Festering political uncertainty in Venezuela has turned the
country into a play field for geopolitical rivalries. The oil-based economy
which began treading a downhill is now staring at an abyss. Absence of
formidable political will to revive and resuscitate the failing economy and an
aversion to democratic transition has in part exacerbated the crisis which has
worsened irrevocably.
Flung apart from India by several thousands of miles
geographically, Venezuelan crisis is grabbing headlines in India. Venezuela’s
oil Minister and President of state run-oil company PDVSA (Petroleos de
Venezuela), Manuel Quevedo who was in India to attend the Petrotech Conference
in Greater Noida offered to double oil exports to India. This offer came in the backdrop of toughest
US sanctions on PDVSA which kicked off on January 28th. As per the
US restrictions, oil companies in Venezuela and American subsidiaries are
prevented from making deposits towards oil purchases directly into the accounts
of PDVSA. Sanctions came into existence in response to gruelling political
upheaval in Venezuela. Putting rest to all speculations of India’s interest in
Venezuelan oil, Ministry of External Affairs clarified that India will stick to
earlier agreements and ruled out scope for any more extra oil imports in the
wake of fresh American sanctions.
Venezuela has been tumbling down the road of economic growth
ever since President Maduro’s first stint in 2013 and reached a point of no
revival by 2016. Unperturbed by massive protests, amidst opposition boycott and
public anger Maduro emerged victorious in a heavily rigged Presidential
elections of 2018. Despite calls from international observers’, US, Venezuelan
opposition, Latin American Lima Group, elections weren’t declared null and
void. To contain brewing public
discontent, Maduro jailed opposition leaders. As of December 2018, economy hit
a new low, hyperinflation touched 10 million times and nearly 2.3 million
people fled the country. On January 10th
Maduro sworn in for the second six years term by the Supreme Court infiltrated
by Maduro loyalists in a ceremony largely shunned by international community. US
openly denounced Maduro’s highly illegitimate elections. US, Brazil and
Colombia refused to recognise his leadership. Paraguay severed diplomatic ties
with Venezuela and closed its embassy. But President Maduro remained defiant
and failed to take any measures to stem the free fall of Venezuelan currency.
To consolidate his authority, Maduro stripped National
Assembly of its legislative powers and rendered it powerless. Instead he elevated
National Constituent Assembly containing his loyalists. With the support of
security forces and approval of National Constituent Assembly, Supreme court
judges administered oath of office to Maduro. Riled by the authoritarianism of
Maduro who rode to power through illegitimate elections, people thronged to
streets and took massive protests. Opposition demanded fresh elections. But
Maduro blatantly rejected the proposal. Lending directionality and legitimacy
to protests, invoking constitutional provision, the majority leader of the
opposition in National Assembly, industrial engineer, Juan Guaido
self-appointed himself as the interim President of Venezuela to oversee conduct
of free and fair elections. Leopoldo Lopez, the tallest opposition leader of
Venezuela who is under detention since 2014 is the political mentor of Guaido.
As the leader of the National Assembly, Guaido began to reach
out to other countries. A dozen EU countries, several Latin American countries,
US and Canada supported Guaido while Russia, China, Iran, Turkey, Bolivia,
Cuba, Syria, Cambodia, North Korea, Suriname, South Africa, Dominica backed
Maduro. Soon momentum for fresh presidential elections began to gain ground.
Irked by growing support to Guaido, Maduro alleged that recognition of Guaido is
akin to a coup hatched by the US. But US contended that it is an embrace of
democracy. The countries that threw weight behind either of these leaders, took
the issue to UNSC. The political fight in Venezuela eventually headed to UNSC
where US demanded annulling the results of Venezuelan 2018 Presidential
elections and conduct of fresh elections. Russia on the other hand, called for
peaceful resolution of the crises. As the crisis intensified, UN General Secretary
called for dialogue to resolve the crisis. Venezuelan warring political
leadership that refused to oblige. Even the comity of nations that supported
the two Venezuelan leaders remained deeply divided.
