Iraq’s Oil Fund Had Un Oversight. Who Will Monitor Venezuela Is Tbd.

Iraq’s reconstruction effort had a United Nations mandate, a special inspector general and international monitors overseeing its oil fund — and it still lost track of $8.7 billion.

Venezuela’s oil fund has Secretary of State Marco Rubio and a Qatari bank account.

Nearly two weeks after President Donald Trump ousted Venezuelan dictator Nicolás Maduro, his administration has already collected at least $500 million from oil sales, holding the money in a Qatari bank with the White House giving the secretary of state sweeping discretion over how it’s spent. There’s no independent auditor to track the money, no public accounting of how it will reach ordinary Venezuelans — and no timeline for when Venezuela might eventually regain control of its oil resources.

For some former U.S. officials from both parties who managed Iraq’s reconstruction, the Venezuelan arrangement brings back memories of problems they faced: Even with vastly more oversight and safeguards in place, the Iraqi rebuilding effort, called the Development Fund for Iraq, couldn't properly account for where its money flowed.

“We had all kinds of people watching this stuff, but we still had a lot of corruption, a lot of bad decisions where the money should go,” said James Jeffrey, who served as U.S. ambassador to Iraq from 2010 to 2012 under President Barack Obama. “The basic question is — if the U.S. government is actually marketing this oil, which it is — what is it going to do with the money?”

After Maduro’s removal earlier this month, Trump said that the U.S. would sell Venezuela’s crude exports to “benefit the people of Venezuela and the United States.” Energy Secretary Chris Wright later said those sales would continue “indefinitely.”

But the administration has yet to answer basic questions about how the fund will operate.

While Trump has issued an executive order authorizing Rubio to spend the money for "public, governmental, or diplomatic purposes" on behalf of Venezuela, seven former U.S. officials, in interviews, noted that language is broad enough to justify nearly anything. It’s also unclear whether the U.S. government plans to hand over the money directly to Venezuelans, give it with conditions attached, have the U.S. spend it based on Venezuelan requests or simply have American officials decide what the country needs.

"What does 'for the benefit of the Venezuelan people' mean if we're controlling the money? Is it just like U.S. government officials will sign off on, 'This money can go to this person in Venezuela, or this business or this investment'?” said Edward Fishman, who worked on Iran oil sanctions at both State and Treasury during the Obama administration, now director of the Center for Geoeconomic Studies at the Council on Foreign Relations. “There's all kinds of risk of corruption and misuse of these funds."

Administration officials argue Venezuela is very different from Iraq — and that the U.S. can help Venezuela rebuild in a way no other country can. But they acknowledge the administration is moving quickly, adding that they are reviewing existing legal structures and restrictions on Venezuelan banking and that even though the proceeds aren’t being deposited in the U.S. Treasury, they are in accounts controlled by the U.S. government.

The White House did not respond to questions about how the fund will be overseen, how Qatar was chosen to hold the funds or how the administration will ensure the oil revenues are used to benefit the Venezuelan people. Instead, an administration official focused on what the fund will do to help energy prices.

“We now have leverage — oil is on the market again, most of which will be sold to the United States, so this is another measure that will drive down domestic energy prices. We now have the leverage to stop narcoterrorism and the trafficking of deadly drugs,” said one administration official, granted anonymity to discuss strategy. “The president and his team are carefully crafting each deal to stabilize Venezuela and re-route oil profits back to the Venezuelan people to help their country recover from decades of mismanagement.”

The Treasury Department declined to comment, while the State Department did not respond to a request for comment.

The lack of clarity around the current arrangement underscores the risks Trump has taken in seizing control of Venezuela’s oil industry at a moment when his administration is trying to focus its midterm messaging on the economy. Any hint of waste, corruption or mismanagement of the Venezuelan oil could undercut that pitch — hurting Venezuelans, damaging Republicans’ electoral hopes and tarnishing Trump’s legacy.

“The administration so far has been relatively successful seizing these tankers, but what happens if one of them escalates, and you get a U.S. service member killed or wounded or something. That’s a risk. There’s a cost,” Fishman said.

