Venezuela Investors Are Facing A Legal Minefield as US Recalibrates Stance
Investors who want to take part in the White House’s plans to revitalize Venezuela’s oil-based economy are at risk of stepping into a political and legal minefield over diplomatic recognition.
Acting President Delcy Rodríguez is not officially recognized by the US and other countries as Venezuela’s rightful authority. Instead, that distinction still belongs — at least on paper — to members of the opposition-led legislature who were elected more than a decade ago.
This recognition status, seemingly at odds with President Donald Trump’s full-throated endorsement of Rodríguez, means that companies would face off in US court against lawyers working for opposition politicians largely living in exile, in the event of any legal disputes over their investments. And any contracts signed with Venezuelan state-owned entities — including the national oil company — could get torn up by a future government intent on challenging Rodríguez’s constitutional standing and legitimacy.
What’s more, US courts hearing cases involving billions of dollars in disputed Venezuelan assets follow the American government’s official diplomatic stance, so the opposition still represents the country in ongoing legal battles against scores of jilted creditors, arbitration claimants and other plaintiffs, as it has for years.
“The concern here is if in 10 days, Delcy Rodríguez is no longer acting president, we have someone like González come in and González says, ‘Hey, we’re not going to honor any of those contracts that you just signed because they weren’t signed by a legitimate representative of the Venezuelan government,’” said Ingrid Brunk, chair of international law at Vanderbilt Law School, referring to Edmundo González, the exiled retired diplomat who is widely considered the rightful winner of Venezuela’s contested 2024 presidential election, based on an independent vote tally.
Until the US addresses this recognition issue, Venezuela is unlikely to attract desperately needed long-term investment, as companies shy away from agreements that would be difficult to enforce in the US, one of many risks they are weighing in a country once known as a stable, prosperous democracy, legal experts say. Creditors won’t be able to restructure unpaid debts. And for the Rodríguez administration, access to billions of dollars in Venezuelan assets abroad, including frozen bank accounts, gold reserves in the Bank of England and Special Drawing Rights at the International Monetary Fund, will remain elusive.
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The recognition lag is growing more conspicuous as Venezuela’s new leadership moves swiftly to roll back decades of state-led legislation to draw back investors. Among the proposed reforms is a provision to allow for international arbitration of contract disputes, a measure that would help to restore investor confidence by avoiding Venezuela’s politicized court system. But in the US, the measure could not be implemented until the US recognizes the Rodríguez government.
Read more: Venezuela’s Leader Rolls Out Red Carpet for Oil Investors
Even in recent days, US recognition “has been explicit and repeatedly reaffirmed” in “statements of interest filed by the US government in US courts,” said Dinorah Figuera, president of the opposition-led parallel assembly who is now based in Spain.
In response to a request for comment on the recognition issue, a State Department spokesperson said the Trump administration “continues to work with the interim authorities to stabilize Venezuela” in a three-part plan outlined by Secretary of State Marco Rubio.
Ad-hoc Boards
The roots of the conundrum date back to 2019, when the first Trump administration imposed oil sanctions on Venezuela and withdrew recognition of strongman Nicolás Maduro in favor of then-National Assembly head Juan Guaidó, who declared himself the country’s legitimate president based on a constitutional provision. The US shut its embassy in Caracas and Venezuelan diplomats withdrew from Washington.
Scores of other countries followed suit on the US stance. Although Guaidó was in Caracas at the time, most of his parallel administration was living abroad or eventually fled, often rubbing shoulders in Congress and influential think tanks in the US capital. As government harassment grew, Guaidó would later leave too.
In that period, the emboldened parallel administration set up ad-hoc boards of exiles to oversee international assets owned by Venezuela’s state-run Petróleos de Venezuela SA and the central bank. These boards remain active in US courts. Critically, the first Trump administration granted the parallel administration access to more than $300 million in frozen Venezuelan Central Bank funds in the US banking system.
The most visible of these parallel entities is PDVSA’s ad-hoc board, which represents the company in a years-long court battle over the shares in Houston-based refiner Citgo Petroleum Corp., Venezuela’s most valuable overseas holding. A court-ordered auction of the shares is close to reaching a final outcome.
Neither PDVSA ad-hoc board chair Horacio Medina nor the board’s press contact could be reached for comment.
The lack of clarity about formal recognition is part of a wider constellation of risks that will probably keep most oil companies away from Venezuela for now, said Luis Pacheco, who served as the first chair of PDVSA’s ad-hoc board from April 2019 to December 2020.
“Don’t you think companies that are going to sink billions of dollars in Venezuela are going to think about this? This is not a risk that can be measured,” Pacheco said. “If you want to do a deal, you would not only need a US license but also a compliance test.”
One court in New York handling a claim on Venezuelan assets has now requested that the US present a filing to clarify its position on recognition, with a Feb. 11 deadline.
“The way to solve this is to recognize Delcy, but that’s a very premature move,” said José Ignacio Hernández, senior specialist at consultancy Aurora Macro Strategies and the parallel administration’s former attorney general.
The thorny issue is among many facing oil companies as they weigh Trump’s push to reinvigorate Venezuela’s oil industry. Citing current legal and commercial frameworks in Venezuela, Exxon Mobil Corp. Chief Executive Officer Darren Woods has described Venezuela as “uninvestable.”
Read more: Exxon Calls Venezuela ‘Uninvestable’ as Trump Pushes Oil Plan
Blocked
On Jan. 5, the same day that Rodríguez was sworn in as Nicolás Maduro’s successor in Caracas, Venezuela’s opposition-led National Assembly elected in 2015 — which former President Joe Biden said was the country’s last democratically elected body — renewed its leadership for another year. Their original term expired in 2021, but the opposition has repeatedly extended the mandates of its lawmakers, initially to preserve the former interim government structure.
The parallel authorities can also hinder efforts to gain access to other assets. For years, Venezuela’s central bank has been trying to recover gold stored in the Bank of England’s vaults in London as part of the country’s foreign reserves.
British courts, following UK recognition policy, blocked Maduro’s attempts to repatriate or sell the gold, ruling that the Bank of England could rely on instructions aligned with UK foreign policy, which had recognized Guaidó’s authority at key points in the litigation. Since then, the case has ricocheted through appeals, with courts repeatedly denying access to the central bank in Caracas.
For now, relations between US and Venezuela are rapidly thawing, even though Trump’s backing for the “very, very smart” leadership in Caracas hasn’t yet translated into recognition of the new administration as the country’s legitimate representative. Further muddying the outlook, Trump has said he likes opposition leader María Corina Machado “a lot,” and wants her to be involved “somehow.”
As Rodríguez consolidates power, the US is airing out its embassy in the Venezuelan capital in anticipation of a reopening. Venezuelan diplomats are cautiously doing the same in Washington.
“It’s unusual to have assisted someone to come into power and then not recognize them,” said Vanderbilt Law’s Brunk. “You still have just dramatic political instability and the mere recognition is not going to really fully solve that problem for the oil companie
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