Venezuela's Oil Gamble: Is Big Oil Ready to Invest?

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A Productive Reversal with a Firm Warning

U.S. President Donald Trump has reversed his harsh criticism of a UK agreement to transfer sovereignty of the Chagos Islands, signaling a new, more accepting stance after discussions with British Prime Minister Keir Starmer.

In a social media post on Thursday, Trump described his talks with Starmer as "very productive." He acknowledged the UK's position on returning the islands to Mauritius while leasing back the strategic military base at Diego Garcia.

"I understand that the deal Prime Minister Starmer has made, according to many, the best he could make," Trump posted.

However, this softer tone came with a significant condition. Trump added a stark warning about the future of the U.S. military presence on the island.

"If the lease deal, sometime in the future, ever falls apart, or anyone threatens or endangers U.S. operations and forces at our Base, I retain the right to Militarily secure and reinforce the American presence in Diego Garcia," he stated, without providing details on what such military action would entail.

From "Great Stupidity" to Cautious Support

This new position marks a sharp turn from the president's previous rhetoric. Last month, Trump had publicly condemned the UK's decision regarding the Chagos Islands, calling it "an act of GREAT STUPIDITY."

The administration's fluctuating stance highlights the diplomatic complexities surrounding the strategically vital military installation.

The Strategic Value of Diego Garcia

The Diego Garcia base, located on the Chagos Islands, is a critical military asset for both the United States and the United Kingdom. Positioned nearly 2,000 miles (3,200 kilometers) from the coast of East Africa, the facility enables the projection of military power across the Middle East and Asia.

Under the agreement finalized last year, Mauritius would gain sovereignty over the islands, but the UK would maintain "full responsibility for the defense and security of Diego Garcia" for a 99-year period. The deal was initially viewed as a success for the British government, particularly after securing early support from the Trump administration.

Republican Concerns Over China's Influence

Despite the administration's revised stance, some Republican lawmakers remain worried about the deal's implications. Their primary concern is that the new arrangement could create an opportunity for China to conduct espionage on U.S. military activities at the base.

These fears are part of a broader anxiety in Washington about Beijing's expanding economic and military footprint throughout the Indian Ocean region.

Russia is offering its crude oil to Chinese refiners at steeper discounts as a new trade deal between the United States and India creates uncertainty over future purchases from one of its biggest customers.

This strategic price cut aims to secure demand in China after India, the second-largest buyer of Russian crude since 2022, signaled a potential reduction in its imports.

Deeper Discounts on Key Russian Grades

According to trade sources, the price adjustments on key Russian blends have been swift and significant.

The discount on Russia's ESPO blend, which is shipped from the Kozmino port, has widened to almost $9 per barrel below ICE Brent. This marks a notable increase from the $7–$8 per barrel discount that had been typical in recent months.

Meanwhile, the discount on Urals crude, Russia's flagship grade shipped from the Baltic Sea, has already reached $12 per barrel below Brent. Traders report that this discount could deepen further as market conditions evolve.

The US-India Trade Deal Catalyst

The catalyst for this pricing shift is the recent trade agreement between the U.S. and India. The deal makes lower U.S. tariffs for Indian goods dependent on India slashing its purchases of Russian oil.

With this new geopolitical pressure, Indian refiners are hesitating, forcing Russian sellers to find alternative buyers and sweeten their offers to secure market share.

China's Pivotal Role in Russian Oil Exports

As Indian refiners await clear directives on how to proceed, sellers of Russian crude are increasingly targeting China with more attractive pricing. China has been the top destination for Russian crude since the war in Ukraine began, and its importance is now set to grow.

If India scales back its imports, Russia will become even more reliant on China's appetite, refining capacity, and political willingness to absorb its oil exports.

Indian Refiners Remain in a Holding Pattern

The situation in India remains uncertain. Refiners are reportedly waiting for official government guidance before committing to future purchases of Russian oil.

At the same time, Urals is being offered in India at a widening discount to Brent, with the differential now at $11 per barrel. This is testing the appetite of Indian refiners, who must weigh the benefits of cheap Russian oil against their country's new trade commitments with the United States.