Unlike in Iraq, where the U.S. had the Coalition Provisional Authority on the ground managing reconstruction funds, the Trump administration is working with Delcy Rodriguez, Maduro’s former vice president, who the U.S. sanctioned in 2018 for corruption and drug trafficking ties.

The Development Fund for Iraq also operated under a UN Security Council resolution, had international monitoring through an advisory board — and even had a special inspector general.

“If the regime puts in a request for the disbursement of a billion dollars, who’s going to track and audit that?” said Juan Zarate, who served as deputy national security adviser for combating terrorism and a senior Treasury official under President George W. Bush. “I’m not sure I would trust anything the regime does. This is a nefarious group still in power."

Elliott Abrams, who served as special envoy to Venezuela during Trump’s first term, said handing money to the regime would be the “worst solution” for the Venezuelan people, and that it should be distributed through “reliable organizations,” like the World Food Program, Save the Children and the Catholic Church.

The U.S. handed control of Iraq’s fund back to Iraqi authorities about a year after taking control of it. Venezuela has no comparable timeline, with U.S. officials having laid out no clear plan for elections or a handoff of control.

In Iraq, the money sat at the Federal Reserve Bank of New York, where U.S. regulators and lawmakers could at least see how it was handled. This time, the funds are in a bank account in Qatar, outside Congress’ direct line of sight.

“That speaks to the opaque, non-transparent nature of everything that’s happened in Venezuela,” said John Feeley, who served as U.S. ambassador to Panama during the first Trump administration.

None of the biggest banks, which could host the funds in the U.S., have publicly expressed an interest in doing so. JPMorgan Chase, Bank of America, and Citigroup declined to comment.

Another useful corollary, experts said, is the escrow accounts set up for South Korea, Japan, China and other countries in the 2010s, which allowed them to abide by U.S. sanctions while still buying Iranian oil. The sanctions required allies to reduce their exposure to Iranian oil over time, and those countries were able to set up escrow accounts housed at domestic banks to stash Iran’s proceeds from its continued oil sales to the Asian nations. Iran could then use that revenue to purchase approved goods from those countries.

That infrastructure doesn’t appear to exist for Venezuela, where the structure came together in a matter of weeks.

Officials have given some short-term clarity on the estimated $140 billion owed to Venezuela’s creditors. The president’s recent executive order declared that funds “paid to or held by the U.S. in designated U.S. Treasury accounts” or funds “on behalf of the Venezuelan or its agencies or instrumentalities” are to be shielded from creditors’ demands — including oil companies that had their assets nationalized.

“That was a very, very smart move,” said Matt McManus, a visiting fellow at the National Center for Energy Analytics, who spent decades working at the State Department, where he worked on Iraq and Venezuela. “You don’t want the funds necessary for Venezuela’s future to be clobbered by creditors, and you don’t want the first dollars going straight to oil companies. That would not help with the administration’s diplomacy with the Venezuelan people.”

José Ignacio Hernandez, who served as special attorney general in the interim Venezuelan government recognized by the U.S. in 2019, praised the creation of the oil fund and Trump’s executive order, noting the interim government led by Juan Guaidó had advocated the same strategy for the nation’s debt.

A U.S.-controlled oil fund is the “only way through which… the current corrupt mechanisms in place can be used to the benefit of the immediate reconstruction of Venezuela,” said Hernandez, who is now senior specialist at advisory firm Aurora Macro Strategies.

But in the longer term, it is unclear whether proceeds can be used to pay off an estimated $140 billion in Venezuelan debt. In Iraq, the U.S. government and various international bodies pushed Iraq’s creditors to take a major haircut on the payments they were owed, a move that if replicated in Venezuela is likely to rile Wall Street and complicate the administration’s efforts to entice oil companies back to the country.

The myriad unknowns have experts skeptical that ordinary Venezuelans will benefit much from the cash piling up in a U.S.-controlled Qatari account.

“So much is going to have to break well,” said Helima Croft, head of commodities at RBC Capital Markets and a former CIA analyst. “There are so many fundamental questions that have not been resolved.”