The Impact of Nicolas Maduro's Arrest on Western Hemisphere Geopolitics

FRANK MCKENNA: It's all about the oil. Cuba wasn't taken over militarily. Haiti wasn't taken over militarily 'cause they don't have oil.
PETER HAYNES: Welcome to a special edition of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes. And I'm the host of this podcast series where we discuss important geopolitical issues that impact investors, traders, and for that matter, interested citizens from around the world.
Today's special episode comes on the back of the stunning capture and arrest of Venezuelan President Nicolas Maduro by US Special Forces. Now that the world has had a few days to absorb this news, we thought it would be interesting to hear from Frank on the implications for Western hemisphere geopolitical dynamics, and in particular, the impact on Canada, of this bold move by the Trump administration to take over governing another sovereign nation. To get Frank's perspective on these events, we now tune in to a call he hosted with institutional investors earlier this week. We hope you enjoy this discussion.
So Frank, thanks again for joining us. I'm going to lead off with some questions that will level set the discussion. And as I mentioned, we'll weave in the investor questions along the way. So here we go, Frank. Let's start with the actual 6-minute military operation in Caracas.
How is it possible that the US captured Maduro without suffering any material casualties? It is an impressive feat, but this wasn't going after bin Laden hiding in a safe house. This was capturing the head of a sovereign country with an established military hierarchy. What do you think actually happened during that 6-minute operation?
FRANK MCKENNA: Well, it was a brilliant military exercise. And it was audacious in the extreme, and I think very courageous on the part of President Trump. You think about the implications of the aborted effort in the Bay of Pigs in Cuba, some 50 years ago, and the stain that put on President Kennedy's presidency, and the ruination of President Carter when things went badly on the Iran-Contra effort to try to free hostages. And you look at that, and then, of course, the capture of bin Laden, again, President Obama put a lot on the line.
So at the end of the day, one has to hand it to the administration. They took a big chance here because it could have gone badly. But I would say it's a tribute to the American military and just how good they are, a lot of modern electronic warfare mechanisms in place, using Growler aircraft very effectively, mapping movements with airborne sensors, shutting off the power before the attack took place.
They had to move in and capture Maduro within 3 minutes before he could get to the safe room. He was knocking on the door of the safe room, virtually, when they captured him. I think there was a lot of old fashioned human intelligence as well. The CIA had people on the ground in the country.
And I believe they would have also used the intelligence that would be gleaned locally. There's a lot of opposition to the Maduro regime in Venezuela. And then, finally, I think they probably had some insider help that will come out in the fullness of time. The only thing I would say, a real tribute to military ingenuity, using all of the modern weapons and coordination was impeccable.
But we can't forget there are 50 to 100 dead people as a result of this Probably 50 of them are Cuban soldiers who simply followed orders and did their job, went from Cuba and followed orders and did their job. And these will be 50 families whose sons will not be coming back to them, and fathers and spouses not coming back to them. So we can't forget, there's a real loss of human lives here as well, people who had no idea they were in a war, no idea that they were doing anything other than doing their job, and the next thing you know, they're dead.
PETER HAYNES: You're absolutely right. We do need to look at both sides of that stone. There's been a lot of questions, Frank, about Trump's true motivation for arresting Maduro and the US's "next day" plan. It now appears that his main motivation, at least that's what he's saying, is to control the flow of oil from Venezuela. Of course, more recently, there have been some alternative views with respect to the US controlling national security in the Western hemisphere, concerns about influence by Russia on the ground militarily, China, and Iran, as well, being proxies in the area. What do you think is the real reason why Trump went after Maduro?
FRANK MCKENNA: Well, there have been a number of competing theories given by the US administration. But the good thing about Trump is he says the quiet things out loud. So first of all, in spite of all of the rhetoric, we know this is not about drugs at all. In actual fact, Venezuela is a bad actor and Maduro is a bad actor. That's just a given.
But in terms of fentanyl, the majority of fentanyl flows-- some of it is sourced in China, but flows through Mexico, the vast majority of it. So it was not about that. Colombia is the biggest source of cocaine. And Venezuela is not a particularly large source of either of these two drugs. So we know it's not about that.
We also know that just three weeks ago, Juan Orlando Hernandez, who is the former Honduran president, was pardoned by Trump. He'd been convicted by a judge and jury after a trial in a United States Court for drug smuggling. And he was pardoned by Trump because he was a friend of people that Trump was close to, Roger Stone, particularly. So we know it's not about that.
