:26Because they said, okay, let's do something. Let's bring international players so they can bring money. And that's how the apertura came.

The first major oil opening

9:35This is the moment we wanted to talk with Jose about the most. The apertura. The opening. Because if you squint at least, it is analogous to what's happening now. A rusty heap of an oil industry and an opening for foreigners to plow money into the economy. Jose, if you couldn't tell from his genius comment, is a fan of that earlier apertura. He says he saw firsthand how letting in both money and expertise from outside of the country could benefit Venezuelans.

10:08Yeah, as we mentioned before, he says he worked for the very first project of the apertura. Way back in 1992, he got himself hired by one of those foreign investors, a Japanese company. Which was exciting. Had you ever met a Japanese person before? No, I had to buy a book, How to Deal with Japanese. They sent him to Tokyo for months to get trained. And Senor Pereira got schooled in Japanese business culture. Well, for example, I became Pereira-san. Hey, Pereira-san. Pereira-san. Yeah, yeah, yeah, yeah.

10:38He picked up new business principles? Like the one where you try to get some consensus before making big changes? It can be crazy, but if you are having a team of 20 peoples, you need that all that 20 peoples are in consensus. It takes time to put the people together. Is that how the oil industry usually works? No. I came with the American culture that is like this. You know, and if you're the boss, you'd make a decision. He worked for a few years for the Japanese company building up oil field infrastructure

11:10and then jumped over to an American company, majority owned by Conoco and Chevron, also part of the Apeltura. Jose says those two companies brought new technology that Venezuela had needed for years. For example, a lot of Venezuela's reserves of oil are this kind of sticky, icky, tar-like stuff. Bad stuff. So we needed to have a way to produce that. Venezuela didn't have that technology. And these companies had figured out how to deal with the sticky, icky stuff. Essentially, they diluted it, made a smoothie of it, so it could be transported in a pipeline.

11:44That was a technology that was brought by Chevron, by Conoco, these companies. Yeah, they brought tons of new technology and also tons of money. Just enormous amounts of investment. So do you think that the Apeltura worked? The first years, the first decade worked very good. Yeah, Jose says for the industry and for many, though not all, Venezuelans, it worked very well.

12:14Foreign companies brought new oil fields online, fixed up the old ones. Oil production nearly doubled. And all that investment meant lots of jobs for Venezuelans. So, Jose says he's been thinking a lot about the Apeltura as he's seen the news trickle out of Venezuela about this new deal with the United States. This is going to be like Apertura 2.0. So the thing we did in the 90s... Apertura 2.0. Yes, it's going to be like Apertura 2.0, yes. The White House said the company they're doing business with is going to invest $100 billion in new oil production.

12:49And this week, Chevron said they're going to spend more than $7 billion over the next five years. Yeah, lots of cash. And remember the motto, always be investing? Jose says that investment... You don't put it in Mars. You put it in Venezuela because you have to drill the wells. So to drill the wells, you have to have that truck driver. You need the chauffeur. You need the empanada lady that prepares the breakfast. She's very important. You need all of that. She might be the most important person. Yeah. So I'm not kidding.

13:20You will need everything so that people can have a better life. But when Jose looks at the Apeltura he helps spearhead back in the 90s, he says it also includes a cautionary tale, which is when you open up Venezuela to foreign investment and the foreigners seem to have the upper hand, things can go sour. Right. Because here is how the Apertura 1.0 ended. As foreigners started reaping the benefits of their investments, a brash, red beret-wearing populist named Hugo Chavez,

13:55el comandante, was gaining popularity. In 1998, he'd run for president and win partially on the promise of sharing the oil wealth, lifting people out of poverty, and dethroning the oil elite. Chavez criticized Pedevesa, the state oil company, calling it a state within a state. And Jose says on that point, he wasn't exactly wrong. The problem that was happening with Pedevesa, that those guys that began to work with my dad, that these guys became like, they were like kings.

