Venezuela, China, and the Defense of the Petrodollar: Libya 2.0?

from Michael Hollister

First published at FREE21 Magazine on November 05, 2025

1.352 words * 7 minutes readingtime

The escalating tensions between the US and Venezuela in recent weeks have been officially justified as a fight against drugs and drug cartels. A massive US military deployment—warships, fighter jets, and thousands of Marines—is supposedly positioned in the southern Caribbean to stop drug smuggling and activities of the gang “Tren de Aragua.”

An old saying goes:
“There are always two reasons. The one you’re given, and the real one.”

A closer look behind the façade reveals that beneath the official explanation of drug interdiction lies a conflict of far greater magnitude. This is about the petrodollar and China’s growing energy hunger. The question arises whether Venezuela might become another Libya.

The Stated Reason: War on Drugs

On September 2, 2025, a US airstrike sank a Venezuelan speedboat, allegedly operated by the ‘Tren de Aragua’ gang. Eleven people died. For Washington, this was a blow against drug trafficking; for Caracas, an attack on its sovereignty. President Trump even threatened to shoot down Venezuelan jets should they approach US warships (Politico, Sept. 2, 2025; AP News, Sept. 5, 2025) and deployed an additional 10 F-35 fighter jets to the region (Reuters, Sept. 6, 2025).

The Unstated Reality: Oil, Tether, and Yuan

Venezuela sits on the world’s largest proven oil reserves. Global oil trade is conducted in US dollars—the “petrodollar”—a cornerstone of the US financial system. The Maduro government has been under US sanctions for years and consequently cut off from the US financial system—and thus from the US dollar. Caracas responded by increasingly settling its oil deals in digital currencies like Tether (USDT) or selling its oil in national currencies, primarily Chinese yuan. More than half of all oil exports now occur in Tether. (Reuters, Sept. 3, 2025; LiveBitcoinNews, 2025)

Venezuela’s oil exports have nearly doubled in 2025. In February, deliveries to China stood at roughly 500,000 barrels per day (bpd). By June: 850,000 bpd. July: 920,000 bpd. August: nearly one million bpd. Venezuela now covers 4-7% of China’s oil demand. (Reuters, March 4, 2025; Reuters, July 2, 2025; Reuters, Sept. 3, 2025)

China’s Role and Vulnerability

Venezuela exports approximately 85-90% of its total oil production to China. Beijing is thus the primary buyer of Venezuelan oil and its most important customer. This is, as typical of Chinese policy, long-planned and executed. The People’s Republic has invested massively in the Caribbean state’s oil production, including new drilling platforms in Lake Maracaibo. This should enable the Maduro government to increase its oil production from 12,000 bpd to 60,000 bpd—a 500% increase! Medium-term, Caracas could produce 1.5 to 2 million barrels per day, feeding the People’s Republic’s energy hunger. All of this is invoiced in yuan and Tether—outside the US petrodollar system. (Reuters, Sept. 4, 2025)

For Beijing, this is far more than just “friendly assistance between allies.” During a phase of growing industrial production, China’s need for energy carriers—oil and gas—from secure and affordable sources is expanding. The largest suppliers are Russia, Brazil, and Saudi Arabia. However, any state must diversify its supply sources for security policy reasons, and the capacities of these global players are limited.

The loss of Venezuelan oil would therefore hit China noticeably, as short-term substitution is hardly possible. With their military intervention off Venezuela’s coast, the US has thus given teeth to its sanctions against Caracas—but not only placing massive pressure on Maduro; they’ve found an effective means to strike China directly and to the bone.

