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Blood Is Thicker than Oil: The Throes of Venezuela’s Crisis

Blood Is Thicker than Oil: The Throes of Venezuela’s Crisis

As the smoking gun of Venezuela’s unrest clears away, onlookers wonder whether it is about to be holstered back or cocked for another shot. To most observers, the socio-political crisis in Venezuela came as a big surprise, as if out of nowhere. Owing perhaps to its remote geographic location and the prominence of more spectacular geopolitical events, it is easy to overlook the fact that we are not speaking about a recent outbreak. Instead, the current presidential scandal is but the very latest addition to a long-lasting crisis that began somewhere in 2010 due to economic shortages and worsened with the upheaval of the existing political equilibrium following the death of long-standing president, Hugo Chávez, in 2013. Venezuela has been a powder keg for nearly a decade, as the country’s unsustainable oil-reliant economy has shown its unfortunate limits, which were further compounded by the government’s ineffectual policies, strongly influenced by the anti-Western leanings common to both Chávez and current president Nicolás Maduro. 

Diagnosing the problem 

In a nutshell, the rising oil prices in the 2000s helped bolster both the country’s economy and Hugo Chávez’s popularity. Allegations of authoritarianism and human rights violations notwithstanding, the country’s economic performance increased as it was fuelled by oil revenues. Nevertheless, the figures hid direr realities, such as rising inflation (which eventually spiralled out of control), a black market for hard currencies and diminished, uncompetitive domestic production capacities owing to strict price controls, limits on foreign exchange and a stifled private sector, meaning that the country relied on importing essential goods such as medicine and foodstuffs using oil revenues since it could not meet its demand internally. The Chávez Administration’s unsustainable policies finally caught up with the country towards his death, and no improvement came when Maduro took over and failed to adapt to the economic context, opting instead to hold Chávez’s line.

Venezuela’s case can be mirrored by that of Uzbekistan: both were ruled for a long time by authoritarian leaders (Hugo Chávez and Islam Karimov, respectively) who pursued economic policies that generated stark systemic imbalances. Both leaders died and their positions as heads of state were taken over by lesser-known political figures: Nicolás Maduro and Shavkat Mirziyoyev. The differences lie primarily in the strategies the new leaders pursued: whereas Mirziyoyev opted to normalize Uzbekistan’s relations with its neighbours and launch a reform program with a view towards improving the private sector, liberalize capital markets and attract investors, Maduro continued Chávez’s policies, including those associated with gross economic mismanagement.

Venezuela has been a powder keg for nearly a decade, as the country’s unsustainable oil-reliant economy has shown its unfortunate limits, which were further compounded by the government’s ineffectual policies, strongly influenced by the anti-Western leanings common to both Chávez and current president Nicolás Maduro.

Venezuela is, unfortunately, no stranger to political and economic turbulences. The late President Chávez himself was both the orchestrator of a failed coup d’état attempt in 1992 and the would-be victim of one ten years later. Flagging oil prices in 2014 – 2015 hit the economy particularly hard, as oil revenues collapsed, thus the shortages of essential commodities worsened and the population’s discontent grew. An incident with an attempted assault on a student in 2014 led to the outbreak of a wave of protests (in a curiously similar fashion to the onset of the Arab Spring), the most famous of which is the so-called ‘Mother of All Protests’, which saw between 2 and 6 million people marched in response to the dissolution of National Assembly by the Supreme Tribunal of Justice. The body count exceeded 600 deaths, while the number of injuries was somewhere in the 18,000s; in the end, this constitutional crisis saw the creation of a Constitutional National Assembly, a body that runs parallel to the National Assembly in a bizarre institutional competition, mirroring the stances of Maduro’s supporters and opponents.

At present, the crux of the country’s political crisis is the contested legitimacy of Maduro’s presidency by the young newly-elected president of the National Assembly, Juan Guaidó, who repudiated Maduro’s 2018 re-election and, citing an article from Venezuela’s constitution, claimed acting presidency of Venezuela for himself. Now, the country is effectively divided in two: Guaidó, supported by the National Assembly and those who oppose the establishment, and Maduro, supported by the Constitutional National Assembly that runs parallel to the National Assembly. 

Truth in stereotype 

Both presidents have supporters abroad, of whom we shall speak in due course, but let us first have a look at the profiles involved – those of the competing presidents, and that of Venezuela itself. Regarding his memorable novel “The Autumn of the Patriarch”, renowned Colombian writer Gabriel García Márquez once said that “the dictator is the only archetype ever given to the world by South America”. The main character of the novel is an instance of this class of rulers – an illiterate individual of obscure origins, who managed to claw his way to power by leveraging the support of foreign powers and maintained his hold on the highest office through sheer brutality and political instrumentation. He surrounds himself with the finest goods while the population endures hardships and appropriates the highest military honours as a testament to his reliance on the armed forces and on the loyalty of seasoned generals. Much of the novel’s narrative revolves around the tribulations of power that the tyrant experiences, exploring the haunting loneliness that is inextricably tied to his position.