And we know it's not about regime change because the first person that got thrown under the bus after this was, of course, Machado, who was the leader of the opposition party and the winner of the Nobel Peace Prize. As somebody within the administration whispered, if she had of turned down the Nobel Peace Prize, she probably would have been the president of Venezuela today. So we know it's not about that because he's chosen, as his stablemate to run the country, the Maduro regime. Some of the most brutal ministers in that regime seem to be the chosen few to run the country. So it's not about regime change. In fact, he's making it clear there won't be an election in the near future, even though, by popular estimates, in the last election, Edmundo González probably would have won 70% of the vote if the vote had been counted correctly.
And we know it's not about the democratization of Venezuela because of all of those things. So it's about the oil. It's all about the oil. Cuba wasn't taken over militarily. Haiti wasn't taken over militarily because they don't have oil.
PETER HAYNES: So, Frank, also, the public, in terms of the ability of the public to be able to understand, I think the messaging was pretty straightforward to the American people, when, as you say, it is about oil. So just as a follow on, are you surprised that Trump chose to work with the existing Venezuelan government and VP Delcy Rodriguez? I know you mentioned that Machado didn't have the support of the US government. But these are the same accused officials, in Venezuela, of all of the repression. It is not a new administration that would bring comfort to the people of Venezuela, who have suffered under Maduro's oppression.
FRANK MCKENNA: Yeah, actually, Machado had a lot of support from the US government prior to winning the Nobel Peace Prize. And Gonzalez was recognized as the president of Venezuela by the US government after the last election. In fact, Rubio, in January of this year, called him and called him the rightful Venezuelan president. It obviously is not about that.
And I was just surprised how quick Machado got thrown under the bus, within hours of President saying, no, no, she's just not strong enough, and so on. So yeah, I guess, when you realize the motivation is all about the oil, the government of the United States wants as little disruption of the status quo in Venezuela as possible so that they can get the oil flowing quickly. So they've chosen to go with the devil they know, and "devil" probably being the right word here.
PETER HAYNES: Yeah, and I'm probably like many other observers who don't know that much about the history of Venezuela. But I had to look up why Machado was not allowed to run herself in the last election.
FRANK MCKENNA: Right.
PETER HAYNES: She was barred for some made up corrupt charge. And someone else had to run as her proxy, and then ultimately won. So that confused me because everyone talks a lot about Machado. But the reality is, she was barred from running in the last election.
FRANK MCKENNA: She was barred. And her candidate ended up winning but not being allowed to win, Gonzalez. But she's really the head of the opposition forces. And the United States went to great lengths to get her out of Venezuela, to go to Sweden for the Nobel Peace Prize.
But anyway, she's now saying that she would like to go back to Venezuela and have an election. And of course, that will not be in the US interest either. So there will be some clashes taking place. Remember, there are 8 million Venezuelans that have really chosen to leave or have been exiled from Venezuela in the last number of years. Disgraceful the way that country has been run, the way they've destroyed so much wealth.
But it'll be interesting as to how many of those people want to go back to Venezuela and whether, if they go back, are they prepared to live with the same regime which threw them into exile. And are they going to force the United States to try to change governments more quickly than the United States seems to want to? And I ask the question, as well, there are hundreds of thousands of political prisoners in Venezuela jails, are they going to be freed? Now, is that going to be part of the calculus? So a lot of moving parts here.
PETER HAYNES: Absolutely, there's been a lot of happy gas that has come out from the, call it, anti-Chavesmo crowd about the US move to oust Maduro and paving the way to a possible future of democracy in Venezuela. However, this move does introduce a lot of uncertainty for the people living in the country. And it's hard to imagine regime change without boots on the ground by the US military. I recognize that none of us really know how this will play out. And military pundits are careful not to draw parallels to Noriega or Iraq or Afghanistan or Libya, some of these other situations. What is your best guess, though, of how the next 6 to 24 months look in Venezuela? And when do you think the US will force an election?
FRANK MCKENNA: Rhetorically, the United States doesn't seem to be in any rush at all to have an election. They are in a big rush to get oil flowing. And as you would have heard from the news feed that Trump is saying he can get 50 million barrels almost immediately that's in storage in Venezuela, get it to the United States, and start taking the money there and sharing it, he says, with the Venezuelan government. I was in Latin America when this happened, in Uruguay, and also in Brazil and in Argentina. I was quite surprised at how different the reaction is in every country. Uruguay is opposed to what the United States did, as is Brazil. Argentina is supportive of it.
