Imperialism and the markets

Katie Martin (0:06)

Pushkin. Well, 2026 has certainly started with a bang. Happy New Year, everyone. We seem to have a new world order. Donald Trump has plucked the president out of Venezuela, dropped bombs on Caracas and declared that he's in charge. If you think he's joking about taking control of Greenland next, then I hope you're sitting down because I'm here to tell you, he's absolutely serious, most likely. Greenland, of course, is a protectorate of Denmark, a NATO member, so good luck NATO. Through it all, what are markets up to? Well, kind of nothing. To be fair, we did predict this kind of shrug at Venezuela on this very podcast just before Christmas, and for once, we were right. Today on the show, we're going to ask whether that makes sense, but also to take a bit of a dive into Venezuela's oil. Trump clearly wants it, but is it really the point here and is it worth the effort? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at the FT in London, which had a very light dusting of snow today. Joining me down the line from New York City, I have not one but two co-pilots. Mr Rob Armstrong off of the Unhedged newsletter, of course.

Rob Armstrong (1:23)

Hi, Katie.

Katie Martin (1:24)

But also we have an oil pointy head in the form of the very excellent Jamie Smith.

Jamie Smyth (1:29)

Hi, Katie.

Katie Martin (1:30)

Hey, Jamie. Thanks so much for coming along today. We know you are a busy man. Listeners, there will be two male voices here. If you're confused, Jamie is the one who knows what he's talking about. Chaps, Happy New Year. We should get straight to it because time waits for no podcast in 2026 Rob, as the token American on the pod, what is your glorious leader up to, please?

Rob Armstrong (1:54)

I forego all psychoanalyzing of the president. This move in Venezuela, by which I mean the fact that he's engaging in what looks like regime change. He says we're going to run the place temporarily. This was not on my bingo card at all, was sort of outside of the realm of what I thought he would get up to. So I have turned in my presidential analysis union card and given up the game.

Katie Martin (2:26)

But the facts on the ground are what? He's taken Nicolas Maduro out of the country.

Rob Armstrong (2:31)

Yes, we were briefly neighbors in Brooklyn, Maduro and I, they had them in lock up in Brooklyn. I didn't drop by to bring him a care package. He's appeared in Manhattan in court on charges of narco-terrorism and pled not guilty. And now we have this tremendous open question, or two tremendous open questions, only one of which I think we're going to address on the show. So, open question number one is, what does the president mean when he says he's going to quote run Venezuela until something else happens? And two, is this resource imperialism? In other words, is this all about the oil? And that question I think we can address on the show today.

Katie Martin (3:22)

We can, which is why we have the very lovely Jamie Smith. Now, Jamie, tell me, I thought Venezuela, yes, it's got lots and lots of oil, but I thought it was like crappy oil that no one wanted. What's going on here?

Rob Armstrong (3:34)

Is that the technical term, Jamie, crappy oil? Is that what we call it?

Jamie Smyth (3:37)

Not really. It's called heavy oil. And this is, yeah, it's very different to the type of oil that is pumped out of the Permian, like the biggest US oil field. That's light, sweet, crude. The heavy oil is actually very thick.

It's very difficult to get out of the ground, and it costs a lot of money to get it out of the ground. And it means that the average cost of production per barrel in certain parts of Venezuela is as high as $80.

Rob Armstrong (4:05)

And remind us what the global price of crude oil is today.

Jamie Smyth (4:09)

Global price is hovering around $60. So if you're producing at $80, you know, you're losing money at the minute.

Rob Armstrong (4:16)

Yeah, I don't know a lot about business, but when you make something for $80 and sell it for 60, my feeling is you're behind there.

Jamie Smyth (4:25)

Exactly.

Katie Martin (4:25)

That's not supposed to be how it works yet, yeah.

Rob Armstrong (4:28)

This leaves a very big question to answer for those who frame the American adventure in Venezuela as an effort to take control of or steal the country's oil. Because people don't generally steal things that have a negative value. You don't just go around taking on liabilities, voluntarily. Is there a way of making sense of the case for the US wanting this oil given that it's unprofitable right now?