While emotionally appealing, the legal concept of "odious debt" is unworkable. Defining what constitutes an "odious regime" or illegitimate use of funds is a slippery slope that could destabilize the entire sovereign debt market, as almost any government could be labeled as such by someone.
Under the law, a debt claim is treated the same regardless of who holds it. However, the negotiation strategy changes dramatically depending on whether the creditor is an original lender or a hedge fund that bought the debt at a steep discount, impacting the perceived fairness of any offer.
Unlike corporate bankruptcy where a court can replace management and control assets, a sovereign nation cannot be controlled by an external legal body. This fundamental issue of sovereignty makes a standardized, enforceable bankruptcy-style mechanism for countries practically impossible.
U.S. sanctions, intended to pressure the Venezuelan regime, create a legal barrier that prevents creditors and the government from even beginning negotiations on restructuring its defaulted debt. The path to resolution is ironically blocked by the very policy designed to force it.
In a future restructuring, the typical fight between creditors and citizens will likely be preceded by a new top tier of claimants. The U.S. government, seeking to cover its intervention costs, and oil companies, needing payment for past expropriations, will likely get first access to revenues.
Iraq's massive 80% debt write-off was an anomaly driven by the Bush administration's goal of building a stable democratic ally. The U.S. directly ran the country and had strong political motives for deep debt relief. This unique context is absent in Venezuela's case, making the Iraq precedent a poor guide.