Of course, Milei there is an ally of the president. But you have governments in Colombia really opposed. And much to my surprise, the most vigorous opposition was probably from Mexico, traditional ally of the United States, but very opposed to what took place. So opinion is really divided in Latin America. Almost all of the public that I talked to when I was there are of the view Maduro is a bad guy and it's good that he's gone. But this is really a hell of a way to run a railroad. And there's a lot of bad guys in the world, and we've got to figure out what are the implications of what just took place.
PETER HAYNES: So, Frank, there is a school of thought that maybe we as the general public are overreacting because it's Trump and it's his rhetoric, whereas the US has obviously had military interventions in other countries in the past. You've mentioned a few earlier. They haven't all gone perfectly. How much of this is about the overreaction because of who is leading the charge?
FRANK MCKENNA: Yeah, I think there's an element of that. Trump inspires extraordinary loyalty, but also deep-rooted antagonism from many people within the United States and externally to the United States. So some of that's probably about that. But then again, he brings it on himself. Even his most ardent supporters would say, look, you executed a brilliant military strategy.
Look, just take your victory, but leave the hubris behind and don't immediately start talking about delivering the same kind of results to Colombia or to Mexico or to Greenland. The hubris is not flattering. And for that reason, he inspires a lot of loyalty, but a lot of opposition as well.
PETER HAYNES: Let me switch gears here to the energy infrastructure. You talked earlier about it being about oil. I know you know that industry well, given some of your board assignments in the past. Over the weekend, there was a lot of ink spilled by energy specialists who claimed to understand the state of the energy infrastructure in Venezuela.
Now that the US is opening up Venezuela to the multinational energy firms, who I believe are meeting with the president later this week, most pundits do not expect Canadian firms to have an interest in rebuilding Venezuelan heavy oil production, despite the fact that we have technical expertise in this country. Do you agree with this take? And based on what you know, how long do you think it will take Venezuela to go from the 1 million or even less barrels a day that they're currently producing back to their highs, which was 3 million before nationalization 20 or 30 years ago?
FRANK MCKENNA: Yeah, I think it's a really, really important question. No, I don't think Canadian majors will go down, but I could see some of our individual engineers, for example, go, because what we do in the oil sands is identical to what they do in these oil sands. And they used to produce over 3 million barrels a day. And now they're less than 1 million barrels a day, which is what happens when government gets too involved in private business.
But, look, it may not be completely instructive, but I think it is. My experience in getting to fit on projects is that it takes a long, long time. You have to go through a whole planning process and engineering, and try to scope out how much it's going to cost. Then you've got to figure out whether you've got a reasonable return on that investment. You've got to secure financing.
And normally, we would do it-- I'm on the board of Canadian Natural Resources, often incrementally of several hundred thousand barrels and get those into production, and then, perhaps, move onto several hundred thousand more barrels. But it takes billions of dollars. These projects are extraordinarily capital intensive. It takes a huge amount of money.
And in this case, the infrastructure is all messed up. The pipelines are leaking. The oil infrastructure, the oil lifting infrastructure is not up to speed at all. All of these companies that he wants to go in have got to calculate, first of all, the return on their investment. They've got to calculate the political risk.
As the CEO of Exxon said, we've been expropriated twice already in Venezuela. So they've got to think about that. Then they've got to think about the market for the oil.
The United States, yeah, right now, under Trump, they're saying, yeah, no, we want that heavy oil. But they're not going to go through the same environmental limitations we have in Canada-- industrial carbon pricing, methane emission standards, et cetera, et cetera. So when Trump is gone, will there still be a market in the United States for ultra dirty oil? Maybe, but maybe not.
And in the world, in 10 years time, which is what it's going to probably take for them to get production back up, will the world still have a huge market for oil? Or will solar and wind and nuclear and so on displace oil as the fuel of choice? Companies are probably looking at as much as $100 billion to exploit this resource. Are they prepared to put $100 billion on the line not knowing, in 10 years time, about the political regime in Venezuela and in the United States and in the rest of the world?
And are the banks gonna bank them? Right now, a lot of financial institutions are reluctant even to support Permian exploration because that basin is starting to reach the stage of saturation. And attracting financing is not all that easy. So is there going to be money for that?
And the only way I see that money flowing is if the United States puts the balance sheet of the United States behind it. And is that going to take the form of guarantees or actual cash on the barrel head? And what are other US producers going to say?
The result of this will presumably be more oil in the market, cheaper oil. The rest of the US producers, domestic producers, are they going to sit back and say, yeah, we don't mind the government financing our competition, cutting our throats so that we're losing money on our production? So a lot of moving parts here, Peter. I don't know how it'll all play out, but it will not go as simple as it sounds on the surface.
