After months of escalating tensions, on 3 January, the United States carried out a large-scale operation in Venezuela, extracting President Nicolás Maduro and First Lady Cilia Flores.
Introduction
After months of escalating tensions, on 3 January, the United States carried out a large-scale operation in Venezuela, extracting President Nicolás Maduro and First Lady Cilia Flores. President Donald Trump confirmed the move, stating that Washington would run the country until a transition could be put in place. The operation marks the first time in more than three decades that the US has seized a sitting Latin American head of state.
Maduro, who has been indicted in a federal court in New York on charges including narco-terrorism conspiracy, has long been a central figure in US sanctions policy and regional pressure campaigns. His sudden removal carries implications beyond Venezuela’s borders, as the country sits atop the world’s largest proven oil reserves.
Why Did the US Capture Maduro?
Nicolás Maduro rose through the ranks of Venezuelan politics under socialist Hugo Chávez and took over the presidency in 2013. Since then, his rule has been heavily criticised, both at home and abroad. Opponents accuse him of persecuting political rivals, restricting liberties, and holding elections that lacked credibility.
Tensions with Washington escalated under the Trump administration, as U.S. officials linked Maduro’s government to drug trafficking and rising migration flows. Pressure intensified in August, when the U.S. placed a $50 million bounty on Maduro and launched strikes against suspected drug-smuggling vessels in the Caribbean and eastern Pacific.
The US alleges that Venezuelan authorities were involved in state-backed drug trafficking, including ties to the Cartel of the Suns, designated as a terrorist organization. Maduro has denied the charges, arguing that US operations were designed to force regime change and take control of Venezuela’s oil reserves.
Maduro’s last public appearance as president came only hours before his arrest, when he met Chinese special envoy Qiu Xiaoqi at the Miraflores Palace to discuss bilateral relations. The meeting suggested that Caracas still viewed its foreign partnerships as a source of political support. Shortly afterward, explosions were heard across Caracas.
This was more than a localised arrest; it was a strategic signal directed at China and Iran. It dismantled the assumption that the US lacked the resolve to act against regimes propped up by foreign adversaries.
Drill, Baby, Drill
Securing energy resources appears to be a central consideration behind US actions in Venezuela. The country holds the world’s largest proven oil reserves and, according to Wood Mackenzie, has roughly 241 billion barrels of recoverable .
Proven Oil Reserves by Country (Billion Barrels)
Yet Venezuela’s production history highlights how difficult those barrels are to unlock. Output peaked near 3 million bbl/d in the late 1990s, before political upheaval, strikes, and sector restructuring under Hugo Chávez triggered a long decline. US sanctions imposed from 2017 onward accelerated the collapse, pushing production below 500,000 bbl/d by 2020. Limited sanctions relief in recent years supported a modest rebound, but output today remains around 800,000–900,000 bbl/d.
Historical Total Venezuelan Supply
Expectations of a rapid supply surge risk overstating what is feasible. Iraq took nearly a decade and more than $200 billion to return to pre-war production levels, while Libya has yet to regain its 2010 peak.
Venezuela faces even steeper constraints. Its reserves are dominated by extra-heavy crude, requiring upgrading and imported diluents for transport. Years of underinvestment, sanctions, loss of skilled labour, and the decline of state oil company PDVSA have taken a heavy toll. Aging infrastructure, repeated refinery outages, and limited access to modern drilling and upgrading technology continue to constrain any rapid recovery.
PDVSA has indicated that facilities were not damaged during recent events, suggesting limited immediate disruption. In the near term, oil markets appear able to absorb uncertainty. Inventories are adequate, and OPEC+ has signalled that its 1.65 million bbl/d of voluntary cuts could be reversed if needed.
A pro-US government could enable sanctions relief, renewed foreign investment, and a gradual recovery in exports. However, returning to 3 million bbl/d or more would take years and substantial infrastructure investment. President Trump has already indicated that US oil companies would help operate and develop the Venezuelan oil sector.
Oil markets are tightening structurally. Global consumption now exceeds 101 million bbl/d, led by the United States, China, and rapidly growing demand in India. From a market perspective, the near-term effect may be a temporary rise in geopolitical risk premia. Over time, sidelined Venezuelan supply, close to 1 million bbl/d, could weigh on oil prices and support risk assets.
Source: The Coastal Journal
Venezuela’s resource base extends beyond oil, with deposits of iron ore, bauxite, gold, and nickel, as well as copper, zinc, and rare earth elements, mainly located in the Guayana Shield in the south of the country. Venezuela holds Latin America’s largest gold reserves. Official surveys point to potential scale in battery metals. The government claims reserves of up to 340 million tonnes of nickel alongside large copper resources. Despite this geological potential, commercial mining activity remains minimal. Most non-oil minerals account for less than 1% of national output, and large-scale foreign mining investment is largely absent, leaving much of the country’s mineral wealth undeveloped.
The Economic Warfare Between US and China
Modern empires competition today is less about direct conflict than about control of inputs. Energy, metals, and critical materials function as the grain of the modern world. When leaders signal a willingness to secure those inputs directly, markets should read it not as rhetoric, but as resource strategy.
The US-China rivalry is fundamentally structural rather than ideological. The United States is energy-rich but dependent on imported metals and rare earths. China dominates metals processing but relies heavily on imported oil, sourcing roughly 70% of its crude abroad. Each is strong where the other is vulnerable, and both are seeking to weaponise that asymmetry.
Control over energy flows also has monetary implications. Influence over Venezuelan oil is not only about supply but about reinforcing the Petrodollar and preventing the rise of the Petroyuan.
There is also a regional dimension. China has steadily expanded its footprint in Latin America through infrastructure investment and commodity financing. Recent US actions suggest a push to reassert influence in the Western Hemisphere, forcing Beijing to compete under less favourable conditions. The Trump administration’s 2025 National Security Strategy identified the Western Hemisphere as a core priority, reviving the logic of the Monroe Doctrine, now known as the
Why the US Is Targeting Venezuela, and What it Means for Markets
