President Donald Trump’s plans to restore Venezuela’s beleaguered oil industry faces a series of challenges that will cost U.S. oil companies many billions of dollars to overcome.
The move follows a series of deadly strikes on Venezuelan boats supposedly carrying drugs, attacks widely considered to be illegal. The United Nations Secretary General António Guterres, the body’s top official, called Trump’s ousting of Maduro a violation of the UN’s charter.
According to Helima Croft, head of global commodity strategy at RBC Capital Markets, oil companies’ efforts to grow production, such as rebuilding infrastructure, would take about a decade. She wrote in a note to investors on Saturday that according to oil executives, these efforts will cost $10 billion annually, bringing total investments over the next 10 years to about $100 billion.
“The notion that Venezuela has the largest reserves of oil in the world—303 billion barrels of oil [in reserve]—may be a stimulant in trying to get the price of oil to drop for potentially his own electoral purposes,” Tinker Salas told Fortune. “Although [Trump] is grossly mistaken if he thinks that Venezuelan oil comes online tomorrow and will affect prices of oil before the election.”
“The weekend’s action in Venezuela also raises fiscal questions,” he wrote. “It is not clear how, if at all, the US intends to ‘run’ Venezuela but military adventures carry a fiscal cost. Despite the noise of social media warriors, geopolitical considerations are likely to concern investors less.”
The factors influencing U.S. oil companies go beyond just the infrastructure challenges plaguing the industry in Venezuela. According to RBC Capital Markets’ Croft, increasing oil production will hinge on companies feeling confident about the safety of setting up shop in Venezuela. That begins with who will be leading the country moving forward.
“We thought Libya was going to be an easy turnaround, post-[former Libyan Prime Minister Muammar] Gaddafi,” Croft said. “So the question is, What’s our template for a rapid recovery of an oil sector that has suffered decades of decline and mismanagement?”
Tinker Salas argued that other factors, including an improvement in technology to extract low crude oil, could expedite production, but until there’s evidence that companies can thrive in Venezuela, there will likely be few efforts to escalate drilling.
“I don’t think any large U.S. major company is going to want to invest without a series of guarantees, because you’re talking about billions of dollars of investment,” Tinker Salas said. “This is an investment for the long term, not for the short term.”
Macquarie’s Shvets and Liu added an ominous warning for the long term of U.S. foreign policy, writing, that this is “another nail in the coffin of [the] global rules-based order,” marginalizing the UN “similar to the League of Nations circa 1930s.” The League of Nations was the forerunner to the UN and is famous among historians for its formation after the wreckage of World War I and its almost immediate failure to prevent the rise of authoritarianism in the 1930s that gave way to World War II.
This could also signal that the Church Committee rules may be “obsolete,” the Macquarie analysts wrote, referring to the regulations in place since 1975 to address abuses intelligence revealed during the Vietnam era. The CIA reportedly played a critical role in ensuring the success of this military action in Venezuela, after all.