PETER HAYNES: Yeah, it definitely was made to look like it was an easy road to the end. And as you learn more about the local economy and, obviously, the politics, and you didn't mention security forces that will be needed to protect the oil wells from the militia and the others that have historically run roughshod. So I want to shift gears here, Frank, and look at the global implications of the US capture of Maduro. What does this move mean for Russia and China, both of whom were increasingly building relations with Maduro?
FRANK MCKENNA: Really, this flows right out of the national security document that the United States issued recently. And it establishes that the United States is supporter of this whole spheres-of-influence concept. So essentially, big countries can exercise their power in their sphere of influence. And that's exactly what just took place here.
But if you follow that to its logical conclusion, China can do the same thing so that China would be able to have their own version of the Monroe Doctrine to say, yeah, Taiwan is rightfully ours. We're big, they're small. Might is right, and therefore, we want Taiwan. We're gonna take it.
Russia would say, huh, it's not news to us. We've been doing this all along. That's why we took Ukraine. We're big, they're small, and we're doing it because we can.
And by the way, Latvia and Lithuania and other countries in that area might be next. So the implications are rather ominous in many ways. Could be a smaller sphere of influence. Ethiopia might say, look, we need Eritrea in order to have access to tidal water. One has to be very careful, when you set these dominoes in play, what can ultimately come out of it.
PETER HAYNES: Frank, if we move to the so-called "spheres of influence," or the "Donroe Doctrine," as he's nicknamed it, where does Canada fit in?
FRANK MCKENNA: Well, [LAUGHS] that's a good question. Theoretically, we're of course, right in the US sphere of influence. And they are big, powerful, big military and everything else. We're not a small bite.
We're either the largest or the second largest country geographically on the world. We're one of the richest countries in the world. We've got extraordinary resources, natural resources.
United States could say, yeah, Venezuela's a small country. We're big boys. We can gobble it up and we'll take Cuba, too, without even having indigestion.
Canada, on the other hand, in many ways, isn't equal to the United States. We're highly respected. We fought in two World Wars. We had one of the largest standing armies in the world after the Second World War. We're a country with a very advanced sense of civility, legal system, and highly respected internationally. I think Canada can continue to hold its head proud and say, we enjoy having the United States as a neighbor, and we enjoy having the United States as a friend and a customer, but we're a proud, strong country in our own right, and that's the way it's going to be.
PETER HAYNES: All right, we'll get to that a little bit more as we move outside of the region of Venezuela into the rest of the world in a moment here. But I did want to-- you just mentioned Taiwan and China and the spheres of influence--
FRANK MCKENNA: Just before we leave Canada, I just want to say, at a practical level, there are some things I think this means. And I want to point those out. One, there was already considerable support generated in Canada for pipeline egress to the West Coast.
After what just took place, there will literally be zero support to revive Keystone XL, to move another major pipeline down into the United States, possibly competing with Venezuela heavy oil. There'll be no support for that. There will be increased support for egress to the Pacific Ocean so that we can get access to world markets and get better pricing, continue to narrow the differential, get better netbacks, and not be exposed to the vagaries of US politics.
I think it also means, by the way, it has some implications in Quebec. Quebec is on the verge of electing a government sworn to have a referendum on separation. Well, if I were a Quebecer, I think I might say, well, look, the world has changed as we know it. And do I really want to be a sovereign nation sitting next to the United States of America, which tends to act like Pac-Man when it comes to gobbling things up?
I think that if I were a Quebecer, I would say, I've had a good thing in Canada. My language, my culture, has been protected. I've been heavily subsidized by the rest of Canada in terms of transfer payments. I've got a good thing here, and I'm not gonna take a risk on the unpredictability of the United States of America. So in some bizarre way, it may end up being a positive for Canada.
PETER HAYNES: What about on Alberta sovereignty?
FRANK MCKENNA: If I were in Alberta, I would be thinking the same thing. I think Alberta has lots of great issues they can talk about. And in fact, they are having a constructive dialogue with Ottawa and the rest of the country right now. But I think Albertans are proudly Canadians. They share Canadian values. And I don't think that they want to become a 51st state of the United States of America.
PETER HAYNES: And in the case of Quebec, obviously, the separatists are leading in the polls. And then their election's in October of this year, I believe. So we'll be spending more time discussing that.
FRANK MCKENNA: Yeah, but, Peter, there are gainer events that are afoot. Not only is the Trump essential invasion of Venezuela instructive for Quebec, but Quebec lost the Liberal leader who resigned over Christmas. And the new leader, Charles Millard, looks to be a very attractive candidate. He's a pharmacist by training, which makes him a good candidate to look at the healthcare system, which is a big issue in Quebec.
