Venezuela becomes new play field for geopolitical rivalries

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 28^th. 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 10^th 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 23^rd 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.

Back in 2017, the author wrote a piece on the role of non-viable grandiose Chinese investments that exacerbated tumultuous economic collapse of Venezuelan economy- https://myind.net/Home/viewArticle/venezuelas-dictatorial-socialist-regime-chinese-cash-have-pushed-the-country-towards-a-catastrophic-collapse. This piece will elaborate another facet of how poor economic management of resource-dependent economy accelerated its collapse from riches to rags. Venezuela, the fifth largest oil exporting country has the largest reserves of non-conventional oil (extra crude) oil reserves in the World.

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 21^st 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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