Treasury Secretary Scott Bessent on Thursday refused to rule out a potential criminal investigation into Kevin Warsh, President Donald Trump's nominee for Federal Reserve chair, if Warsh disobeys presidential calls to cut interest rates.

The exchange occurred during a Senate Banking Committee hearing when Senator Elizabeth Warren, the committee's top Democrat, challenged Bessent over a recent joke made by President Trump. According to The Wall Street Journal, Trump quipped that he would sue Warsh if the Fed nominee did not lower rates to his satisfaction.

"Can you commit right here and now that Trump's Fed nominee Kevin Warsh will not be sued, will not be investigated by the Department of Justice if he doesn't cut interest rates exactly the way that Donald Trump wants?" Warren asked.

Bessent’s response was brief: "That is up to the president."

Traditionally, the White House maintains a separation from the Federal Reserve, allowing the independent board to make decisions on interest rates without political interference.

Sen. Elizabeth Warren questions Treasury Secretary Scott Bessent during a Senate Banking Committee hearing on February 5, 2026.

A Pattern of Pressure on the Central Bank

Bessent's testimony was his second appearance on Capitol Hill this week, following a contentious hearing with the House Financial Services Committee. In that session, Democrats questioned him on topics including tariffs, inflation, crypto regulation, and the independence of the Federal Reserve.

The issue is particularly sensitive given President Trump's recent actions targeting current Fed Chair Jerome Powell for not lowering interest rates. On January 11, Powell confirmed he was the subject of an unprecedented Department of Justice investigation related to cost overruns during the renovation of the Federal Reserve's headquarters.

Critics of the administration argue the probe, which references Powell's testimony to the Senate Banking Committee last year, is a thinly veiled effort to pressure the central bank's leadership.

Political Fallout and Nomination Fights

The pressure campaign has triggered pushback from both sides of the aisle.

Committee Chair Tim Scott, a Republican from South Carolina, stated this week that he does not believe Powell committed a crime in his testimony. Another Republican on the committee, Senator Thom Tillis of North Carolina, has pledged to block Warsh's nomination unless the DOJ drops its investigation into Powell, whose term as chairman ends in May.

Meanwhile, President Trump has doubled down on the investigation.

Warren and her Democratic colleagues have also urged Scott to halt Warsh's nomination until the investigations into both Powell and Federal Reserve Board Governor Lisa Cook—who is being investigated for alleged mortgage fraud—are concluded.

Before the hearing, Warren characterized the administration's actions as an attempted "takeover" of the Federal Reserve.

"Donald Trump has been trying to take over the Fed for months and months now," she said. "He's threatened to fire Jerome Powell. He started a bogus criminal investigation against him. He started a bogus investigation trying to fire Lisa Cook, and now he wants to appoint his man who's going to do exactly what he says at the Fed. That's a takeover."

The Canadian government, under Prime Minister Mark Carney, announced Wednesday it is scrapping a national electric vehicle (EV) sales mandate. This policy reversal marks a significant pivot away from direct climate action targets, following earlier decisions to drop an emissions cap for the oil and gas sector and cancel regulations for clean electricity.

The previous policy, established in 2023 under then-Prime Minister Justin Trudeau, had mandated that 20% of all vehicles sold by 2026 must be emissions-free. This approach was unpopular with automakers who argued it created unsustainable costs and faced pressure after the new U.S. administration scaled back its own support for EVs.

In place of the mandate, Canada will introduce stronger emissions standards for vehicle model years 2027-2032. The government stated these new standards are designed to help achieve its long-term goals of 75% EV sales by 2035 and 90% by 2040.

A New Focus on Emissions Over Mandates

Prime Minister Carney framed the decision as a pragmatic shift intended to protect the country's auto sector. He stated that replacing the sales mandate with tougher emissions standards "focuses on the results that matter to Canadians, while avoiding undue burdens on the Canadian auto industry."

Despite the change, Carney insisted that Canada remains "a leader on climate change" and confirmed that a national climate competitiveness strategy would be released in the coming weeks.

This move follows other recent policy changes aimed at boosting energy production. Last November, the federal government abandoned a planned emissions cap on the oil and gas industry and dropped proposed rules for clean electricity, citing the need to encourage investment.

Divided Reactions to the Policy Shift

The announcement has drawn both praise from industry allies and sharp criticism from environmental groups, reflecting a deep divide on the best path forward for Canada's economy and climate goals.