And he's also been the CEO of the Chambers of Commerce of Quebec, [FRENCH], which means that he's really wired into the business community in Quebec and would have strong credibility and support in that community. He's a formidable candidate and probably makes the Liberal Party-- should he be elected as leader, and it looks like it will almost be unanimous. Should that happen, we may have a much more competitive situation in Quebec than it looked like a few weeks ago.
PETER HAYNES: Well, I think we learned in Canada not to just count anyone out based on what happened in our federal election last year. Prior to the holidays-- I want to come back to Taiwan here, Frank. I asked you, when I was going through our predictions about 2026, whether China would invade Taiwan. Your answer at that time was "no." Have you changed that answer? And secondarily, if they invaded Taiwan, would the US defend Taiwan under the current-- what you know about the national security strategy and what we've seen this week?
FRANK MCKENNA: It's a question that doesn't have a good answer. So on the one hand, if I were China watching the military might of the United States play out, I would realize that the United States has extraordinary capabilities. And second, I would realize that with President Trump, unpredictability is his calling card. And if I were to invade Taiwan, I just don't know what he would do.
On the other hand, China might argue, well, look, he's taken Venezuela, which was a major source of oil for us. He did it under a spheres-of-influence doctrine. Same thing is true for us. Taiwan is right in our sphere of influence. In fact, it's even more probable that it should be part of China.
So they could argue that. I still think there's a lot of support in the United States for defending Taiwan against China. And so my answer would probably-- although the waiting would probably change a little bit, I think my answer would be, I still don't think that China is going to make that move. And I do think the United States would defend Taiwan.
PETER HAYNES: Does this have any impact on the war in Russia? Or war in Ukraine, I should say.
FRANK MCKENNA: Yeah, I think it does in this sense. The inevitable result of what the United States has done is probably designed to bring down the price of oil. They're going to control 40% of the world's oil market. Oil is what is fueling the war in Ukraine.
The Russian economy is really starting to stumble. Inflation is at very high levels. Interest rates are at very high levels. The economy is really starting to reel.
And I think that with the increasingly accurate attacks by Russia-- by Ukraine on Russia oil infrastructure, refineries, and so on, every month, we're seeing reduced export of oil out of Russia and reduced netbacks on that oil going out of Russia, which is going to influence the war effort. So if I were Putin, I would probably say, mm, the last thing I need is more and cheaper oil on the market further undermining my economy. So I think it makes it a little more likely that the Ukraine war will come to an end.
PETER HAYNES: OK, Frank, let's go back to Congress. Trump apparently is telling people that he notified the oil executives that he was invading Venezuela, but he didn't notify Congress, which brings this whole notion of an oligarchy to the surface. What do you think happens next in Washington? Will there be-- and I know it's mostly party lines right now, but do you expect any additional blow back from Congress?
FRANK MCKENNA: The fact that the president can openly and baldly admit that he let big oil know that this was probably going to happen and didn't go to Congress, and there are a lot of constitutional lawyers, legal experts would say that this was an unconstitutional act, it was an illegal act, and that Congress had to be involved in ratifying this. This Congress, under this president, seems to be very, very pliant, very malleable, and go along with just about everything that he wants.
But there is less support in the United States for this than I thought there might have been, because the United States, I think, applauds their military successes. But there's only a third-- in the polling that I've seen, only a third of Americans are supporting this particular move. And there are fault lines in MAGA itself. 75% of Republicans support what the president did, but 25% is a fairly big number.
And there is a division of MAGA which is very isolationist and does not want the United States to get into foreign quagmires. And they reference Iraq and Afghanistan and it could even go back as far as Vietnam. So if the United States gets drug in and has to actually put boots on the ground in Venezuela, the tide of public opinion will turn even more dramatically against the president. And as the president's popularity declines, and as the midterms approach, and as affordability becomes an issue, there's no doubt that Congress is asserting more power and trying to take power away from the presidency.
We'll see that play out in the weeks and months ahead. But I think, in the very near future-- and I mean in the days and weeks ahead-- every person running for Congress is going to be more concerned about their own safety and their own seat than they are about the president's. Right now, with the death of a Congressman out of California, there's only a two-seat cushion that the Republicans have. And it's highly likely, even with all the gerrymandering and the massive wall of money that will go into this, that we'll probably see a flip in the house. And that will change the political calculus in the United States dramatically.
