Why Venezuela Bonds Are Rallying After Maduro’s Ouster

Ryan Knutson (0:00)

Hey, it's Ryan Knutson, host of The Journal Podcast, our show about money, business and power. If you're looking for more deeply reported stories like we share every day, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com/thejournal, all lowercase, to subscribe now.

Alex Ossola (0:22)

Some European allies and Republican lawmakers are pushing back on President Trump's idea of taking over Greenland. Plus, after a long time out McCold, investors in distressed Venezuelan bonds may finally be a step closer to a payday.

Matt Wirz (0:37)

One of the big things that's going to have to happen is a forensic experiment where there'll be a look at how much debt is out there, who is it owed to, and then who gets what. But newsflash, no one's going to get the full amount that they put in.

Alex Ossola (0:50)

And why removing Maduro may not be enough to attract the US oil industry to Venezuela. It's Tuesday, January 6th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

After the military raid on Venezuela, President Trump has once again raised the idea of the US taking over Greenland. And that's causing alarm for some US lawmakers and allies. The president said on Sunday that US national security required American control of the territory. And yesterday on CNN, senior White House aide Stephen Miller was asked about whether the US would take military action against Greenland.

SPEAKER_4 (1:32)

The United States should have Greenland as part of the United States. There's no need to even think or talk about this in the context that you're asking of a military operation. Nobody's going to fight the United States militarily over the future of Greenland.

Alex Ossola (1:48)

Greenland's a Danish territory, and Denmark says US military intervention there would mean the end of NATO. And today, major European allies in NATO called on the US to choose cooperation and not coercion. On Capitol Hill, meanwhile, some Republicans who have supported the Venezuela mission said that talk of taking over Greenland was inappropriate. Others said they weren't sure if Trump was serious, but didn't think an annexation of Greenland would happen. About a month before the US operation that captured Nicolas Maduro, President Trump hinted to a few American oil executives that something was coming. He told them to get ready. It's an indication of how central oil is to his decision to go into Venezuela, as well as his close ties to the industry. I'm joined now by Collin Eaton, who covers American oil companies for the Journal. Collin, yesterday, White House Press Secretary Caroline Levitt said that Trump was looking forward to working with American oil companies on new investments and opportunities in Venezuela. Why is the Trump administration pushing this? What is its goal?

Collin Eaton (2:51)

Well, the oil and gas industry in Venezuela has become central to its economy, and it's been in a dilapidated state over the past two decades. The reason that Trump wants to bring it back, he's talked about lowering oil prices here in the states, but there's also the insular effects of the improvement in Venezuela's economy can stem the flow of migrants from Venezuela to the US. That's been a priority for the Trump administration. Clearly, Venezuela has a ton of oil. The joint venture assets that Chevron is a part of in Venezuela have a lot of oil underneath them, which is a key reason why Chevron has stayed in the country.

Alex Ossola (3:39)

Yesterday, investors seemed excited by the potential for other companies to join Chevron and operate in Venezuela. But these companies haven't announced any plans to do so. You write that people familiar with the matter say Chevron has no plans to increase spending in Venezuela, that ConocoPhillips says it's premature to speculate on new investment, and Exxon didn't respond to requests for comment.

Collin Eaton (4:00)

So equity investors did interpret this as an opportunity for companies to have a new oil frontier. The issue is there are a lot of details that need to be hammered out. The Constitution of Venezuela does not allow for any foreign entities to have a majority stake in a project like the ones that Chevron runs, and oil companies want to see more long-term stability. The companies that have operated in Venezuela have been burned before. And assets nationalized in 2007 under Hugo Chavez. They've been injured and aren't rushing to get back in. My understanding is that for these companies to go back into Venezuela or go into it, removing Maduro was necessary, but not necessarily sufficient. The Trump administration knows the high stakes gambit here, and so they're going to do what they can to persuade companies to put American dollars to work in the country. How that goes is going to be in the hands of the oil industry from this point.