14:28They were untouchable. They became very, you know, it was like a theocracy, you know? Yeah, theocracy, an oligopoly. And they weren't just going to let Chavez take their power. These guys didn't like Chavez, and they did kind of a plot to take Chavez, and that created the national strike. In late 2002, oil workers, their management, walked off the job. It was a standoff between Chavez and the oil elite.

15:01There was violence in the street. Oil production dropped to close to zero. Venezuela was starved of its oil money. They were thinking that if they do that national strike, and they squeeze Chavez, he will resign. That was their idea. That's what they thought. And look what Chavez did. He fired 20,000 people. Whoa. 20,000. Including everyone you knew. Everyone I knew, yes. Not him. He was in the private sector by then. Can you imagine all my former colleagues being fired?

15:33I have neighbors, neighbors that live beside my house that were fired. In the mid-2000s, Chavez made good on his promise to try to redistribute the oil wealth. He tore up the contracts the foreign companies had with Perevesa. Said they were unfair. He was a little bit right, but if you see the things in what happened after, he took a bad decision. For Jose, though, everything worked out okay. Because all those formerly foreign-owned companies?

16:04I became the manager. You became the manager of all the nationalized oil companies? 44 companies, yes. Wow. 44 companies. Which means Jose had a front row seat as foreigners made their slow retreat out of the country. The only major American oil company to stay was Chevron, under a new contract that gave majority control to Perevesa. Meanwhile, Perevesa was taken over by Chavez loyalists, some of whom couldn't tell a pump jack from a nodding donkey.

16:38Just kidding. That's the same thing. It took years, but at the end, they destroyed it. It lost two-thirds of the production capacity. But at the same time, Perevesa became bloated. They hired an enormous number of employees. Like five times that we had in the past, yes. They are only being paid because it's like a political party. So that is the cautionary tale of the apeltura. If you let foreign investors in, it can be good. It can revitalize the oil sector.

17:09A lot of people can reap the rewards. But beware, because things can change. If Venezuelans get the sense that they're being taken advantage of, they might take everything back. Now, this new Venezuelan oil deal just announced by Trump, it's a weird one. Even though the Venezuelan constitution says that oil deposits are owned by the Venezuelan people and can't be transferred to a private company or country, this deal gives the rights to 17 oil fields in Venezuela to a private company, which might be partially owned by the U.S.

17:44Of course it's not the best deal. I will never negotiate that. But, no, of course not. If they didn't have a chance to negotiate, that was imposed. Okay? Yeah. Remember the U.S. military bombed Venezuela, removed its former president, put him on an airplane, and is holding him at a jail in New York. The current U.S.-backed president seems basically at the beck and call of the White House. Not exactly a negotiation. But despite all that, and despite the climate impacts and how the oil wealth might not be shared equitably,

18:17Jose thinks anything to jumpstart Venezuela's oil economy has the potential to be good for Venezuelans. He's not out. Wow. Are you going to come out of retirement to do this? I can be advising back from here from the U.S. I'm not planning to go back to Venezuela. Oh, yeah, because there's one more thing that happened to Jose in Venezuela that we haven't told you about yet. Yeah, it might be the most cautionary epilogue to this cautionary tale, especially for any oil execs trying to get in on this deal.

18:54Here's a little image, a preview. Can you imagine 20 guys with skeleton masks and rifles? That's after the break.

19:05You know, I don't really think that any oil exec who is thinking of going into business in Venezuela right now has the time to listen to the show. But if you are, you're going to want to hear this part. This story is about just how bad things can get when an oil exec gets caught in a geopolitical struggle.

Imprisonment and political fallout

19:24In the 2010s, Jose Pereira got a pretty sweet job. He became president and CEO of Citgo, which is an oil company owned by Venezuela and selling Venezuelan oil, but based in the United States. So he moved up to Houston, was living the oil executive's life. We have all the toys. I flew in helicopters all over. I have a plane that I could travel all over. But it was a tough situation politically.