PETER HAYNES: If that had happened, Frank, and we were talking about January 2027 when Trump did this, would anything happen differently? He doesn't notify Congress, but he no longer controls Congress. January 2027, hypothetical scenario, the Democrats control at least one of the Chambers, how would this have played out differently?
FRANK MCKENNA: Well, they would certainly-- they would be calling the president in and all of his people, the Secretary of Defense, they'd be called in and they'd be reamed out before Congress. There might even be a vote of censure. They may even try to do another effort at trying to impeach the president. But certainly, Congress would assert its rights.
Congress has always felt that it should be consulted in the case of an attack on foreign soil. And so you have a much more aggressive Congress if that were the case. And you may see that anyway. If we start seeing American lives lost as a result of being pulled into the quagmire, we will absolutely see a rebellion within Congress.
PETER HAYNES: Stay tuned on that for sure. Turning to next steps, Frank, it appears, based on the rhetoric, that Trump has been fairly emboldened by the success to date of the Maduro ouster, and particularly the lack of casualties, as you just mentioned, and that he seems to have some imperialist aspirations, as outlined in the, quote, "Donroe Doctrine" and his recent comments. In particular, Trump's mentioned, and you mentioned this before, Colombia, Cuba, Mexico, they all better get their-- straighten up or else.
And perhaps, most controversially, and this continues to be a high profile topic, he mentions the need for the US to, quote, "own Greenland" for security purposes. These comments have sparked a lot of outrage from other sovereign democracies. And we all saw the joint letter that was written from European leaders to the US, or maybe it was to the UN, regarding that rhetoric.
Do you believe Trump does plan military action in all of these countries who are now all sleeping with one eye open? Is he en route to moving towards these countries? And for many of the listeners on this call, including me, what does the rhetoric mean about Canada?
FRANK MCKENNA: My answer is, no, I don't think that's going to happen. I think, in fact, the rhetoric is self-defeating because the more he and his people use this bellicose language, I think the more outrage and pushback there is in the United States of America. The citizens of the United States of America are conscious of the hundreds of thousands of lives lost in Vietnam and the trillion dollars and lives lost in Iraq and Afghanistan. And they do not want to get sucked into a foreign war.
Columbia, for example, what would you do? I mean, Columbia has a real army. It's a real country. There's no doubt that it's the source of a lot of cocaine. But on the other hand, the president there is term limited. So you could take him, pick him up, take him away, but it doesn't matter. The government is going to change there in a few months anyway. I don't think they're going to put boots on the ground in Colombia.
Cuba, why would you take it? It's a failed state. Why would you ever do something militarily? Economically, Cuba may fall, but militarily, why would you do anything?
I mean, if they want to do something good, they should go into Haiti, which is just desperately needing boots on the ground. But they're not going to do that because there's nothing there for them.
Mexico, you know, they talk belligerently about taking Mexico drug cartels out. But the Mexican president is bending over backwards to be cooperative and has done a lot on the immigration file and also on the drug file.
Greenland is the most curious one of all. And I would say, in a way that Canadians would understand, why would you buy the cow when you get the milk for free? The United States has a base on Greenland. They had a dozen bases. They chose to vacate the bases they had on Greenland. Greenland is part of NATO.
The United States can do whatever they want virtually in Greenland in terms of security. The government of Denmark has invited them in. You're talking about a government that's a major ally of the United States of America. Why would you do that?
On the other hand, you have somebody like Katie Miller, who's the wife of Stephen Miller, who was without doubt the most irrational flamethrower in that Trump administration. She basically puts a map of Greenland up with a United States flag on it and says, "soon." Well, why would you do that? You're basically just creating trouble.
By the way, she also said, yesterday, the United States doesn't need anything from Canada, free trade is over. Why would you do that? You need Canadian potash. You need Canadian oil. You need Canadian steel. You need Canadian aluminum. You need Canadian tourists. You need Canadian medical people crossing the border. All of this is just very provocative.
But the biggest issue is that the United States has historically had a major military presence in Greenland, which they chose to vacate. In fact, Thule, the military base they have now, which they continually diminish, they took away from the Indigenous community in Greenland at great suffering for that community, and one of the reasons why they're not inclined to be invited back.
So I think it's a lot of rhetoric, at the end of the day. Some type of pragmatic deal may be done where Greenland becomes the host of an American military operation. But as of now, there's just a lot of talk and hot air. And all it does is really annoy the European allies of the United States of America, who have been there, by the way, in a lot of causes. We lost 150 people in Afghanistan by joining the United States under a UN sanctioned resolution, fighting on behalf of America. So America's got to have some respect for its allies.