“The Autumn of the Patriarch” explores the ebb and flow of the tyrant’s political life, swivelling between unyielding paranoia and a need for people he could trust, between his apparent invulnerability counterbalanced by his inevitable demise, or between his naïve belief in the love of the people he rules over versus the reality of their hatred and contempt.

The novel explores the ebb and flow of the tyrant’s political life, swivelling between unyielding paranoia and a need for people he could trust, between his apparent invulnerability counterbalanced by his inevitable demise, or between his naïve belief in the love of the people he rules over versus the reality of their hatred and contempt. This, in turn, is mirrored masterfully in the population’s own contradictory attitude towards the tyrant, whom they view as saviour and bane, saint and demon, protector and plague. As the dictator shrouds himself in obscurity and secrecy, he reaches an almost myth-like status in the eyes of the common folk, who know him mostly by various paraphernalia, anecdotes, legends and policies. The dictator is locked in his impenetrable fortress, which descends into little more than a decrepit ruin as he seemingly dies before being restored to glory when he returns.

Through this masterpiece, García Márquez gave us a model through which one can begin to understand politics in a (Latin American) dictatorship, which could be summarily described as a cyclical power vacuum that gets temporarily filled only to reignite once the status quo is upset. In such a setting, there is a marked lack of a solid political infrastructure that is required in order to confer legitimacy and reliability to the government’s policies as well as enforce a minimal standard of competence for its staff. Instead, we witness the coalescence of politics and policy around a singular individual who fills the vacuum by strong-arming his way to the top, whose political acumen consists mainly in subduing opposition through brute force and exploiting the interests of foreign powers to ensure his continuity.

Furthermore, the distance between the highest layers of authority and the rest of the populace is very high, while the government’s policies are aimed primarily at preserving the dictator’s power. This therefore creates an ineffective political apparatus which gives rise to systemic ills such as corruption; combined with the scarcity of resources, such an ecosystem encourages unhealthy competition that drives away foreign investors who could help accelerate progress in key economic sectors, as well as a desire to achieve higher social status by whatever means.

When we look at Venezuela’s cultural report by Hofstede Insights, we will notice the presence of many of these elements. It is a country with a very high power distance and a high ‘masculinity’ index – a hallmark of a drive for success and a competitive mindset. Yet, Venezuela is also described as having a collectivistic mentality (i.e. one’s identity is defined by one’s association with a group or social class), a high need to avoid uncertainty as well as an appreciation towards tradition and norms, and finally an optimistic attitude towards life.

In such a setting, there is a marked lack of a solid political infrastructure that is required in order to confer legitimacy and reliability to the government’s policies as well as enforce a minimal standard of competence for its staff.

In this case, we may note that a combination of a collectivistic mindset and a high drive to face obstacles head-on, compounded by desperation born of severe paucity is the perfect recipe for civil unrest and conflict. Corruption and a high power distance tend to create information asymmetry i.e. uncertainty, especially in combination with stark poverty which clashes with the population’s desire to avoid uncertainty, all of which are funnelled into public outrage and malcontent. Venezuela, like other Latin American countries, has been through a war for independence and witnessed those of its neighbours; in the mid-nineteenth century, it experienced a civil war where the governing conservatives (who sought to conserve the rigid colonial social order and system) were ousted by federalists who promoted more liberal policies based on values such as equality and federal autonomy. In 1945, then-president Isaías Medina Angarita was removed following a coup d’état that enjoyed popular support. More tragically, public memory still recalls the infamous Caracazo of 1989, i.e. violent riots that were also sparked by an oil-scented economic crisis, ending in mass civilian deaths and political instability. The population grew up with those stories; it became part of their national identity. The population believes in the will of the people prevailing over dysfunctional political management. 

