Viewpoints on Energy, Geopolitics, and Civilization
Jose Clavijo/The Geopolitics:
The Geopolitics of the Venezuelan Crisis
Despite its impressive presence in the energy sector, Russia's priorities in Venezuela tend to be geopolitical.
Moscow intends to establish a forward base of strategic
nuclear-capable bombers in an island off Venezuela's coast,
A great game is gaining momentum in Venezuela pitting the US against the entrenched interests of China and Russia. Over the years, as Hugo Chávez and then Nicolás Maduro mismanaged the economy and systematically eroded the rule of law, the increasingly ostracized regime turned to Moscow and Beijing for support. Both were keen to gain a foothold in a strategically located country, awash with natural resources, right in the US's backyard. Moscow and Beijing have injected roughly US$ 90 billion into Venezuela (a notorious lack of transparency hinders exact estimates). The funds have come mostly by way of massive loan-for-oil agreements at discounted prices. But they have also signed substantial military contracts ranging from sophisticated Russian weaponry to Chinese riot-control gear. Beijing alone has invested around $70 billion in Venezuela . The loans provided by Chinese development banks were invested in the energy and mining sectors, but because of their discretionary nature , the funds were also diverted to other infrastructure projects. Lamentably, many of these projects remain idle or unfinished.
Nevertheless, the Venezuelan regimes' corruption and economic mismanagement has meant that the largesse has come with increasing demands. Russia has large minority stakes in several major joint ventures in oil and gas with PDVSA -Venezuela's crumbling national oil company- including a lien on a 49.9 percent share in Citgo, its huge US-based refining arm that served as collateral for the most recent Russian loans. For its part, Chinese loans are being repaid through parallel contracts in oil shipments where Beijing directly controls production. As a result, China and Russia are the country's main bilateral foreign creditors, making the Maduro regime not only economically indebted to Asia's largest autocracies, but existentially so, as any withdrawal of support would lead to its collapse.
Both countries also have an embryonic security presence in Venezuela, including a Chinese satellite tracking facility and a Russian cyber presence . In addition, Moscow intends to establish a forward base of strategic nuclear-capable bombers in an island off Venezuela's coast, in what would be its largest presence in the Caribbean in half a century. The rapprochement of the Maduro regime with China and Russia provide these with strategic regional clout in their global rivalry with Washington. Anti-US, “axis of evil” aligned Venezuela has become an outpost that serves as leverage in their ongoing tensions over Washington's meddling in their own regional spheres of influence: namely, Eastern Europe and the “near abroad” in the case of Moscow, and the South China Sea and Taiwan for Beijing.
Notwithstanding a long history of mutual distrust, the search for an alternative to the US-led international liberal order has compelled China and Russia to forge an informal alliance of convenience in recent years. But the alignment is untested, as their economic profiles and strategic interests differ considerably . Though they share a steadfast presence in Venezuela, these diverging interests are evident in their respective strategies.
China's vaster commitment is tempered by economic prerogatives. The strategic bilateral relationship was initially politically and economically expedient. China needed to diversify and increase its voracious energy demands. Meanwhile, leftist strongman Hugo Chávez, mistrustful of Washington and intent on ending Venezuela's overreliance on oil exports to the US, was searching for new partners outside the Western liberal realm. China invested heavily: from 2010 to 2013, approximately 64 percent of its credit lines to Latin America went to Venezuela . Regardless of the criticisms aimed at Chinas “debt-trap” diplomacy , its stalwart presence in Venezuela was supposed to be a showcase of its alternative development and aid model. But Beijing perilously miscalculated the country's capacity to fulfill its contractual obligations, as oil production collapsed due to a decline in prices, corruption and ill-conceived policies. As a result, China has attempted to diminish its financial commitments in the country.
Despite its impressive presence in the energy sector, Russia's priorities in Venezuela tend to be geopolitical. In Putin's attempts to revive the country's aggrieved sense of grandeur and confront US interests wherever it finds kindred spirits, Venezuela plays the role of spoiler. Hence, Caracas's prominent role in Russia's attempts to diversify its economic and security ties into the Middle East, South Asia and South America . While Beijing has opted to lend defensively to hopefully facilitate repayment and raise oil exports, Moscow's more conciliatory stance has allowed for flexible debt restructuring and the provision of timely bailouts in exchange for juicy energy assets at discounted prices. Venezuela, after all, has the world's largest oil reserves. The obtainment of valuable oil and gas extraction licenses allows Moscow to become a bigger player in the global energy market. The greater exposure is not devoid of risks. Whereas several smaller Russian energy companies have pulled out of projects, energy giant Rosneft has doubled down, taking greater operational and shareholder control of its investments due to gaping holes in the balance sheets of joint ventures and disappointing oil output. The fact that Rosneft has yet to break even on its estimated US$ 9 billion investments in Venezuela over the past decade lends credence to the political nature of Russia's presence.
