Farangan in front of Bay Azar Azar, Tattana Bautzer.
NEW YORK/HOUSTON, Jan 9 (Reuters) – U.S. involvement in Venezuela’s oil sector presents a potential opportunity for international banks, with JPMorgan Chase in an advantageous position due to the country’s history and past involvement with international trade finance.
A group of banks, including JPMorgan and Citigroup, have historically operated in the country, but have scaled back or pulled out of operations in the past few decades. U.S. banks are now, however, likely to compete for opportunities in trade financing or financing investments in oil infrastructure, a source familiar with the situation said. Venezuela is under an interim government after the U.S. impeached President Nicolas Maduro over the weekend, and analysts stress there are still significant challenges to doing business.
Among banks, JPMorgan may have an edge in the country, where it has had a presence for 60 years. When JPM cut back its banking and stock trading operations in 2002, it kept an inactive office in Caracas for several years, which could be reactivated as needed, according to a second source familiar with the matter.
“JP Morgan is one of the few US banks with an office in Venezuela, although activity is minimal due to the current sanctions,” said Maria Paola Figueroa, head of Frontier Latin America Research at the International Finance Institute. “The potential reopening of the oil sector and the broader economic recovery could create meaningful opportunities for foreign banks to re-enter the Venezuelan market, to ease US financial sanctions.”
Venezuela has been under US sanctions since 2006, which were tightened in 2017, barring US financial institutions from providing new money to the government or the state oil company, PDVSA. In 2019, Washington imposed extensive sanctions on its oil sector. Now the United States plans to roll back sanctions on Venezuela after it begins marketing Venezuelan oil. The Energy Department said Wednesday that oil proceeds would be deposited into US-controlled accounts at world banks.
For JPMorgan, there can be many ways to engage. An idea floated within the bank was the possibility of creating a trade bank to finance oil exports, a third source familiar with the matter said, without specifying whether official discussions were underway. The bank, which has a strong presence in oil-producing regions such as the Middle East and Africa, has historical precedence here, as it led the consortium of banks that operated the Trade Bank of Iraq, established in 2003 after the US-led invasion.
JPMorgan may also use funds from its Security and Resilience Initiative, a $1.5 trillion 10-year plan it unveiled last year to finance areas such as critical minerals, where Venezuela has deep resources, a second source familiar with the matter said.
“JP Morgan is a best in class global bank,” said Mike Mayo, banking analyst at Wells Fargo. “So if there’s a lot of opportunity globally or in Venezuela, a best-in-class global bank should get its fair share.”
Currently, the bank trades Venezuelan sovereign bonds that are not under sanctions with offshore counterparts, the source said.
Separately, an industry source said there could be opportunities for banks to be interested in restructuring, financing deals and within energy.
A White House official said President Trump’s administration is carefully evaluating all options, putting the best interests of the American people first. Any announcements will come directly from the administration; Anything else is pure speculation, the official said.
Banks, others are currently in wait and see mode
US banks have been doing business in Latin America for decades, but the share of revenue from the region is small. In 2024, JPMorgan Chase’s share of the Latin America/Caribbean region was 2.19% of its global revenue.
But with Venezuela accounting for only 0.1% of global GDP, it is of wider importance.
“Venezuela … is a country of enormous geopolitical and economic importance,” Deutsche Bank economists said in a Jan. 5 note, citing oil reserves.
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“The dark horse here is Citigroup,” Mayo said, citing the bank’s past experience in Latin America. Citi declined comment.
Spanish lender BBVA is the only major foreign bank with a significant presence in Venezuela.
IESE Business School professor Alejandro Moreno-Salamanca said that if the political transition in Venezuela moves forward, there will be opportunities in energy and infrastructure projects, “especially for BBVA.”
A spokesman for BBVA said: “Due to high uncertainty it would be premature to say anything at this time.”
Bank of Nova Scotia CEO Scott Thomson told a banking conference in Toronto on Tuesday that U.S. involvement in Venezuela would be good for the growth of the bank, which depends on the Latin American region for part of its income in its international business. The bank withdrew from Venezuela in 2014.
Curbs on operations
Domestically, Venezuela’s banking system is highly regulated and operates under severe financial isolation and economic instability, Paola Figueroa said, relying on foreign banks, alternative currencies and offshore intermediaries outside US jurisdiction to move payments and settle business.
Even if restrictions are lifted, there may still be reluctance from banks. For example, even after the lifting of sanctions on Iran in 2016, global banks were reluctant to do business.
It’s far from an “if you build it, they will come” scenario, said Christopher Hodge, chief U.S. economist at investment bank Natixis.
(Reporting by Saeed Azhar and Tatiana Bowser, Additional reporting by Lanan Nguyen, Nivedita Balu, Michelle Price, Jarrett Renshaw, Andrea Shalal, Jesus Aguado, Megan Davis and Anna Driver)