PETER HAYNES: Frank, I want to switch gears now back to Canada here, specifically. There's a school of thought, we've read this from the opposition, the school of thought that Mark Carney overplayed Canada's hand in tariff negotiations, and that this move into Venezuela and the potential to unlock the heavy oil is really gonna impact Canada's leverage at the bargaining table in both tariff negotiations, and then, more specifically, the upcoming CUSMA renegotiation, which may all be one. Do you buy this argument?
FRANK MCKENNA: No, I don't at all. I mean, I'd love to see us having a deal. But what deal was on the table, Peter? I'm fairly familiar with these negotiations. Essentially, we seem to be circling around something involving steel, which would imply both continuing tariffs, maybe smaller, and quotas, but virtually nothing else, nothing on softwood lumber, nothing on autos, aluminum, et cetera. So really, what deal was on the table?
And the CUSMA negotiations haven't even been entered into yet. So what's happened since that time? Well, Trump's popularity has diminished, which reduces his leverage in that negotiation. We've seen more of the TACO trade, Trump Always Chickens Out, as the expression goes. The 10% that he promised to hit us with after Premier Ford's ad campaign, it hasn't gone anywhere. It's just disappeared. The furniture, kitchen cabinet tariffs that were supposed to be at 50% January 1, he backed off to 25% December 31. The pasta tariffs against Italy he backed off on.
CUSMA support is accelerating in the United States. During the recent hearings, we saw the auto industry and virtually every industrial group coming out saying "we need CUSMA." These are American groups. We saw all of that. We saw affordability become a dominant issue, which is really affecting the popularity of Trump and his base. We've got the midterm elections coming closer.
And we have an IEEPA decision, which could be out as soon as Friday of this week and I think is more likely to result in those tariffs under IEEPA being ruled illegal. And if that happens, it's gonna-- and it depends on what the court decides. Are they going to require a divestment of the money? It's $100 billion. I think you're going to see some bond vigilantes starting to jump up and down if that were to happen, and Treasury markets start to be influenced by it.
So a lot of moving parts, and none of it has been particularly favoring the administration's hand. So, no, I don't think we're any worse off as a result of not taking that deal. And hopefully, we'll eventually get there. And hopefully, the United States of America will remember who their friends are.
PETER HAYNES: And we'll be following the play by play of those CUSMA negotiations as we move forward in 2026. In recent days-- recent weeks, I should say, Mark Carney confirmed that former CPP and BlackRock executive Mark Wiseman would be sworn in as Canada's ambassador to Washington in mid-February, a position that arguably is second most important to the prime minister as we've spoken about previously. And I know it's a position that you're familiar with better than anyone, Frank. Wiseman is a known deal maker. Do you think his role in Canada-US trade negotiations will be important?
FRANK MCKENNA: Yeah, I think it will be critically important. When I was at the embassy, we basically negotiated the last softwood lumber deal. The current ambassador, Kirsten Hillman, has really been the point person negotiating the CUSMA deal. And Mark Wiseman will be exactly that when he takes office.
I spent two hours with him yesterday. We had a great chat. He's extraordinarily curious about the role and the implications. He's clearly wired. He's got a very strong network from his days in business with BlackRock and Lazard Freres and the pension plans. He knows the wealth managers around the world. He knows a lot of the leading people in the United States.
And more importantly than any of those things, he's got the ear of the prime minister. And the prime minister has a lot of trust in him. And so I think he's going there to be a negotiator. And he's got decades of business experience behind him in that role and I think a lot of credibility on both sides of the border. So hopefully, in July, when we're doing this podcast again, there'll be a deal done and it'll be in the rearview mirror and we can get on with doing business back and forth.
PETER HAYNES: Yeah, that would be great. Frank, as we just about finish up here, I want to talk about the energy patch. It's a sector that's very complex and controversial. It's got lots of moving parts, but in turn is very, very important to the Canadian economy. With that said, what do you think are the implications for Canada's energy sector at a macro level of Trump's first step in Venezuela?
And is a new pipe-- obviously, you saw the reaction to the stock prices earlier this week. They rallied a little bit. There were a lot of reasons in the industry as to maybe why the market was heavy already in those names.
But back to what you think are the macro implications in Canada of Trump's first step in Venezuela. And as you mentioned earlier, let's talk about how we get that new pipeline to Tidewater in sooner rather than later. Is it going to go through Northern BC? Do you think there's going to be less resistance, because of what happened in Venezuela, from Indigenous groups and/or the premier of New Brunswick-- of BC.