19:54Jose was a Venezuelan, kind of raised in Oklahoma, running a Venezuelan oil company in Texas? Yeah. The Americans thought he was just a chavista and the Venezuelans, well, eventually they didn't trust him either. And that got worse in 2017 when President Trump and the successor to Chavez, Nicolas Maduro, really started going at it. Sanctions from Trump. Harsh words from Maduro. Jose says being stuck in the middle was exhausting. He was ready to call it quits, getting ready to retire.

20:25And then, just before Thanksgiving, he was at the movies with his wife, Justice League, when he got a call. It was Venezuela's petroleum minister. They wanted him to come to Caracas to give an update about a refinery project. So it was like a short notice. Come tomorrow. Come tomorrow. Tomorrow, yes. So I quit the movie. I told my wife, we see the movie when I come back. Next morning, he and five other executives fly to Caracas. They give their presentation. It goes well. He says they were from Maduro's counterintelligence unit, the folks who rounded up Maduro's political prisoners.

21:18One of them approached him. And said, who is Jose Pereira here? So I said, I'm Jose Pereira. Okay, you have to come with me. And then we went to a small room. He came inside a general. And he announced that we were accused to be American spies, had committed treason to the country, and we're going to go to jail. They put us handcuffed. And the next time I went out to see the sky was 10 months after. So I stayed in solitary confinement for the next 10 months.

21:5110 months in solitary, accused of treason, corruption, and embezzlement. All of which, he says, he didn't do. The U.S. government agreed. They said he was wrongfully detained. But he was stuck. This is the last snapshot of our story. Jose, alone in a cell. The starkest of contrasts with the expense account life he'd been living before. He lost 100 pounds. 100 pounds. Yes. Yes. You lost 100 pounds? 100 pounds in one year. Yeah. So no diet.

22:22Starving. Oh. Yeah. Eventually, he got out of solitary. His family figured out how to get him food. And he was reunited with his sicko colleagues. Oh, wow, my friend. We hugged all of us. We began to cry. He says they kind of saved each other. In detention, they became workout buddies, Bible study buddies, Domino's buddies. It was like when he worked for the Japanese company. Every decision they made, they made together and discussed at great length.

22:53Well, let me tell you, we create like a boardroom. No, no, no. Literally, we did like a boardroom. We were the six in a roundtable, taking decisions how we will survive. Eventually, after nearly five years of imprisonment, two cases of scabies, two of COVID, a case of bronchitis, and a heart attack, Jose, the rest of his sicko colleagues, and two other prisoners were swapped for two Venezuelans, nephews of then-president Maduro.

23:23What's a good deal? What's a good deal? So that explains why he doesn't want to go back and why his son, who also works in oil for generations, says no way. And it might also explain why kickstarting foreign investment in Venezuela has been so hard for President Trump, why most of the big oil companies haven't jumped back into Venezuela so far. Apertura 2.0, it is not exactly happening on the best of terms.

23:54It is one country, the U.S., pretty much dictating the terms, with gunboats and helicopters. Jose and a lot of other people do not want to be in the middle of that.

Credits and upcoming bonus episode

24:15A quick word before we go. We are working on a new bonus episode about a topic we've been asked to tackle a bunch of times over the years, the economics of podcasting. We are pulling back the curtain on NPR Plus, the sponsor messages you hear, or maybe don't hear, the dollars and cents of it all. If you're curious about how any of that works and have a question, drop us an email, planetmoneyatnpr.org. This episode of Planet Money was produced by Emma Peasley and Samuel Horst-Kessler.

24:45It was edited by Marianne McKeown. It was fact-checked by Emma and Sierra Juarez. It was engineered by Josephine Neonai with help from Jimmy Keighley. Alex Goldmark is Planet Money's executive producer. Special thanks to longtime Planet Money producer Willa Rubin, who is currently covering energy for NPR. You've got to check out her coverage. It's really great. I'm Nick Fountain. I'm Erika Barris. This is NPR. Thanks for listening.