Inside the power struggle over Venezuela’s debt restructuring
As the Venezuelan interim government led by Delcy Rodríguez prepares to renegotiate the country’s $240 billion debt, creditors are entering a fierce competition to secure their claims. The winner will not only shape the terms of Venezuela’s return to global financial markets but may also claim a bonus prize: a share of future revenues from the country’s oil industry.
The losses, however, will be borne elsewhere. Whether that burden falls on distressed bond investors, foreign governments, or Venezuelans themselves, already reeling from one of the worst natural disasters in the country’s modern history, remains to be seen.
What’s already clear, however, is who holds the strongest hand. With Nicolás Maduro captured in January and a more cooperative Rodríguez government now in office, the Trump administration has gained significant leverage—an advantage it will almost certainly seek to exploit.
The US holds the strongest hand—but negotiations won’t be easy
Washington already effectively controls the main sources of Venezuela’s oil-based revenues. And because many of the largest debt claims—including China’s—are ultimately tied to those revenues, the US holds considerable sway over the restructuring process. This influence is further reinforced by Venezuela’s decision to appoint Centerview Partners, a New York-based investment-banking firm, as financial adviser.
Yet US leverage does not automatically translate into an easy victory. In fact, the highly fragmented composition of Venezuelan debt is likely to give even seasoned American restructuring lawyers a headache. Around $100 billion consists of sovereign and state oil company PDVSA bonds, including accumulated post-default interest. The remainder includes unpaid oil-company and trade debts, expropriation awards, and loans from China, Russia, and development banks. Among those creditors, China may prove the toughest negotiator. After all, Beijing has little reason to accept steep losses and retains meaningful leverage of its own.
Beijing is the creditor Washington cannot ignore
Venezuela owes Beijing roughly $20 billion, much of it stemming from oil-backed lending arrangements in which oil exports were used to repay Chinese loans. Although Washington now effectively controls access to much of Venezuela’s future oil revenues under the post-Maduro order—and has little incentive to share the proceeds with Beijing—China is unlikely to walk away quietly.
While the Chinese government has limited ability to seize Venezuelan assets in the near term, it is far from powerless. It could refuse to accept the proposed terms, demand treatment comparable to that offered to bondholders, bargain directly with Washington, or withhold future investment and financing. Its most consequential option, however, may lie beyond Venezuela itself: Beijing could make cooperation in other debt restructurings more difficult, complicating ongoing and future restructurings under the G20 Common Framework. Still, China may ultimately have to accept some losses.
From distressed debt to a potential jackpot
Meanwhile, bond investors could be in for a windfall. For years, Venezuelan sovereign bonds traded at just a fraction of their face value. When fund manager Altana Wealth announced plans in 2020 to launch a Venezuela-focused hedge fund, for instance, the country’s 2027 bonds were trading at just 6.25 cents on the dollar. Following Maduro’s removal, however, those bonds rose to around 40 cents, while some issues traded close to 50 cents. Citi research suggests that a restructuring could produce recoveries in the mid-forties, potentially rising into the high-forties if creditors receive oil-linked instruments.
Though major US-based financial institutions, including Fidelity, T. Rowe Price, and Morgan Stanley, are members of the principal creditor committee, it would be premature to assume that US investors will receive preferential treatment. Still, the composition of the creditor committee and Washington’s control over Venezuela’s oil revenues could offer clues about where the negotiations are headed. And even if Venezuelan sovereign bonds ultimately trade at the midpoint of current estimates—around 45 cents on the dollar—investors who bought them at 5 cents will have generated a ninefold return on their initial investment.
A successful restructuring must do more than reward creditors
But what about the bigger picture? After all, potential gains for investors are rarely the defining measure of a successful debt restructuring. The ultimate goal should instead be medium- to long-term fiscal sustainability—and achieving that will depend on the annual payments Venezuela must make, the share of oil income pledged to creditors, the length of the grace period, and the resources protected for essential imports, reconstruction, and public investment. Rushed or incomplete debt workouts can leave countries with an unsustainable burden if repayments begin too early or rely on unrealistic assumptions, such as a future oil boom.
This is where the International Monetary Fund (IMF) typically comes into play. In cases like Greece’s debt crisis and Argentina’s repeated cycles of restructuring, IMF involvement helped bring greater transparency and credibility to the process through debt sustainability assessments, macroeconomic reform programs, and frameworks designed to ensure comparable treatment among creditors.
The IMF’s resources could also prove valuable in the wake of the devastating twin earthquakes that struck Venezuela on June 24. With reconstruction costs projected to reach around $37 billion, Caracas has already requested access to $200 million from its $4.5 billion allocation of Special Drawing Rights—the first financial engagement between Venezuela and the IMF in more than two decades.
Yet while the Fund resumed dealings with Venezuela in April and has discussed economic data with the authorities, it remains excluded from the restructuring process for now. As the Rodríguez administration has decided, the road to restructuring will not run through 19th Street in Washington, but through Wall Street.
Regardless of how negotiations unfold, it’s clear that Venezuela needs a fair and sustainable restructuring. Remaining in default would block investment and delay economic recovery. At the same time, completing a deal quickly is not the same as completing a fair deal. If investors who bought bonds at 5 cents on the dollar secure preferential treatment while China holds up the broader process, the restructuring could end up being little more than a paper exercise. Meanwhile, the longest-lasting burden would likely fall on Venezuelans, who would ultimately repay the debt through oil revenues and taxes—resources that would otherwise be available to rebuild their country.
Bart Piasecki is an associate director at the Atlantic Council’s GeoEconomics Center.
Further reading
Tue, Apr 14, 2026
The debt comes due—but there is no one to pick up the tab
Econographics By Bart Piasecki
Many of the IMF’s latest warnings center on the fallout of the Iran war. But another key message has focused on debt: because the world has neglected fiscal consolidation for more than two decades, the time to reverse course is now.
Fri, Feb 6, 2026
Iran can still normalize its economy—but the path will be painful and slow
Econographics By Bart Piasecki
Iran’s inflation crisis is driven by persistent exchange‑rate instability, entrenched fiscal dominance, and international sanctions. Despite these structural challenges, there remains a clear—but difficult—path toward economic normalization.
Tue, Oct 7, 2025
How a weaker US dollar can help debt-burdened African countries
New Atlanticist By Bart Piasecki
Trump’s drive to weaken the US dollar is having global side effects. For some African countries, it is helping to ease immediate fiscal pressures.
Image: Close-up of Venezuelan bolívar banknotes. Source: iStock.