Is the U.S. Reviving the Petrodollar with Venezuela and Iran?

The pressure being exerted by the United States on both Venezuela and Iran is escalating. The commonality between these two nations—rich oil and gas resources and governments that resist U.S. imperialism—plays a pivotal role in understanding this situation. The U.S. does not require their oil for immediate consumption; rather, it seeks to maintain its financial dominance.

Recently, Trump indicated that land operations against Venezuela could be a possibility. Officially, the justification is to combat drug trafficking; however, as we have discussed before, this rationale does not stand up to scrutiny. The actual aim appears to be regime change, a point almost acknowledged in a recent Financial Times article.

The report features Corina Machado, who claims that a growing number of individuals are joining her underground movement and that they are in communication with the Trump administration to facilitate Maduro’s ousting. Interestingly, she goes on to suggest—though evidence contradicts this—that the military does not support the current president, which is why he has involved popular militias.

Both parties involved in the Venezuelan scenario have intricate calculations to consider. While the Trump administration may not want to intervene militarily, it seems intent on applying sufficient pressure to force a shift in regime. Outcomes remain unpredictable, and as James Bosworth aptly notes, the polarized nature of online discussions makes forming an informed opinion difficult.

What is evident is the objective of regime change: to install a government more aligned with U.S. interests, granting priority access to Venezuela’s extensive natural resources, especially oil. Trump has claimed during his campaign that had he been in power, U.S. companies would already be extracting resources.

It could be argued that the U.S. might achieve its goals without necessitating regime change, as Maduro has shown a willingness to sell oil, despite the hostile rhetoric. Achieving this would mean lifting sanctions and acknowledging past errors, which runs counter to the Trump administration’s efforts to assert its influence within its designated “sphere,” reminding Latin American nations of the continued relevance of the Monroe Doctrine.

The situation with Iran mirrors that of Venezuela. The U.S. could reach its objectives to some extent without aiming for regime change, given that the Iranian government has expressed a willingness to negotiate. Yet, the prevailing U.S. policy in the Middle East, heavily influenced by Israeli interests, sets those discussions up for failure from the start.

A coalition, backed by the Israeli lobby, has intensified calls for a renewed strike against Iran. European nations have initiated the snapback mechanism under the JCPOA, reinstating UN sanctions as the agreement’s original ten-year term expires. Iran has previously warned that its cooperation with the International Atomic Energy Agency would cease if the snapback were enacted, indicating a breakdown of the deal’s monitoring framework.

The implications are clear: diplomacy has stalled. Iran’s Supreme Leader has ruled out the prospect of talks, denouncing them as futile. Meanwhile, President Pezeshkian has dismissed dialogue, citing the U.S.’s unreasonable expectations. In response, the U.S. has bolstered military defenses for Israel, with satellite imagery indicating the deployment of an additional four THAAD missile systems on top of existing ones.

The expanded air defenses demonstrate the efficiency of Iran’s missile capabilities while reflecting U.S. and Israeli preparations for potential conflict. Trump’s contentious peace plan concerning Gaza appears aimed at providing Israel the freedom to instigate further attacks.

This initiative hinges on the complete capitulation of Hamas and establishes a neoliberal international mandate over Gaza, achieving all of Netanyahu’s stated war objectives without burdening Israel economically, legally, or militarily—allowing Israel to redirect its focus onto Iran.

Iran possesses the third-largest oil reserves and the second-largest gas reserves globally. Should the U.S. gain control over both Iran and Venezuela’s oil reserves, it would hold the first and third largest reserves worldwide, already benefiting from influence over the second and fourth largest reserves in Saudi Arabia and Canada, respectively. Such dominance would not only allow the U.S. to manipulate prices and distribution but also dictate transaction currencies—a crucial advantage.

Alistair Crooke has suggested that U.S. concerns about its debt drive the push in the Middle East and Latin America to amass significant resources under U.S. control. While I broadly agree with this perspective, I take issue with specific details.

In my view, the U.S. doesn’t inherently fear its debt; it could technically print dollars or elect not to repay and maintain its fiscal deficits. Varoufakis articulates this deficit as “The Global Minotaur,” the engine behind U.S. hegemony since Nixon dismantled Bretton Woods.

However, the 2008 financial crisis and subsequent geopolitical tensions—particularly the 2014 operation in Ukraine leading to the ongoing war with Russia—have reshaped both financial and geopolitical landscapes. This financial crash diminished global confidence in American deficits as stabilizers and has left many nations weary of U.S. manipulation to uphold its supremacy.

This shift means countries are increasingly reluctant to store U.S. dollars as reserve currencies or to conduct trade in them. Holding reserves typically involves placing them within the U.S. financial system, which in turn fortifies the economic and military prowess of the U.S. Excessive use of its currency in global trade allows the U.S., with its infinite dollar supply, to surpass others. In response, nations like Russia and China are advocating for and developing alternatives to the dollar-centric model.

Trump’s administration harbors understandable concerns about this development, which he has made clear. If nations cease holding and using U.S. dollars in trade, American influence would plummet. How does Trump propose to avert this crisis? By creating a necessity for other countries to require dollars. What is currently irreplaceable for these nations, and what they cannot self-produce? Oil.

The Trump administration is enacting a dual strategy. On one front, it is devaluing the dollar to benefit U.S. industry. Should this strategy succeed, it may result in excess production without corresponding consumption, allowing for continuous dollar issuance without the looming threat of inflation or domestic crises.

Ironically, this aligns with a strategy proposed by Xu Gao, Chief Economist at Bank of China International, in a detailed paper titled “Where Are the Errors in Dalio’s Understanding of National Debt?” Gao advocates for a Modern Monetary Theory approach to managing national economies and debts.

This approach holds when a government can mandate the use of a singular currency internally. However, since the U.S. leverages its currency as the cornerstone of its global dominance, it requires other nations to need dollars.

Therefore, the U.S. is motivated to generate external demand for the dollar. Some analysts argue that U.S. assets and digital markets are overvalued. Industries like Tesla and AI illustrate this point, as many digital technologies can be replicated. Russia and China have already constructed alternate versions of the internet, while numerous countries strive to develop their own digital ecosystems. Although the U.S. retains abundant resources, alternatives exist elsewhere.

Yet, there is something that is irreplaceable, unproducible, and universally needed: oil. If the U.S. were to gain control over the four largest oil reserves globally, it could mandate that oil transactions occur in dollars, ensuring a perpetual demand for its currency. For that to happen, it needs the oil resources of Venezuela and Iran.

This strategy would have significant ramifications for China, the largest importer of oil, as it could impede its access to inexpensive oil, while Russia, China’s primary supplier, would have to offer its oil at discounted rates, limiting profitability under sanctions. Both scenarios align with U.S. objectives to weaken Russia and contain Chinese growth.

This argument may also shed light on other U.S. foreign policy moves, such as financial assistance to Javier Milei’s Argentina, which boasts substantial untapped oil and gas reserves in the Vaca Muerta region. This financial support comes with the condition that Milei wins upcoming legislative elections, further securing U.S. access to these resources.

However, achieving favorable outcomes for the U.S. in Venezuela and Iran is far from guaranteed; in fact, regime change in these countries is improbable, and various other oil producers—particularly Saudi Arabia—are drifting away from U.S. dominance. Nevertheless, despite numerous caveats, competing interests, and the agency of other nations, this strategic logic does provide some insight into significant shifts in current U.S. foreign policy.