Cold war rivals America and Russia which are supporting the
rival factions Guaido and Maduro found themselves on the opposite sides. In a
bid to support their respective groups, both have offered humanitarian aid.
America dispatched aid which was stopped by the Armed forces loyal to Maduro
who pledged to stop American aid. While the common man in Venezuela continued
to suffer there is no let down from both sides. At this juncture, Guaido has
set a deadline of Feb 23rd to allow the aid to pass into the country
reeling under severe humanitarian crisis due to shortages of food and medicine.
In the meanwhile, Trump at Miami rally urged Venezuelan military to accept
Guaido’s offer of amnesty or “stand to lose everything”. Maduro on the other
hand, announced that Russia aid of 300 tonnes due to arrive on Wednesday can
take of country’s needs. Venezuela continues to reel under the political
impasse. But it is an interesting story how the richest country in Latin
America is reduced to rags.
Venezuela became independent in 1830 and established ties
with America by 1835. With the discovery of petroleum reserves in 1914 on the
shores of Lake Maracaibo the country hit a jackpot. It eventually transformed
into a petrostate and economy began to rely entirely on petroleum exports. Venezuela
led by authoritarian leaders, power rested in privileged few and over years
political institutions gradually crumbled. Soon the economy was afflicted by
what is termed as “Dutch Disease” where the discovery or availability of huge
amounts of natural resources lead to an increase in the wealth of the country
due to sudden boom in the prices the resource in global markets. Typically,
majority of the Petrostates whose economies are reliant on the oil exports go
through boom and bust cycles. When international oil prices soar, these
economies attract huge foreign capital, currency will appreciate, income levels
and standard of living will also increase. Subsequently, tradable sectors like
agriculture and manufacturing which were less remunerative failed to attract
people, labour-intensive sectors suffered neglect. Oil became life-line of the
economy. By consequence, with a fall in oil prices, economy collapsed.
Consequently, the fortunes of economy were subject to fluctuations of the
global oil prices. Economic uncertainties are exacerbated by gross financial
mismanagement of dictators at the helm of the affairs who controlled the oil
sector.
From early 1920s till 1950s Venezuela was ruled by
authoritarian leaders-Juan Vincete Gomez and Marcos Perez Jimenez who regimes
were marred with frequent coups. Exasperated by frequent coups, in 1958
Venezuela adopted two-party democracy and elected first stable government.
According to the new system, all the elite which enjoyed the shares from the
oil exports formed what is termed as “Pacted democracy”, a term coined by Terry
Lynn Karl where all the privileged class, the power elite lobbyists had
guaranteed access to power in proportion of the votes garnered. Translating
into simple terms, the revenues from the oil exports were shared among the
parties in proportion to voting results. Venezuela joined as founding member of
OPEC (Organisation of Petroleum Exporting Countries) in 1960. In the aftermath
of Yom-Kippur war when prices of oil quadrupled, Venezuelan economy boomed,
making it the highest per capita income Latin American country. In 1976
President Andres Perez nationalised the oil industry, PDVSA which actively
partnered with foreign companies. This arrangement called as Punto-Fijo pact
was in vogue till 1980s began to fall apart with the decline of oil prices.
In the span of roughly three decades of rising oil prices,
Venezuela witnessed rampant corruption and reports peg this amount to whopping
$100 billion. As a matter of fact, intellectuals, argue that Venezuela had been
victim of corruption ever since its inception as an independent country. Even
now, judicial authorities’ express helplessness in curtailing this menace.
Ruled by dictatorial regimes, embezzlement of wealth and scandals have become
an associated phenomenon of governance. Baring a brief period in 1960s by and
large the country’s finances were swindled by forces close to top echelons of
power.