Profiles in politics 

The duelling presidents are also of contrasting profiles. Nicolás Maduro, 56 years of age, is part of the so-called ‘chavistas’ i.e. hardline supporters of Hugo Chávez. Once held in high regard as a competent administrator, Maduro was elected with the narrowest of margins against his opponent, an early sign of his lacklustre popularity. In spite of his support for Chávez and his continuation of the latter’s policies, Maduro’s profile does present some marked differences from that of his predecessor. Chávez was a career military officer from a (supposedly) poor background, who rose to power against the backdrop of the previous president’s extreme unpopularity, and despite the country’s ever worsening political climate, rising crime rate and unsustainable economy, still enjoyed considerable public approval, especially among the poorest segments of the population. Maduro, on the other hand, never completed high school; instead, he was involved with leftist politics since his teenage years, and his ascension to Head of State came in the wake of the death of his better-liked predecessor, who had apparently earmarked him as his successor before he died. Whereas Hugo Chávez counterbalanced the dictatorship he was creating with a strong propaganda machine and populist policies, Maduro failed to do so, especially as the early years of his presidency began with the Venezuelan economy plummeting.

Aspenia’s Marco Vincenzino sees this proxy war as being primarily motivated by financial concerns and access to energy resources. The stakes for the United States are tied to its energy trade with Venezuela – about 41% of Venezuela’s oil exports head to US markets, making up 7% of US oil imports in 2017.

Nicolás Maduro inherited the late president’s seat, but also the country’s ills and no favourable oil prices to aid him. He sought to increase his powers and to secure his position, and employed tough measures and armed forces to suppress dissent. In their own ways and to varying extents, both Maduro and Chávez embodied the archetypal dictator described by García Márquez. Maduro’s weak ability in interacting with the citizens is evidenced by his denial of the extent of the crisis in the country (despite millions fleeing Venezuela due to poverty), refusing humanitarian aid and blaming the usual suspects as his predecessor – the United States and the West in general – even though it is clear that average Venezuelans now care far more about solving the country’s domestic problems than abstract geopolitical rivalries, far removed from more immediate needs such as decent healthcare and ensuring dinner on the table.

Blackouts and running water shortages have caused disarray among Venezuelan folk and increased desperation. For instance, at one point the tap water in households turned black, rendering it unusable; it is indeed dire as it is symbolic: a bitter reminder that the country’s main resource – oil – is very limited beyond its industrial and commercial applications, and its importance pales in comparison with that of more basic commodities such as fresh water. At any rate, with military support to rely on, the strategy of the Maduro administration is to outlast the protest – stand their ground longer than the opposition can muster the population against them.

Juan Guaidó, aged 35, is very different from his rival. A college-educated politician with degrees in engineering and public management, Guaidó has been described as a ‘political superstar’ by Sky News who managed to harness popular support despite his relative anonymity prior to his self-appointment as interim president and the lack of military support. Reuters also remarks on Guaidó’s sudden ascension, noting that he is a compromise between the various factions of Venezuela’s opposition, as well as a hope for many to fill the leadership vacuum. To many Venezuelans, where Maduro is a relic of a bygone past that has long since outstayed its welcome, Guaidó’s youth and boldness inspires that which Venezuela wants most to hear: hope for a better tomorrow. Interestingly, he bears several similarities to Hugo Chávez himself: he was born on the same day; he is descended from a family with a military history, and he cited the poverty witnessed earlier in life as the catalyst for his political career. To the establishment, this similarity to Chávez would’ve been a goldmine to exploit propagandistically speaking, but to Guaidó this is a burden he must distance himself from. 

Path to power 

Either way, assuming he will assume the Presidency of Venezuela, Guaidó will find himself facing a very difficult puzzle in terms of domestic politics. On the one hand, his very claim to the presidency relies on an article from the constitution, meaning that he is seeking to build his image as a viable political solution not on strength and raw willpower, but on the rule of law and political legitimacy. Should he eventually officially become President, both the population and his geopolitical supporters will expect him to pursue this path. On the other hand, regardless of what he will choose to do, he will face significant hurdles. If he does a 180 degrees turn on who he presents himself to be and instead of reforming the country he will seek to consolidate his position like others before him, then he will likely renew the cycle of dictatorship, meaning he will need military support and to find ways to deal with the opposing factions, especially the ones with connections to armed groups who would be capable of disrupting civil order or carrying out guerrilla attacks.

David E. Sanger accurately notes the image problem this poses for Trump’s administration: having conceded Russia key influence in Syria, it faces the risk of being criticised for the same ineffectualness it accused Barack Obama’s cabinet of displaying internationally.

However, if he chooses to uphold the law to its fullest extent, that means he will have to bring to justice anyone who has committed illegal acts during previous presidencies, and, if international observers are to be believed, that includes many members of the establishment and its unaffiliated supporters, which explains why the current administration fights tooth and nail and refuses any major compromise – there is a lot to lose. Let us bring to mind two important facts:

1) during Hugo Chávez’s tenure, many military-grade weapons were accessible to prisoners who were released or sold them to other groups; with the crime rate high as it is, it can be assumed that the weapons might well be out on the Venezuelan streets, and given the corruption, it is still possible that weapons continue to be accessible to various buyers.

