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The Trump administration’s deal for a US government stake in a Venezuelan oil company marks the riskiest foray yet for a little-known Pentagon office that was created for another purpose — making loans to develop critical technologies.
The White House announced this week that the Defense Department’s Office of Strategic Capital would take a 35% equity stake in North American Blue Energy Partners, headed by politically wired Venezuelan investor Alejandro Betancourt López, at “no cost to the American taxpayer.” The goal: make Venezuela’s oilfields more attractive to US investors, thus boosting revenue in Caracas while boxing out Chinese and Russian companies.
The OSC has already helped procure equity stakes in at least five other companies during President Donald Trump’s second term, according to the Council on Foreign Relations. But the Venezuela deal further stretches the bounds of its mandate, involving oil instead of a classic critical technology, and has already prompted Democrats to vow to investigate.
Any oversight effort, if Democrats retake power in Washington come November, could scrutinize the office’s unprecedented pursuit of government stakes in private firms.
Taking stakes “was never the intention when setting up OSC, which in and of itself is not necessarily a problem,” a former OSC official told Semafor in an interview. “But it still raises some legitimate legal and ethical questions.”
Jon Hillman, who runs the Council’s tracker, said in an interview that the Venezuelan oil deal “feels like uncharted territory,” adding that the office’s “mission has been to scale private investment in specific, critical supply chain technologies needed for national security.”
The statute that established the OSC defines its power to provide “capital assistance” narrowly as covering only loans; a Pentagon spokesperson initially told Reuters that the office “does not take equity stakes” in private companies because of that limited authority.
But a White House official offered a different explanation to reporters Tuesday, saying that the legal authority to take an equity stake in Betancourt López’s company “was granted to the OSC when it was created by statute during the Biden administration.”
“This is a very standard deal for OSC in terms of its ability to hold the financial position that it has under this deal, and all financial positions granted to OSC are consistent with the statute,” the White House official continued.
The Pentagon and the White House did not respond to requests for further clarification.
Georgetown Law School visiting scholar Peter Harrell said in an interview that it’s “not possible to offer a definitive legal view” because officials “have not provided a definitive legal theory.”
The Trump administration, he added, may be banking on no one having the legal standing — or the desire — to sue over the deal.
That includes oil companies hoping to profit off the newly open Venezuelan oil market.
“I think quietly everyone may be confused,” said Steptoe attorney Cari Stinebower, who advises oil companies that want to do business in Venezuela. “But I think no one’s going to be vocal about it because most everyone wants to participate in the investment opportunities in Venezuela.”
Senate Armed Services Committee ranking member Jack Reed, D-R.I., is among those already requesting more details on the agency’s legal authority to close the deal. Some Republicans are also keen to learn more about the Venezuelan agreement.
“I’m reviewing it right now and I have some questions,” Rep. María Elvira Salazar, R-Fla., told Semafor.
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The Biden administration created OSC in 2022 to issue and guarantee loans to companies developing technology “vital” to national security. Recent legislative efforts to officially expand its authority to include equity stakes have so far proven unsuccessful.
“The mere fact that Congress has been looking at enshrining this in statute sort of speaks for itself that it doesn’t exist,” Tad DeHaven, who tracks the Trump administration’s stakes in private companies for the libertarian-leaning Cato Institute, told Semafor.
But the administration, led by Deputy Defense Secretary Steve Feinberg, has pushed ahead, recruiting bankers to help wield a loan authority that has swelled from $1 billion to $200 billion thanks to the recent Republican party-line tax bill. The OSC’s current director, David Lorch, was previously a managing director at Feinberg-founded private equity firm Cerberus Capital Management.
Since the ouster of former Venezuelan President Nicolás Maduro eight months ago, the administration has made some progress in convincing other US oil companies to return to the region. Energy Secretary Chris Wright is set to sign an agreement with Chevron on Wednesday in Venezuela that expands its operations in the country, another White House official said Tuesday.
But reinvigorating the sector will take years, and it’s not clear yet whether this week’s deal helps speed things up. Investors may seek more clarity before proceeding.
One source of potential uncertainty: Betancourt López. The US recently intervened in an international money-laundering investigation into him in order to finalize Monday’s deal, the second White House official said.
The second White House official called Betancourt a “proven operator” who would be able to deliver for the administration, shrugging off reports critical of his handling of power plant contracts. The official also dismissed concerns that the deal might further delay free elections in Venezuela.
Republican lawmakers allied with Venezuela’s opposition leader, María Corina Machado, took the opportunity to call on the Trump administration to move faster. Elections must be held next year “with this deal or without this deal,” Salazar said.
“While the deal is good for the US and Venezuela, I still want that the transition to happen a lot quicker,” Rep. Carlos Giménez, R-Fla., told Semafor. “We need to be moving forward much quicker [because] the current government is illegitimate, and we need to be dealing with a legitimate government.”
Eleanor’s view
There’s most likely a law in place that provides OSC with some legal authority to seek equity stakes in private companies, even if the statute that established it does not.
But the administration’s reluctance to specify that law, as well as to provide other details of the Venezuelan oil deal, amounts to an engraved invitation for a future Democratic congressional majority to investigate the office.
Notable
- The Wall Street Journal first reported the Venezuela deal.