The Maduro regime's forebodings of US imperial designs on Venezuela's abundant natural resources conveniently overlook that it has already ceded tranches of its sovereignty to Moscow, Beijing and Havana. The three seem to represent a bigger “imperial” threat to the country's self-determination than any abstruse US intentions. This time around, though, Washington is not a unilateral interventionist power but rather part of a sweeping coalition of democracies throughout the Americas, from Canada to Argentina, that are pressing for a return to democracy. If successful, the realignment of interests with the rest of Latin America could portend a new and more dynamic relationship. Unlike China and Russia's rather predatory presence in Venezuela, the US has in recent decades pursued conciliatory policies towards the region based on common values and concerns. Long gone is the era of direct and indirect meddling . Democratic values, improved governance, increased trade and investment flows, and specific risks such as drug trafficking and money laundering are overriding issues.
The historical juncture couldn't be more propitious for change, what with the waning of leftist populism in the region and the repercussions of Venezuela's collapse transcending its borders and potentially overwhelming the region's support mechanisms. But the US needs to tread carefully and utilize the current goodwill to forge a peaceful transition in Venezuela. There is a risk of both escalation and miscalculation. The Trump administration's policy towards Venezuela contrasts with its retrenchment from the international arena, and seeming disregard for the promotion of democracy and human rights. Moreover, it's is being conducted by neocons such as John Bolton and Elliott Abrams, with a past penchant for interventionism; while there is a dearth of Latin American specialists at both the White House and State Department that could provide measured advice. Concurrently, the new US security strategy deprioritizes the fight against terrorism to focus on great power rivalry, in particular, the risks posed by a rising China and a resentful Russia. Venezuela could well become a testing ground for Washington's new strategic interests.
For all the media headlines, for all the allegations of imperialism and interventionism by the Maduro regime, the Venezuelan crisis is above all a human tragedy. The country was once the most prosperous and stable in Latin America. Now its people suffer the worst humanitarian and economic calamity in the Americas in modern times. Venezuela's GDP has shrunk by 50 percent in the last five years, unheard of in a country not at war. Inflation surpassed 1,000,000 percent last year, the only continued instance of hyperinflation in the world. Venezuela is one of the world's most corrupt countries , with the regime widely accused of human rights violations towards its population, including the use of torture and executions . Institutional collapse has brought a breakdown in law and order, resulting in one of the highest murder rates in the world . Poverty based on income has exploded in recent years, with at least 87 percent of the population living under the poverty line, and 61percent in extreme poverty .
Privations and coercion at home have led to an exodus. But adversity beckons both those who leave as well as those who stay behind. Malnutrition is rampant. People are dying for lack of medicines, and of diseases that were eradicated decades ago. Maduro is reluctant to recognize the humanitarian crisis for fear of acknowledging the systemic failure of the so-called Bolivarian Revolution, the brainchild of his mentor Hugo Chávez. But Venezuela may not survive many more years of “revolution”.
Russia lacks the resources to single-handedly bail out Maduro's regime , and China's recent experience serves as a cautionary tale. Whatever the denouement to the Venezuelan crisis, both will play a role in the country's future. China is the third largest client after the US and India – of Venezuelan oil exports, which account for roughly 95 percent of its foreign earnings . A future democratically elected government will most likely have to restructure its huge sovereign debt, including onerous and dubious Chinese and Russian loans. Russia and, to a lesser extent, China have been Venezuela's main suppliers of weapons. Caracas will need to maintain the military relationships for spare parts and maintenance of its matériel. Both will lose a strategic regional ally in Maduro, but their influence will remain, though probably much diminished.
Moscow and Beijing are leveraging their risks and talking to representatives of the interim government. For the time being though, they are firmly behind Maduro's kleptocracy. Economic and geopolitical considerations prevail over moral and humanitarian concerns. China and Russia's distinct autocratic models pose a challenge not only to the Western liberal order but to market democracies around the world. If they aspire to challenge the prevailing order, their actions in Venezuela leave much to be desired.
The views and opinions expressed in this article are those of the author.
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Jose Clavijo is an early retired Venezuelan career diplomat. He was posted in Tunisia, Denmark, India, Japan, Dominican Republic, Philippines, and Morocco. He was also the head of Asia and Oceania Department in the Foreign Ministry. Clavijo studied Political Science at the University of New Orleans, United States, and at the American University in Cairo, Egypt. He earned his Masters of Science in International Politics from University of Bristol, UK. He can be reached at email@example.com. Petroleumworld does not necessarily share these views .
Editor's Note: This article was originally published by The Geopolitics on Mar 22, 2020. 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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