Venezuela: Energy, minerals, and strategic leverage

At first glance, Venezuela appears to be a classic oil story. It has the world’s largest proven oil reserves. However, this is not just about fossil fuels in the traditional sense of energy security. AI is changing the energy equation dramatically.

Electricity demand in the United States is rising rapidly, partly due to explosive growth in data centers built to power AI and cloud computing. In 2023, U.S. data centers consumed around 4.4% of total electricity, and this figure is expected to increase significantly as AI workloads grow. In states where data centers are concentrated, electricity prices are rising faster than the national average, with power bills increasing by 13% in Virginia, 16% in Illinois and 12% in Ohio in the past year alone. Utilities are extending generation capacity and upgrading transmission networks to meet this concentrated demand, highlighting that electricity is now a strategic fuel rather than a commodity.

Venezuelan oil and gas could help to offset U.S. energy demand by supplementing crude oil supplies, thereby alleviating stress on the grid and refineries. However, Venezuela’s strategic significance extends well beyond hydrocarbons. Much of the country sits on the ancient Guayana Shield, which is home to substantial deposits of nickel, copper, bauxite, coltan, gold, and other critical minerals that are essential for advanced electronics, defense technologies, renewable energy sources, and AI hardware. In 2016, Caracas established the extensive Orinoco Mining Arc as a state-controlled area for mineral extraction, formally placing these resources under centralized management.

In practice, however, mining there has become a mix of state oversight, informal operations, and widespread illegal extraction. A significant proportion of minerals, particularly coltan and other strategic materials, are smuggled into Colombia and then on to global markets, with much ultimately ending up in China’s processing networks. Even though official rare earth output remains underdeveloped, Venezuela’s broader mineral ecosystem reinforces Beijing’s leverage in global supply chains. At the same time, it should be noted that China has been Venezuela’s largest buyer of crude oil for years.

From this perspective, it could be argued that control or influence over Venezuelan resources and minerals would offer the U.S. several strategic advantages. Firstly, it would allow Washington to act strategically on its own energy needs rather than leaving them vulnerable to global disruptions. Secondly, it would reduce China’s access to discounted Venezuelan crude, thus limiting Beijing’s ability to diversify. Thirdly, it would strengthen U.S. leverage through sanctions and market positioning.