Trump's secretary of state pick could spell trouble for one of Latin America's biggest oil producers

Venezuela — where oil accounts for most of the government's revenue and almost all of its export earnings — has had an antagonistic relationship with the US since late President Hugo Chavez took office in 1999.

In the mid-2000s, Chavez set out to renegotiate many of the contracts held by foreign oil companies operating in Venezuela, aiming to bolster his socialist government's outreach to the poor.

A number of these companies played ball, but ExxonMobil and ConocoPhillips blanched at the government's desired changes.

"While other corporations negotiated with the Venezuelan government so that Venezuela could obtain majority stakes in oil ventures throughout the country, only ExxonMobil and ConocoPhillips rejected the deals and sought international arbitration," Tim Gill, a post-doctoral fellow at Tulane's Center for Inter-American Policy and Research who focuses on US-Venezuelan relations, told Business Insider.

Venezuela expropriated both companies' assets, and ExxonMobil pursued legal recourse. Seven years later, the World Bank's international arbitration court ruled in favor of ExxonMobil but awarded the firm a significantly smaller sum than it was looking for — $1.6 billion, instead of the requested $16.6 billion.

Tillerson "fell into the trap completely," Ghassan Dagher, a Venezuelan oil-industry consultant, told The New York Times. "In my opinion, he took it very personal with Chávez."

Tillerson again tangled with Venezuela — this time with Chavez's successor, Nicolas Maduro — in 2015, when ExxonMobil started oil-exploration efforts off the coast of Guyana, Venezuela's eastern neighbor.

"Even more than ExxonMobil’s unwillingness to negotiate, its efforts in 2015 to tap into oil off the coast of the Essequibo region enraged President Maduro and the Venezuelan government, including the opposition," Gill told Business Insider.

Guyana, an English-speaking country of less than a million people, has clashed with Venezuela over the Essequibo, a long-disputed territory in the western half of the country.

Venezuela's claim amounts to about two-thirds of Guyana's territory.

"Both Venezuela and Guyana have laid claim to this area, and, as a result, oil companies have generally decided not to rattle relations between the two countries by exploring for oil in the region," Gill added.

"ExxonMobil, however, sought to work with the newly elected, more centrist government [in Guyana] to tap into these resources."

Acrimony ahead

Tillerson still faces what is likely to be a fraught confirmation process before he can set up shop in Foggy Bottom.

A point of contention will likely be Tillerson's professed skepticism toward international sanctions — an attitude that informed Exxon's dealings with Russia and that people with knowledge of his business career say is likely to remain.

With that aversion to sanctions, should Trump pursue a true "America First" policy with Tillerson at the diplomatic helm, tensions between Washington and Caracas may subside, or at least not worsen.

Trump's "basic outlook would suggest he will withdraw from significant international engagement," David Smilde, a sociology professor at Tulane University, told Business Insider in reference to Trump's potential Latin America policy. "That would probably be the best scenario for US-Venezuela relations since the US is probably the least important and effective actor in the region for mediating in the Venezuela conflict."

It's also possible, if Trump continues his warmth toward Russian President Vladimir Putin, that Maduro could work through Moscow — a close partner to Venezuela — to improve ties with the US.

But it's likely that Trump's approach to Venezuela will, in some ways, mirror that of the Obama administration and verge toward confrontation.

Obama has leveled sanctions at a number of Venezuelan officials and declared the country an "unusual and extraordinary threat to the national security and foreign policy" of the US.

While some Obama administration officials and Maduro himself have expressed interest in improving relations, the president has said he doesn't "anticipate major changes in policy from the new administration" — likely an accurate assessment, considering that Trump has lumped Venezuela in with Cuba for criticism over restrictions on political, social, and economic rights.

"The next President of the United States must stand in solidarity with all people oppressed in our hemisphere, and I will stand with the oppressed people of Venezuela yearning to be free," Trump said in October. Maduro has responded in kind, mocking the US president-elect.

Moreover, Trump, despite his overtures toward an "America First" foreign policy, may eventually find tensions with Venezuela as a useful cudgel against domestic criticism.

"Populist leaders like Donald Trump usually find it helpful to create a foreign threat as the villain in their conspiracy theories," Smilde told Business Insider.

"With a weak and discredited government, Venezuela would be a very likely object of Donald Trump's attention," he added.

Trump's shifting stances make predicting his policies difficult, but considering Tillerson's history, the possibility that foreign-policy hawks may join him at the State Department, and the administration they would be representing, it's likely that US ties with Venezuela are headed for rougher waters.

"Given Tillerson’s background and ExxonMobil’s acrimonious relationship with Venezuela, I think we might actually expect to see Trump sanction more Venezuelan state officials," Gill told Business Insider. "It's also possible that the US and Venezuela return to the kind of verbal sparring we witnessed under the Bush administration that generally went nowhere for the relationship."

Trump's secretary of state pick could spell trouble for one of Latin America's biggest oil producers

Acrimony ahead

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