President Trump announced recently, in a post on Truth Social, that the United States is taking an ownership stake in an entity that will lease and develop Venezuelan oil fields. Is this arrangement lawful? As best I can tell, the answer is no.

To my knowledge, the administration has not produced any legal justification for its plans (or even any clear indication of what those plans are), so I may be missing something. But any analysis of this question must begin from the Youngstown principle that the President has no authority to act unless either a statute or some constitutional provision authorizes it.

So is there legal authority? By way of statutory authorization, some reporting suggests that the administration thinks it can invest in the Venezuelan oil venture through the Defense Department’s Office of Strategic Capital. The Biden Administration created this entity administratively to develop industries with high-tech military applications. The National Defense Authorization Act for Fiscal Year 2024 gave it a statutory basis.

Under the statute, the OSC holds the following duties:

“The Office shall—

“(1) develop, integrate, and implement capital investment strategies proven in the commercial sector to shape and scale investment in critical technologies and assets;

“(2) identify and prioritize promising critical technologies and assets that require capital assistance and have the potential to benefit the Department of Defense; and

“(3) make eligible investments in such technologies and assets, such as supply chain technologies not always supported through direct investment.”

If one squints, one might think this law gives the administration authority for the oil venture. Maybe buying part of an entity developing Venezuelan oil is an “eligible investment[]” in a “promising critical technolog[y] [or] asset[] that require[s] capital assistance and [has] the potential to benefit the Department of Defense”?

It appears not. There are at least three problems.

First, the statute does not seem to allow petroleum investments. According to the statutory definition, an “eligible investment” is “an investment, in the form of capital assistance provided to an eligible entity, for a technology that—(A) is in a covered technology category; and (B) is not a technology that solely has defense applications.” Of the listed technologies in the definition of “covered technology category,” the only one that seems conceivably applicable is “critical minerals and materials,” but those terms, so far as I can tell, refer to non-fuel minerals like rare earths, not oil and gas. (Other listed technologies are things like “autonomous mobile robots,” “battery storage,” and “microelectronics fabrication.”)

Second, the statute only authorizes loans and loan guarantees, not equity purchases. True, the definition of “eligible” investments refers to “capital assistance,” but that term has a definition as well. It means “a loan, loan guarantee, or technical assistance.”

Maybe the administration plans to lend money and receive penny stock warrants in exchange (or just receive warrants outright)? Some reporting suggests this possibility. In provisions regarding an authorized pilot program (more on that below), the statute does provide that “[l]oans and loan guarantees provided under [the program] shall be subject to such other terms and conditions and contain such other covenants, representations, warranties, and requirements (including requirements for audits) as the Secretary determines appropriate.” 

This authority, however, seems designed to give the OSC the power to structure loans in ways that advance the statute’s policy goals. It seems odd to read it as enabling a fundamentally different form of investment from the loans it expressly authorizes.

Finally, at least as things stand now, the statute appears to contemplate a competitive application process for loans; it does not create a slush fund for the President to deploy as he chooses.

After listing the general duties I mentioned earlier, the statute authorizes “the Secretary of Defense, acting through the Director [of the OSC], [to] carry out a pilot program under this subsection to provide capital assistance to eligible entities for eligible investments to develop technologies that support the duties and elements of the Office and meet the needs of the Department of Defense.” Congress has since appropriated funds for programs under this authority, including $500 million in the One Big Beautiful Bill for “critical minerals and related industries and projects,” another $1 billion in the same legislation for general capital assistance,  and nearly $100 million in last February’s Consolidated Appropriations Act for “a pilot program on capital assistance to support defense investment in the industrial base.”

Again, these appropriations do not amount to a foreign policy slush fund. The pilot program requires entities seeking investments to submit applications and requires the Director to “establish criteria [including certain requirements] for selecting among eligible investments for which applications are submitted.” The statute thus contemplates a competitive application process for capital assistance based on announced criteria, not predetermined presidential funding directives.

Furthermore, even holding that problem aside, the same limitations discussed earlier apply to the pilot program. The authorized “eligible investments” are loans and loan guarantees and they can only to support a set of technologies that do not include oil.

In short, the only statute I’ve seen referenced in connection with this venture does not, so far as I can tell, provide authority for it.

What about the Constitution? Here, the administration might invoke presidential foreign affairs powers, and it is true that presidents have claimed broad authority to enter certain sorts of international agreements unilaterally. But this arrangement does not even seem to involve an international agreement. On the contrary, it seems designed to avoid entering a deal with Venezuela by operating instead through an ostensibly private intermediary.

That problem, in turn, raises a more fundamental issue:  Even if the President has authority to enter this deal, he will need appropriations from Congress for any spending the deal requires. For that matter, even if the deal does not require funding right now, any revenues derived from it will be treasury funds that can be spent only through statutory appropriations, and the shares themselves will be U.S. property subject to regulation under Congress’s power “to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States.” For reasons I discuss in this article, the President cannot get around these constraints by claiming the activity is private rather than governmental. Once the President exercises control over money in an official capacity, it belongs to the U.S. treasury.

As a last point, let me note that the Iraq War does not seem to provide any precedent for the President’s action. After the U.S. ousted Saddam Hussein, oil revenues flowed through a fund established by the United Nations Security Council for Iraqi governance. Though this arrangement in practice had many problems, in principle it involved a form of trusteeship over Iraqi assets quite different from Trump’s announced venture with Venezuela.

The bottom line is that the administration needs specific authority for the announced Venezuelan oil deal and I have not been able to identify any. Congress, of course, could provide such authority or even ratify an unlawful action after the fact. But in the meantime it should show some backbone and let the President know he needs its support.

Zachary S. Price is a Professor at the University of California College of Law, San Francisco (formerly UC Hastings).