The Theft That Never Was: Inside Venezuela’s 1976 Oil Takeover
Last week, the Deputy Chief of Staff for Policy and Homeland Security offered a sharply different account of Venezuela’s 1976 oil nationalization. It is provocative, but it does not hold up to the record.
President Carlos Andrés Pérez (1974-1979) proclaimed the takeover of the petroleum industry on January 1, 1976. The announcement occurred at the Mene Grande oilfield in Zulia. Crucially, the transfer from private control to a state-run model went smoothly. The major multinationals were compensated, invited to work with the new state-owned company, Petróleos de Venezuela (PDVSA), as service and technology providers, and the process triggered no diplomatic incident with the United States. A brief look at the facts does not support claims of “theft of American wealth and property,” since “the tyrannical expropriation” was precisely engineered to avoid the kind of rupture Miller describes.
The nationalization of the Venezuelan petroleum industry responded to global events unfolding in the Middle East around 1970. To be sure, Venezuelan politicians had long dreamed of granting the state full control over the most important sector of the country’s economy. However, plans for an eventual state takeover of the oil fields remained nebulous, a goal set for a distant future. Muammar Qaddafi (1969-2011) in Libya, of all figures, provided Venezuelan lawmakers with a concrete horizon for materializing full control over the hydrocarbon sector. The Libyan strongman unilaterally increased royalties and taxes on multinationals, with Iran pursuing a similar approach. OPEC then formalized this push for higher prices at its December meeting that year. What followed in 1971 sent shock waves across the world: Libya nationalized its oil industry, followed by Algeria and Iraq. This process quickly expanded to the rest of the Middle East, setting the backdrop for the fuel shortages of that decade and the energy crisis of 1973.
This global context greeted President Rafael Caldera (1969-1974), a Christian Democrat of COPEI, who was intent on capitalizing on these favorable winds. Soon, every political faction in Congress sought to outdo the other in displaying their anti-corporate credentials. Caldera stood at the top as the most nationalist of the pack, passing an unprecedented package of bills and decrees destined to expand government control over the industry significantly. By the time he handed power to Carlos Andrés Pérez from Acción Democrática (AD), de facto state control over the entire industry was already in place. Nationalization became the only politically safe position when the electoral campaign of 1973 started. Once elected, Carlos Andrés Pérez authorized the creation of a Presidential Commission in charge of studying the state takeover and proposing a bill to that effect, to be approved by Congress in 1975. Ordinary Venezuelans shared this renewed fervor for ownership over the national riches of the country, though in a conflicted way.
Polls by the weekly political magazine Resumen showed broad support for nationalization. Yet respondents also rated working conditions at the foreign oil companies very favorably and many wanted foreign capital to remain involved after the takeover because they trusted the firms’ experienced managers. At the same time, they doubted the state’s capacity to run complex industries, while still believing it could improve over time and that a state-run oil sector was in the nation’s interest. That nuance rarely appeared in Congress.
The nationalization became a fait accompli without antagonism with the U.S. government or the multinationals
COPEI and a constellation of center-left and leftist organizations pushed for an immediate, total takeover without any foreign role. Some opposed compensation altogether and even welcomed a showdown if necessary, seeing local employees working for these multinationals as threats to a “genuine” nationalization of the industry. Venezuelan managers soon came under attack from politicians accused of having “their minds colonized” by the American and British firms. They were also viewed as “centers of anti-Venezuelan activity.” Insults in the press and public spaces galvanized domestic employees to take action. Led by Venezuelan mid-level managers such as Gustavo Coronel from Royal Dutch Shell, the managerial class came together to form Agrupación de Orientación Petrolera (AGROPET). The nonprofit aimed to help the country prepare to take full responsibility for the hydrocarbon sector.
From March 1974 through 1975, AGROPET ran a public campaign for an orderly, compensatory nationalization built on continuity, not a politicized break. Their activities included appearing on radio programs, giving TV interviews, publishing in newspapers, and participating in public forums, including congressional meetings, and talks with members of the Presidential Commission mandated by President Pérez. The irony of this body is that it gathered representatives from prominent sectors of society. And yet the Commission excluded the people who actually ran the industry.
AGROPET quickly steered the nationalization debate back toward a technocratic solution. The organization’s pivotal moment came in January 1975, when its leaders met with President Pérez and laid out what became the blueprint for the 1976 nationalization. They argued for an industry built on administrative efficiency, technological progress, apoliticism, and sound management not a politicized rupture. Their model envisioned a holding company with four affiliates that would absorb concessionaire operations. The new organizational culture would blend practices inherited from the Creole Petroleum Corporation and Shell, and the nationalized industry would retain ties to its foreign predecessors. Under this proposal, Petróleos de Venezuela (PDVSA) became, in effect, the direct descendant of the multinationals that built Venezuela’s modern oil industry. It perpetuated the business philosophy of the multinationals. Persuaded by Venezuelan managers, Pérez sided with the technocrats and sent an amended nationalization bill to Congress, crucially allowing foreign capital to return under Article 5. The AD-dominated legislature defended the bill and enacted it in August 1975. Two months later, Creole and the other firms accepted a compensation package of about $1 billion for their expropriated assets.
The nationalization became a fait accompli without antagonism with the U.S. government or the multinationals. It constituted less a watershed than a continuation of relationships the Venezuelan state and foreign oil companies had built across the twentieth century on new terms. PDVSA quickly signed service and technology agreements with the very companies it had expropriated. What’s more striking is that this smooth outcome became, in part, an unintended consequence of Venezolanization: the deliberate integration of Venezuelans at every level of the corporate ladder, a policy initiated by Creole and Shell in the 1940s. Unusual in the industry at the time, it stood out as a strand within a broader set of corporate social responsibility practices these companies implemented in Venezuela. Locals trained through that system helped make the transition to state control orderly and broadly beneficial.
For much of the political opposition, however, the outcome felt bittersweet. They denounced its chucuta nature (a “half-baked” nationalization) and framed Article 5 as outright betrayal. Many wanted the kind of dramatic showdown associated with Cárdenas in Mexico, Mossadegh in Iran, or Velasco Alvarado in Peru, cases where claims of expropriation and “theft” of U.S. property could at least be mounted. Venezuela in 1976 stood far away from that drama, and once the transfer was complete, business continued as usual despite the lamentations of certain congressmen. Venezuela’s 1976 oil nationalization was engineered to preclude confrontation. Getting the history right matters. If the current U.S. administration wants to cite this episode to justify pressure, escalation, or exceptional measures, it has chosen a poor example, precisely because the process avoided the kind of rupture Mr. Miller invokes. So, por este camino no es.
