Why the Venezuela Conflict Traces Back to a 1974 Oil-Dollar Agreement That Shaped Global Power
The underlying trigger behind the US action in Venezuela can be traced to a strategic arrangement forged in the mid-1970s between Washington and Riyadh.
At its core, this issue is about protecting the long-term viability of the US dollar as the world’s primary settlement currency.
This confrontation has little to do with narcotics, terrorism, or the promotion of democratic values.
Instead, it revolves around the oil-dollar framework that has underpinned American economic dominance for half a century.
Venezuela’s recent actions posed a direct challenge to this framework.
To understand the seriousness of the situation, consider what has unfolded in practical terms.
Venezuela controls roughly 303 billion barrels of confirmed crude oil reserves.
This makes it the single largest holder of oil reserves worldwide.
Its reserves exceed even those of Saudi Arabia.
Collectively, these reserves account for nearly one-fifth of global oil supply.
The critical issue, however, lies not just in quantity, but in currency.
Venezuela began settling oil transactions in Chinese yuan rather than US dollars.
As early as 2018, the country publicly declared its intention to reduce dependence on the dollar.
Oil payments were accepted in yuan, euros, rubles, and other currencies, deliberately excluding the dollar.
Caracas formally expressed interest in aligning with the BRICS bloc.
It also developed direct payment mechanisms with China that circumvented the SWIFT network.
Its vast energy reserves gave it the financial capacity to support a non-dollar system for many years.
These moves carry implications far beyond Venezuela.
The foundation of the US financial architecture rests on a single pillar.
That pillar is the petrodollar system.
The origins of this system date back to 1974.
Under this arrangement, global oil trade was to be denominated exclusively in US dollars.
In return, the United States committed to safeguarding Saudi Arabia’s security.
This agreement ensured sustained global demand for the dollar.
Every nation importing oil needed access to dollar liquidity.
This structure enabled the US to expand its money supply while other economies earned dollars through trade.
It financed military reach, social programs, and persistent fiscal deficits.
In strategic terms, control over oil pricing proved more influential than military hardware.
History shows a consistent response when this system is questioned.
In 2000, Iraq announced its intention to price oil in euros.
Three years later, Iraq faced invasion, leadership change, and a swift return to dollar-based oil trade.
Claims regarding weapons of mass destruction were later shown to be unfounded.
In 2009, Libya proposed a gold-backed African currency for energy transactions.
Leaked communications from US officials later suggested this proposal was a major concern.
The plan aimed to establish a continental currency supported by gold reserves.
By 2011, NATO intervention led to regime collapse and lasting instability.
Public remarks celebrating the outcome underscored the finality of the shift.
The proposed gold-based system vanished with Libya’s leadership.
Attention has now shifted to Venezuela.
Its oil reserves far exceed those of earlier challengers combined.
Energy exports were increasingly settled in yuan.
Financial infrastructure was built to operate beyond dollar oversight.
Formal BRICS alignment was actively pursued.
Strategic partnerships were deepened with China, Russia, and Iran.
These nations collectively drive the global move away from dollar dominance.
Such alignment follows a recognizable pattern.
Disrupt the oil-dollar framework and face external intervention.
The sequence has repeated without exception.
A senior US official recently framed Venezuela’s oil sector as historically American-built.
He described nationalization as an unprecedented seizure of US economic interests.
This framing leaves little ambiguity.
The argument suggests historical corporate involvement grants permanent ownership rights.
Applied broadly, such logic would invalidate most resource nationalizations worldwide.
Beyond immediate confrontation lies a deeper challenge.
The oil-dollar system is already showing signs of erosion.
Russia now conducts energy trade in rubles and yuan.
Saudi Arabia has openly discussed alternative settlement currencies.
Iran has operated outside dollar systems for years.
China’s CIPS network rivals SWIFT with thousands of participating banks.
BRICS nations are developing independent payment rails.
The mBridge platform enables direct central bank settlements in local currencies.
Venezuela’s integration into this framework would significantly accelerate change.
This explains the intensity of the current response.
Drug enforcement plays a minimal role, given Venezuela’s negligible share in US narcotics supply.
Terrorism claims lack substantiated evidence.
Democratic justification appears selective when contrasted with long-standing alliances elsewhere.
The objective is preserving a five-decade-old monetary arrangement.
Global reactions underscore rising tensions.
Major powers have condemned the action as coercive force.
China faces significant financial exposure as Venezuela’s largest oil customer.
BRICS members observe the consequences of challenging dollar settlement.
The signal sent to emerging economies is unmistakable.
Defy dollar dominance and face severe repercussions.
Ironically, this may hasten the very shift it aims to prevent.
Countries in the Global South increasingly view speed as their only protection.
The timing adds symbolic weight.
On January 3, 2026, Venezuela’s leadership was removed.
On January 3, 1990, Panama experienced a similar intervention.
The parallel spans thirty-six years.
The justification remained consistent.
Control over resources and trade corridors remained the true objective.
Historical patterns echo across decades.
Attention now turns to the next phase.
Public messaging will frame the narrative.
Energy companies are already preparing to re-enter Venezuela.
Political restructuring is expected to restore dollar-based oil trade.
The country risks following paths seen elsewhere.
Yet critical questions remain unaddressed.
What happens when military leverage no longer sustains currency dominance?
What if economic retaliation becomes viable?
What if alternative blocs reject dollar settlement entirely?
What if global consensus shifts against coercive enforcement?
Recent actions reveal underlying vulnerability.
The global response will determine whether this stance deters or accelerates change.
Using force to defend a currency often signals declining confidence.
Venezuela may not mark the beginning of this shift.
It may represent its most visible inflection point.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services