2) Maduro and his faction are supported by loosely organised armed groups called ‘colectivos’ who are known to attack citizens who oppose Maduro. Thus, Guaidó may run a serious risk of an assassination attempt on him by assailants who have access to military-grade weapons with no official ties to any public institution. Apart from the human tragedy that would be created should such an attempt be successful, it is unlikely that the opposition would produce another candidate behind whom it could unite, making it easier to pick apart and subdue. Furthermore, this could result in two scenarios: either turn Guaidó into a martyr and plunge the country into a civil war that would risk spilling over in neighbouring countries and attract more or less overt involvement from foreign powers, or determine the populace to relent and settle for a modicum of order instead of futilely prolonging the chaos. 

Geopolitics of failure 

In the short run, Venezuela has become yet another classic example of a proxy war, with the United States, the European Union and most of the Western world supporting Juan Guaidó while Nicolás Maduro is backed primarily by Russia, China, Iran, Cuba and Turkey. There are several similarities between Venezuela and Syria, since both are plagued by continued public discontent, escalating into clashes with the forces of a long-standing, oppressive government and drawing in international involvement, causing the exodus of refugees fleeing the conflict, though one must be careful not to exaggerate these similarities and see Venezuela as the Latin American version of Syria. Firstly, unlike Syria, Venezuela hosts vast quantities of petroleum reserves which weigh heavily into the geopolitical dynamics of the situation; secondly, the opposition in Syria was nowhere near as tightly united under one individual as they are now in Venezuela under Juan Guaidó. Thirdly, the situation in Syria was exacerbated by religious and ethnic factors, which is not the case in Venezuela.

Aspenia’s Marco Vincenzino sees this proxy war as being primarily motivated by financial concerns and access to energy resources: China has an increasingly strong economic presence in the region and an interest in its energy reserves. Russia, too, has a vested interest in the country: not only do Russian companies have a deal with Venezuela’s national oil company, but Venezuela is also one of Russia’s greatest arms sales customers and has contracted billions of dollars’ worth of loans and financial assistance from Russia. More than that, it is a thorn in the United States’ side in its very own half of the world, forming an anti-American link across Central and South America. Cuba’s economy also has a strong reliance on Venezuelan oil, whereas Turkey’s main interest is its $900 million gold trade with Venezuela. As far as Iran is concerned, Benny Avni of the NY Post believes that Tehran’s support for Maduro stems from a fear that a successful anti-government movement might create a precedent that would inspire similar actions on Iranian territory.

Last, but not least, the stakes for the United States are tied to its energy trade with Venezuela – about 41% of Venezuela’s oil exports head to US markets, making up 7% of US oil imports in 2017. The US also dominates the processing of the oil for lubricants, fuels, plastics and so on, which feeds into other markets. As the US aims to become a net energy exporter, it requires an oil supply to meet its domestic demand at convenient prices, and Venezuela fits the bill owing to its geographic location. Furthermore, an unstable Venezuela is a source of security risks for the US, especially with regards to illegal arms trafficking and the refugee crisis which, if left unchecked, will generate a humanitarian crisis across the South American continent. It would also result in a geoeconomic and geopolitical vacuum that would present an even bigger challenge to the United States as it would inevitably draw at the very least Russia and China, leaving the US with two difficult choices: either risk a division of its sphere of influence among rivals, i.e. engage in a triumvirate of sorts, or invest heavily to contain the situation. Another aspect to note is that Latin America, in general, used to be fertile ground for Marxist-Leninist ideologies up until the 1970s, owing to a historical disdain for anything resembling imperialism and the old colonial system as well as to the stark economic inequalities. As the Cold War ended, Cuba and Venezuela have remained the only vestiges of socialism in the American hemisphere. With a friendly regime in Venezuela and thawing relations with Cuba, the US would tighten its influence in the Americas. 

A challenge for Trump 

For Donald Trump, the implications are further-reaching. Having promised in his 2016 campaign that he would focus primarily on domestic affairs and reduce US involvement in external matters that do not directly threaten American interests, Trump has nonetheless pursued a rather bold foreign policy by comparison, taking a hardline stance towards traditional US allies in Western Europe while seeking to achieve what no other American President has managed to accomplish: normalise relations and reach an agreement on disarmament with North Korea. Despite a first breakthrough meeting with North Korean President Kim Jong Un in Singapore in June 2018, further talks on nuclear disarmament earlier in 2019 broke down with both sides blaming each other for the failure. Given a) Trump’s aforementioned promise of reduced interference, b) his strained and uneven relations with European allies, and c) the universally negative perception of Kim’s regime in the Western world as well as the widespread accounts of atrocities committed under his command, such a diplomatic endeavour should necessarily have been successful so as not to impinge on Trump’s image. Instead, Trump risks being perceived as diplomatically inept and lacking a sense of friend and foe, both internationally and domestically; this blemish could further be exploited by his political opponents during the next elections.

