Viewpoints on Energy, Geopolitics, and Civilization
Darryn Boodan/ Trinidad Express:
The tragic fall of PDVSA
“PDVSA is a state within a state” -Hugo Chavez.
The story of the spectacular economic and political collapse of Venezuela has many lessons. Such as how a charismatic demagogue can ride to power on a wave of seductive socialist ideas. Also, how such socialist ideas, with its utopian promise of creating a more just and equal society, often end up degenerating into a repressive and totalitarian nightmare. Of course its also about how most of us take toilet paper for granted.
But to understand Venezuela today, you need to know the story of Petroleous de Venezuela, S.A. (PDVSA). That’s because PDVSA, the Venezuelan state-owned oil company, is the dark beating heart of the Maduro regime.
PDVSA was founded in 1976 when Venezuela was one of the richest countries in South America. And with the nation sitting on the largest oil reserves in the world, it’s creation was an attempt to monopolize the industry. Because what could possibly go wrong by creating a powerful state monopoly? It’s not like some charismatic demagogue was going to come along and abuse it for his own ends.
By all accounts, PDVSA was always well managed, with Foreign Policy magazine describing it as having a “lean workforce, an efficient cost structure, and a global outlook”. But this also acted as a dis-incentive as Venezuela never properly diversified their economy. Sounds familiar? In 1998 when the oil price crashed sending the country into a recession, it provided the perfect setting for the populist message of one Presidential candidate; Hugo Chavez Frias.
Hugo Chavez came to power on a wave of discontent, mainly from poor communities. As well as from intellectuals impressed by red berets. Chavez’s Bolivarian revolution had promised radical reforms to the country and generous welfare subsidies and he knew how he was going to pay for it all; PDVSA.
Chavez diverted the company’s reserves meant for reinvestment straight into his political projects and replaced the company’s well-qualified technocrats with his political cronies; all of whom would discover that running an oil company requires more than just wearing a Che Guevara tee shirt.
By 2002, labour unions and oil workers at PDVSA had begun to publically oppose Chavez’s ruinous grip on the company resulting in a two-month strike. Chavez’s response was to double down and fire 18,000 workers. While the Oilfield Workers Trade Union here in Trinidad and Tobago were busy spreading the gospel of the Bolivarian revolution, their comrades across the Gulf of Paria were witnessing the collapse of a company once regarded as one of the best in the world.
With oil production plummeting, employees exiting in droves, accidents increasing and of course no toilet paper, the following years would see PDVSA transition from being a major oil company into being a vassal state of the Chavistas.
“The world’s worst oil company” was what Forbes Magazine called PDVSA in 2017. Measuring depletion rates, Forbes calculated that while it usually takes a company like Exxon 8 years to extract and sell a barrel of oil, it would take PDVSA 198.6 years to do the same. Which is a stat I now think about to help me wait in the line at KFC. Thanks to Chavez, Venezuela’s economy became entirely dependent on an oil company which produces less oil than a bag of pholourie. But there is one thing PDVSA is now flowing in; allegations of criminality.
According to Bloomberg News, a widespread culture of corruption at PDVSA was uncovered when in 2018 ex PDVSA director Abraham Edgardo Ortega pled guilty in a U.S. court for taking $17Million in bribes and for conspiracy to launder money. Also that “fourteen other people have also pled guilty as part of a separate U.S. probe into bribery at PDVSA and other oil companies.”
Also in 2018 Swiss Banker, Matthias Krull pled guilty for his role in laundering over a Billion dollars from PDVSA. According to the U.S. Justice Department, “Krull and members of the money laundering conspiracy used Miami, Florida real estate and sophisticated false-investment schemes to conceal that the $1.2 billion was in fact embezzled from PDVSA.”
Recently when the U.S. Treasury Department imposed sanctions of PDVSA John Bolton tweeted: “Through sanctioning PdVSA, the United States has also sanctioned Nicaragua’s ALBANISA, the government’s joint venture with PdVSA and slush fund of the corrupt regime of Daniel Ortega,”
The story of PDVSA is important because it’s the story of Venezuela; the story of how a once shinning enterprise became a mafia state. And it’s a story that affects us.
Not least because the Government’s “historic” Dragon gas deal with Venezuela, involves three companies; Shell, The National Gas Company of Trinidad and Tobago, and PDVSA.
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Darryn Boodan is a freelance writer and columnist for the Trinidad Express. Petroleumworld reprint this article in the interest of our readers.
Editor's Note: This article was originally published by Trinidad Express, on Feb. 15, 2019. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
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