In 1970s when prices of oil tripled, Venezuela unveiled “The
Great Venezuela” designed along the lines of Mao’s “Great Leap Forward” left
the economy high and dry. Despite huge
inflows of petrodollars, Venezuela has fallen into debts with international
banks because of its overambitious project of turning South Venezuela into a
huge urban inhabitation through 300-state owned companies. Lack of fiscal
discipline, rolling out of numerous welfare projects inflicted huge blow to
economy. Caracas even sought the refuge of International Monetary Fund for a
financial bailout package. Dismayed by alarming corruption, rising inflation
and sinking economy, people protested for a change.
Military officer, Hugo Chavez after his unsuccessful coup
bid, pledged to alleviate poverty through Bolivarian revolution was desperate
people voted him to power in 1999. Chavez’s subsidies ameliorated poverty but emptied
state coffers. Days after assuming power, he convoked a National Constituent
Assembly to promulgate a new constitution. Assembly comprised majorly his
followers who set out to redefine the state. Chavez dismissed democratically
elected Congress, dismissed Supreme judges, Attorney General and replaced them
with his loyalists. In 2000 as per new constitution, fresh elections were held
and Chavez was re-elected for a term of six years. His outlandish socialist
policies, nationalisation of private oil firms, ruthless crackdown of press,
characteristic of a dictatorial regime took a huge toll on the economy reducing
it to shambles. In 2002 huge protests broke out against Chavez regime. Military
withdrew support and forced Chavez to resign. Business man Pedro Carmona, with
American support launched a coup. But within 2 days, with the support of blue
class workers, Chavez returned to power. He removed 20,000 PDVSA workers who participated
in state protests. This move directly impacted oil production. Oil Production
slumped by 2013 drastically. There was no iota of transparency in management of
finances. Debts mounted. Despite the grave mismanagement, economy remained
afloat due to raising oil prices from 2003-12. In a referendum held in 2009,
people voted for removing any term limits allowing Chavez to continue in power.
Detected with Cancer, Chavez underwent treatment but died in 2013. The fourteen
long years of Chavez regime exemplified the 21st Century version of
socialism shattered the economy.
In the Presidential elections held in 2013, Nicolas Maduro,
chosen successor of Chavez got elected. Maduro made no attempts to revive the
economy. Indeed, under his regime, Oil production tumbled, international oil
prices fell, inflicting double blow to the economy. Inflation touched new
peaks, unemployment increased. Despite popular unrest he made no efforts to
steer the country away from the socialistic formulations. In the midterm elections of 2015, opposition
parties commanded majority in National Assembly. Since 2016, Venezuela
descended into chaos. By 2017 Maduro, forced Supreme Court to annul the
legislative powers of National Assembly rendering it powerless. In May 2017,
Maduro ordered to redraft a fresh constitution.
Noted economists opine that Venezuela has reached a point of
no return where the Petro State has become a failed economy. Afflicted by
double whammy of authoritarianism and Dutch Disease and devoid of robust
democratic institutional frameworks, strategists are sceptical about the
reversal of fortunes of the one of the resource-rich countries of the World.
Having realising the dire prospects of deepening reliance on oil exports,
various Petro States are now establishing Sovereign Wealth Funds to diversify
their finances, and make investments in international assets to cushion the
economy against the boom and bust cycles of their resource dependent economies.
Ever since South
America’s democratic transition in 1980, Latin America aspired to reduce the
interference of foreign forces into this region. But unfortunately, owing to reluctance
of Guaido and Maduro to hold negotiations, US and Russia from who both leaders
draw their support are expected to play major role in Venezuelan showdown. With
reports of Russia sending 400 mercenaries to protect Maduro and Maduro
dispatching 20 metric tonnes of Gold to Russia abroad mysterious passenger jet
are abound, it is likely that Russia and China which have high stakes in
Venezuela would meddle in the region’s affairs. With Venezuela shutting air and
sea links to Dutch Caribbean islands, Venezuelan standoff shows no signs of
respite even as country plunges into worst humanitarian crisis ever.
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