Caracas and Washington have reached a new agreement that will allow Venezuela to export up to $2 billion worth of crude oil to the United States, according to U.S. President Donald Trump. The deal marks a major development in negotiations between the two countries and is expected to redirect Venezuelan oil supplies away from China while helping the South American nation avoid deeper cuts to its oil production.

President Trump announced the agreement on Tuesday, saying Venezuela will “turn over” between 30 million and 50 million barrels of oil that had been sanctioned under U.S. restrictions. The oil will be taken from tankers and storage facilities where it has remained stuck due to a U.S. blockade imposed since mid-December.

“This oil will be sold at its market price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!” Trump said in a post on social media.

Trump added that U.S. Energy Secretary Chris Wright will oversee the execution of the deal, and the oil will be shipped directly from vessels to U.S. ports.

The agreement signals that Venezuela’s new interim government is responding to Trump’s demand that it open its oil industry to U.S. companies. Trump has warned that failure to do so could result in further pressure, including military action. He has said he wants interim President Delcy Rodriguez to give the United States and private firms “total access” to Venezuela’s oil sector.

The oil blockade was part of increasing U.S. pressure on the government of former Venezuelan President Nicolas Maduro, which culminated in U.S. forces capturing him over the weekend. Venezuelan officials have strongly condemned the move, calling it a kidnapping and accusing the United States of attempting to take control of Venezuela’s vast oil reserves.

Venezuela has millions of barrels of oil stored on ships and in tanks that it has been unable to export due to sanctions. Sending this trapped oil to the United States could initially require diverting shipments that were originally meant for China, according to two sources cited by Reuters. China has been Venezuela’s largest oil buyer over the past decade, especially after the U.S. imposed sanctions on companies involved in the Venezuelan oil trade in 2020.

“Trump wants this to happen early so he can say it is a big win,” an oil industry source said. Venezuelan government officials and state oil company PDVSA did not comment on the deal.

At present, all Venezuelan oil exports to the United States are handled by Chevron, PDVSA’s main joint venture partner, under a special U.S. authorisation. Chevron has been exporting between 100,000 and 150,000 barrels per day of Venezuelan oil and is currently the only company shipping crude from Venezuela without interruption, despite the blockade.

It remains unclear whether Venezuela will receive any direct access to the proceeds from these oil sales. U.S. sanctions have cut PDVSA off from the global financial system, freezing its bank accounts and preventing transactions in U.S. dollars.

Venezuela has been selling its main crude grade, Merey, at around $22 per barrel below Brent prices at Venezuelan ports. Based on these prices, the total value of the deal could reach $1.9 billion.

Rodriguez, who was sworn in as interim president on Monday, is herself under U.S. sanctions imposed in 2018 for undermining democracy.

Officials from both countries have discussed several ways to carry out the oil sales. These include holding auctions that would allow U.S. buyers to bid for Venezuelan cargoes, as well as issuing new U.S. licenses to PDVSA’s business partners. These licenses could lead to fresh supply contracts, according to two sources.

In the past, such licenses allowed companies including Chevron, India’s Reliance, China’s CNPC, and Europe’s Eni and Repsol to access Venezuelan oil for refining or resale. This week, some of these companies have reportedly started preparing to receive Venezuelan shipments again.

Officials have also discussed whether Venezuelan oil could eventually be used to refill the U.S. Strategic Petroleum Reserve, although Trump did not mention this option publicly.

Following Trump’s announcement, U.S. crude prices fell more than 1.5%, as markets reacted to the prospect of increased Venezuelan oil supplies. Heavy oil price differentials in the U.S. Gulf Coast also dropped by around 50 cents per barrel.

U.S. Interior Secretary Doug Burgum welcomed the possibility of increased oil flows, calling it beneficial for both countries.

“Venezuela has an opportunity now to actually have capital come in and rebuild their economy and take advantage,” Burgum said in an interview with Fox News. “With American technology, American partnership, Venezuela can be transformed.”

He also said that increased Venezuelan oil supplies would be “great news” for U.S. job security and future gasoline prices.

Before U.S. energy sanctions were imposed, American refineries were importing about 500,000 barrels per day of Venezuelan heavy crude. These refineries are well-equipped to process such oil.

Due to the embargo and limited storage capacity, PDVSA has already been forced to reduce oil production. Without a quick solution to export its crude, production cuts would have to deepen further, according to one source.