FRANK MCKENNA: Yeah, the answer is yes, yes, yes, and yes. I've never felt more confident about energy in Canada. When our prime minister is saying that energy is going to be a global energy superpower, I believe him because everything the government has done has been in support of that. And Canadians are really aligned around this mission all across the country. And that includes Quebec, BC, and all across the country.
And I think people realize that with the existential threat of the United States of America, we have to be-- we have to be masters of our own destiny. We can't just sit back and accept the unpredictability of a US neighbor. So I think we're going to be a superpower in terms of conventional energy, increased support for pipeline egress to the West Coast, or maybe even to Churchill I don't know, but to the West Coast. There are at least three routes being looked at, one going more towards Vancouver, and then the North Coast one.
All of that is being looked at very carefully. And I think, as a result, you'll see producers, if they believe there is egress, will increase production. It'll probably be another million barrels a day produced out of Canada. And Pathways, I believe, will go ahead, which will mean that we will have low cost barrels of oil because we've been pounding the cost out.
Our cash costs are less than $20 a barrel now. And we'll have cleaner oil. And we'll have very sophisticated technology backing that oil up. We'll have a massive amount of LNG leaving the British Columbia Coast, with support from the government of BC and Canadians at large. And that will displace coal and oil in other markets around the world, improving the climate. I think that we'll have a massive amount of support in Canada for clean energy as well.
And that includes a Renaissance in nuclear, where Canada is particularly equipped with companies like Cameco and Westinghouse and Brookfield, and with the nuclear industry that we have, our abundance of natural gas, probably the third or fourth largest reserves in the world, wind, which is taking on an extraordinary amount of momentum with wind resources in Newfoundland, Labrador, Nova Scotia, Eastern Canada, all now reaching a point of critical mass, hydrogen development, which is taking place as well.
So I think Canada has the potential to be a leader in conventional and clean conventional energy, as well as clean technologies and clean energy as well. And the amount of money and wealth that will be created will be massive, something like $70 billion now coming out of the oil markets. When we get world pricing for our oil and gas and all of our energy sources, we'll have a huge amount of money available to us to improve healthcare, to improve education, to service our debt, competitive tax rates. So I just can't tell you how bullish I feel right at this moment in our history.
PETER HAYNES: I don't know, 72 months of doing this podcast, I'm the only one who can see-- well, no, everyone can see the smile, but they won't on the podcast. That's the most bullish I've heard you in six years of doing this podcast, and that's encouraging.
Just as we finish up here, Frank, everyone claims to be an expert on Venezuela. There's Substack articles. There's all these unknown people on Twitter who want to be experts. It's difficult for investors to know who to trust for accurate information. At these types of critical moments, Frank, I'd like to ask you who you're listening to and where you're reading your information to get the best take on Venezuela and its impact on geopolitics.
FRANK MCKENNA: I'd recommend everybody travel. There's no better education. And I'm lucky enough to have been in Venezuela before, and just in the last few days, as I mentioned, both in Argentina, Uruguay, and Brazil. And you just pick up a lot of intelligence from people there. I've talked to expat Venezuelans there who gave me information I could never glean otherwise.
But I read everything that I can every single day. So every day, I would read the Globe and Mail, the National Post. I do Bloomberg every day, New York Times, The Washington Post, Wall Street Journal, BBC, and various Substacks as well, and listen to CNN and MSN and as much Fox as I can stand before I have to switch. But I try to be at the end of a big fire hose with a whole lot of information coming through. And it allows me to try to pick and choose and try to get balance in what I listen to.
So I would just recommend to people that keep your ears on. It's a fast moving world right now. And make sure you get a diversity of perspectives, because especially in the United States now, there's so much media that's self-sorting. People who have Democratic audiences give them the Democratic feed, and people with Republican audiences give them the Republican feed. And you really have to cross over and cross-pollinate if you're going to get the best information.
PETER HAYNES: That's great advice, Frank. And we'll be back at it here in a couple of weeks. I look forward to getting together with you then. I want to thank you on behalf of everyone here at TD Securities and our listeners for giving us your wisdom here. And we'll all hope for quieter times going forward. Thank you.
FRANK MCKENNA: Absolutely, Peter. And we're only month or two away from training camp. And I like some of the moves we've made.
PETER HAYNES: Yeah, we'll talk about that more in the next podcast. Thanks, Frank.
FRANK MCKENNA: All right.
Thank you for listening to Geopolitics. This TD Securities podcast is for informational purposes. The views described in today's podcast are of the individuals and may or may not represent the view of TD Bank or its subsidiaries. And these views should not be relied upon as investment, tax, or other advice.