The “poisoned well” strategy is a longer-term option, a geopolitically passive-aggressive approach that seeks to undermine Russia’s position even if it concedes part of its sphere of influence to the latter.

Now, Russian troops have been confirmed on Venezuelan soil and faint hints of the Russian military incursion in Crimea and, more distantly, the Cuban missile crisis in 1962 begin to emerge. It is most clearly a challenge to the United States’ supremacy. As Trump and Vladimir Putin issued warnings to one another to not meddle in Venezuela while accusing each other of undermining the people’s will, Russia has made a bold, territorial move. David E. Sanger accurately notes the image problem this poses for Trump’s administration: having conceded Russia key influence in Syria, it faces the risk of being criticised for the same ineffectualness it accused Barack Obama’s cabinet of displaying internationally. At the moment, we can distinguish three main short-to-medium term strategies available to the US: restricting its reactions to diplomatic statements without taking any action in order to avoid escalation; making a show of its own hard power (e.g. by using its navy to enforce a blockade); “poisoning the well” using economic sanctions against Venezuela. The first strategy would have the merit of not further straining the international climate, although it would have severe consequences for the United States’ imagine (and that of the Western world, in general) as champions of democracy and would give Russia a geoeconomic advantage with additional control over the country’s oil production; additionally, it would not solve Venezuela’s systemic problems.

The second strategy is the one that would best serve American interests. Here, we can cite the precedent of Russia’s diplomatic incident with Turkey in 2015 when Turkish forces shot down a Russian jet fighter. Russia did not retaliate militarily, as it did against Georgia in 2008; instead it opted for diplomatic and economic retorts, refraining from more forceful actions against Turkey’s strong military. Russia’s foreign policy is highly pragmatic, and it would not risk escalating a situation into a conflict it cannot win or which could risk damaging its image as a great power. Should the United States manage to enlist the support of at least one other powerful ally, it would essentially avoid a stalemate and secure a great advantage that would ensure its prevalence. One such ally could be Turkey, but the latter’s independent foreign policy in recent years has brought it closer to Russia’s views, and it too has a stake in preserving the Maduro regime. The European Union could fill in the part, yet the divided stances of its Member States make it difficult to adopt a common European strategy, which leaves the US the option of negotiating with its militarily strong partners from the Anglo-Saxon world: the United Kingdom or Australia. China is unlikely to be inclined to interfere with armed support, given its doctrine of staying out of the internal affairs of other states.

Finally, the “poisoned well” strategy is a longer-term option, a geopolitically passive-aggressive approach that seeks to undermine Russia’s position even if it concedes part of its sphere of influence to the latter. This can be accomplished by concerted embargos and economic sanctions which would leave Russia with a very volatile problem to deal with in Venezuela, turning the latter into an economic black hole for Russian funds and resources. The risks associated with this strategy, apart from drawing considerable public opprobrium (anti-US media could easily construe this as the US taking vengeance upon the Venezuelan people), is that if Russia does manage to solve the political and humanitarian puzzle, it will effectively send a message to the entire world: that Russia can solve problems the US cannot. Lastly, another scenario we can consider is that of a settlement with realpolitik overtones: a secret compromise between the main parties involved, such as Maduro staying in power in exchange for promising to implement economic reforms that would benefit Western and Chinese companies, or Juan Guaidó replacing him at the price of promising to pay back Russian loans and maintain the same business conditions for Russian companies. 

Conclusion 

The delicate balance in Venezuela thus hangs by a thread, with the people being willed into action by a combination of desperation generated by poverty and optimism at the prospect of toppling an oppressive regime. The latter clings to its power to avoid the consequences of losing the political battleground. Internationally, one of the regime’s closest allies made a strong move by providing military support in the United States’ close vicinity. In this case, even the absence of a reaction from the US and other international stakeholders will have strong geopolitical consequences, though none can really afford to idly sit by without taking action. Possible scenarios run the gamut from direct military engagement and economic attrition to secret, backroom deals, but as the dust settles on the streets of Caracas, we can be certain that, whatever the outcome, Venezuela’s social, political and economic restoration will be as difficult as it is crucial in a regional context.

 
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OEconomica No. 1, 2016