Chinese Investments in Venezuela

China’s engagement becomes particularly clear in numbers: Chinese company China Concord Resources invested one billion US dollars in a floating oil platform in Lake Maracaibo. Production is set to rise from 12,000 to 60,000 barrels daily. The foundation is a 20-year contract with state-owned PDVSA. (Reuters, Sept. 4, 2025)

This single project is embedded in a much larger financial relationship: Since 2005, the South American country has received loans and investments from Beijing totaling nearly $60 billion, predominantly for energy and infrastructure projects. Another estimate places total Chinese investment at over $67 billion. Additionally, there’s a joint bilateral investment fund with a volume of approximately $12 billion. (CFR, 2025; Harvard International Review, 2025; Law.asia, 2025)

These enormous sums make clear: China’s interests in the oil state on the Orinoco extend far beyond simple imports of black gold. This is about massive investments in energy, infrastructure, and long-term economic integration. China is investing here in a sustainable and powerful partnership. Any US military intervention or blockade represents not only a threat to oil exports to China—but also to direct capital investments worth billions and China’s long-term plans. With this action, Trump pulls a double lever: pressure on Maduro and an ice-cold blow against China.

Parallels to Libya

The situation bears striking resemblance to Libya 2011. Muammar Gaddafi planned to displace the US dollar in oil trade. A new pan-African currency was to be born—gold-backed. Shortly thereafter, Libya was militarily destroyed, Gaddafi overthrown and killed. Today it’s officially about drugs, but in reality about whether the dollar remains unchallenged as the reserve currency in the energy sector. Trump’s credo is “Make America Great Again,” and for that, a strong US dollar is indispensable. He cannot and will not tolerate any attack on the dollar’s dominance. The Bolivarian Republic of Venezuela, with its vast oil reserves, is a test case. If the country officially and successfully sells oil outside the dollar system, it could encourage other states to follow suit—with grave consequences for US dominance, especially after the current rapid surge in export volumes to China—the economic and political archrival of the United States.

The parallel is striking: back then too, it began with humanitarian pretexts. Back then too, it was ultimately about dollar dominance. And back then too, a resource-rich state that dared to circumvent the US financial system was plunged into chaos.

The Domestic Political Dimension

Beyond the geopolitical dimension, Donald Trump’s domestic political agenda also plays a role. “Make America Great Again” means, in his reading, asserting US power, defending the dollar, and showing strength against unfriendly regimes. A confrontational course against Maduro fits perfectly into this profile and provides him domestic support in critical quarters. Reference to the ‘war on drugs’ offers a popular, seemingly uncontroversial pretext welcomed by the American public that gives Trump backing. (AP News, Sept. 5, 2025)

Conclusion

The US military presence off Venezuela’s coast is only superficially an anti-drug operation. The size and striking power of the deployed military contingent alone speaks a clear and unmistakable language. Behind the headlines lies a geopolitical struggle over the future of the petrodollar and the containment of China—and thus the preservation of US power and dominance. Maduro has dared to sell oil outside the dollar system and evade US sanctions—and China has seized the opportunity to diversify its energy supply. For Washington, both developments are unacceptable. The scenario of a ‘Libya 2.0’ is by no means ruled out. The question isn’t whether, but when and how hard the US will strike. Another Libya draws closer.

Sources (Selection)

Reuters, September 3, 2025: “Venezuela’s oil exports rise to 9-month high…”

Reuters, September 4, 2025: “Floating oil facility arrives in Venezuela for China Concord’s project…”

Reuters, July 2, 2025: “Venezuela’s oil exports rise as more cargoes head to China…”

Reuters, March 4, 2025: “Venezuela’s oil exports rose in Feb ahead of Chevron’s license termination…”

Politico, September 2, 2025: “Navy, in expanding role, conducts strike on drug vessel near Venezuela”

AP News, September 5, 2025: “Maduro vows to defend Venezuela’s sovereignty as tensions rise with US”

Council on Foreign Relations (CFR), 2025: “China’s Influence in Latin America”

Harvard International Review, 2025: “The Future of the Sino-Venezuelan Relationship”

Law.asia, 2025: “China–Venezuela trade and investment relations”

LiveBitcoinNews, 2025: “USDT sparks the change in crude oil payments in Venezuela”

© Michael Hollister — Redistribution, publication or reuse of this text is explicitly welcome. The only requirement is proper source attribution and a link to www.michael-hollister.com (or in printed form the note “Source: www.michael-hollister.com”).

---