Support from Industry and Provincial Leaders

Ontario Premier Doug Ford applauded the federal government's new auto strategy, describing it as a "pivotal" moment. He argued that the move helps the Canadian auto sector compete and protects jobs, particularly as the nation's economy faces pressure from U.S. President Donald Trump.

"I'm pleased to see the federal government take the important step of ending its mandate," Ford said in a statement.

The Consumer Choice Center, an advocacy group, also welcomed the news, adding that "it was always wrong for the government to try to dictate to Canadians what type of car they ought to buy."

Concern from Environmental Advocates

Sam Hersh of the advocacy group Environmental Defence called the new EV strategy "a huge setback." He warned that the policy change could have severe long-term consequences for the Canadian auto industry.

"This may be framed as short-term relief for automakers, but it will lead to long-term pain and put the industry on an inevitable path to decline," Hersh stated.

Navigating Global Trade and Competition

Canada's policy shift aligns with recent international developments and is part of a broader strategy to navigate a complex global trade environment, especially concerning the highly integrated North American auto market.

Following a European Precedent

The move mirrors a similar decision by the European Commission in December, when the 27-member bloc dropped its planned ban on new combustion-engine cars from 2035.

New Incentives and Trade Deals

Carney's government is also rolling out new programs to support the auto sector and diversify trade. A new C$2.3 billion ($1.68 billion) program will offer incentives of up to C$5,000 for EVs made in countries that have free-trade agreements with Canada. An additional C$1.5 billion is promised to upgrade the national EV charging network.

In response to U.S. tariffs, Canada will maintain its counter-tariffs on auto imports from the United States while seeking ways to boost domestic production and investment.

Furthermore, Canada struck an initial trade deal with China last month to lower tariffs on EVs. The agreement allows up to 49,000 Chinese EVs to enter Canada at a 6.1% tariff. This quota is set to increase to approximately 70,000 within five years. However, Carney confirmed that Chinese-made EVs will not be eligible for the new government incentives.

($1 = 1.3679 Canadian dollars)

Bank of Canada Governor Tiff Macklem has issued a stark warning: the Canadian economy is facing a multi-year restructuring that could be painful. Speaking to the Empire Club in Toronto, Macklem outlined major challenges that will require significant adjustment from policymakers and businesses alike.

He cautioned that this transition will be measured in years, not quarters, and that economic growth will be modest throughout the process. "The transition could be faster than we expect," Macklem noted, "but it could also be more painful than we'd like."

Three Headwinds: Tariffs, Demographics, and AI

Macklem identified three primary forces driving this necessary economic overhaul:

• U.S. Tariffs: Ongoing trade friction requires Canada to adapt its economic structure.

• Slower Population Growth: Changing demographics will impact the labor force and overall potential.

• Artificial Intelligence: The rise of AI presents both opportunities and disruptions that the economy must navigate.

He stressed that failure to adapt is not an option and urged leaders to do everything possible to manage these new realities. The situation could become particularly difficult if "the trade situation darkens or other shocks disrupt the economy."

The Central Bank's Policy Dilemma

This complex outlook creates a challenge for the Bank of Canada. The central bank recently held its key policy rate at 2.25% for the second consecutive time, stating that rates would remain steady as long as the economy performs as expected. However, Macklem acknowledged an unusually high level of uncertainty clouds this forecast.

A key difficulty for the bank is distinguishing between structural economic change and cyclical fluctuations. Misdiagnosing the cause of economic weakness could lead to policy errors.

For instance, lowering interest rates to combat what appears to be a cyclical downturn in demand could accidentally stoke inflation if the weakness is actually due to a lower productive capacity—a structural problem. Macklem added that overstimulating demand when the issue is structural could simply delay necessary and unavoidable economic adjustments.

Labor Market and AI's Long-Term Impact

Despite the headwinds, Macklem said he does not expect the jobless rate to trend higher. The Bank of Canada's forecasts suggest the nation's labor force will experience very little growth over the next few years.

Regarding artificial intelligence, Macklem noted that while it has the potential to significantly boost the economy, its adoption by Canadian companies remains modest. "It may be a while before we see a significant impact," he concluded.