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Venezuela: Strategies of an Authoritarian Petrostate
By
Gustavo Coronel
During
the last nine years Venezuelan democracy has been transformed
into a tropical monarchy. For the first time since Fidel Castro’s
1962’s missile crisis a Latin American despot has pretensions
of global hegemony. Oil and hate are being combined to produce
a greatly dangerous threat to U.S. national security. What
is the potential impact of these strategies on hemispheric
and, even, world’s political stability?
1. From Democracy to tropical Monarchy.
Hugo Chavez has now received close to $250-300 billion in oil
income. Instead of using this money in long-range programs
to eradicate poverty and create new employment, he has chosen
to institute a policy of handouts that is actually making
Venezuelans more dependent on the welfare state and less
capable of becoming self-starters. Raining money on the poor
and on a corrupt bureaucracy is allowing him to gain total
political control over the country. In this manner he has
been able to convert a democratic system into a sort of tropical
monarchy, where one man reigns supreme, there are no checks
and balances and accountability does not exist. Currently
there is a constitutional reform in the makings that would
give him unlimited shots at the presidency, organized and
supervised by an electoral system he controls, as well as
absolute control over the financial resources of the country.
2. A Latin Dictator with global pretensions.
For the first time since the Cuban missile crisis of 1962 a
Latin dictator pretends to become a geopolitical player.
Regional caudillos had been mostly contented with prevailing
in their modest domains: Peron, Velasco Alvarado, Stroessner,
Pinochet, Rojas Pinilla, Perez Jimenez, Trujillo, Somoza,
Evita. Only Castro had tried to become a world player by
targeting the U.S. with the missiles he had allowed the Russians
to smuggle into the island. Today Hugo Chavez, with plenty
of money and under the tutoring of Fidel Castro, is trying
to put together a global alliance against the United States,
traveling far from his country and from the region to fulfill
this objective. In trying to do so he exhibits a pathological
nationalism and an embarrassing political narcissism, representing
himself as a new Simon Bolivar.
3. Oil and Hate: a dangerous combination.
In addition to maintaining a greedy and corrupt bureaucracy
of some two million people, as well as a legion of rabble-rousers
and shock troops, Hugo Chavez is spending Venezuela’s
oil money in three main ways: (a), about $80-90 billion in
domestic handouts, giving the poor free or highly subsidized
food, free basic medical attention with the help of 30,000
Cuban medical or Para-medical staff and free or highly subsidized
education and transport of very low quality; (b), about $12
to $15 billion in the acquisition or in the ordering of weapons
from Russia, Belarus, China, Iran and Spain, mostly jet fighter,
rifles, surface to air missiles, tanks and submarines; (c),
some $70 billion in actual or promised donations, grants
and financing of projects and programs in Latin American
and Caribbean countries that he wants to influence politically.
These expenditures are designed to increase his political
control at home and to try to structure a wide anti-American
alliance both in the hemisphere and in other regions of the
world. Some examples of his largesse include giving free
oil to Cuba at a cost of more than $2 billion per year, buying
about $4 billion in government bonds from Argentina and close
to $10 billion in weapons from Russia, while thousands of
abandoned children beg for money in the streets of Venezuela.
4. Main oil strategies of Hugo Chavez.
Chavez has put in place six main oil strategies:
• He is using oil money to consolidate political control in the
country. He does this by distributing money to the poor, giving
them an illusion of prosperity that is only temporary. He is
not using the money to create jobs or to empower Venezuelans
to become self-starters.
• Replacing multinational, private oil companies with state-owned
oil companies from ideologically friendly countries such as
Iran, China, Belarus, or tolerant of his political style such
as Brazil and, less so, Spain.
• Use of oil money and oil subsidies to gain the temporary loyalty
of governments in countries that depend heavily on oil imports,
such as the Caribbean states, some central American and South
American countries and to form political alliances with governments
in countries that share his hate against the U.S., such as
those in Bolivia, Nicaragua, Argentina and Ecuador.
• Promoting oil production cuts within OPEC, in order to generate
price increases that will harm the economies of the consuming
countries. So far, only Iran and less so Nigeria share this
position within the organization.
•
Using oil money to establish global alliances against the United
States. He has promised Belarus a loan to pay its $460 million
debt to Russia, spent close to one billion dollars trying to
get a seat in the UN’s security council, has promised
to build refineries in Vietnam, Syria and, even, the Fiji Islands,
in an attempt at gaining influence worldwide. He keeps making
friendly overtures to China and Russia while aligning his regime
with Mugabe’s Zimbabwe, Assad’s Syria, Kim IL Sung’s
North Korea and Ahmadinejad’s Iran, while trying, somewhat
unsuccessfully, to stay close to Ghadaffi’s Libya.
•
Using Citgo as a political weapon within the U.S. This company
is being used, in a non- commercial manner, to distribute subsidized
fuel to “poor” U.S. citizens that have average
incomes ten times higher than the Venezuelan poor and, through
manipulation of internal price transfers, is being used to
minimize tax payments in the U.S. while maximizing money transfers
to the Venezuelan government, a tax evasion mechanism which
has so far been allowed by U.S. tax authorities. Today Citgo
is totally controlled by a Board made up of Chavez’s
followers and is no longer perceived as a “U.S. company”.
5. Domestic and Global Impact of these strategies.
So far these strategies have had only modest success, not at
all proportional to their high cost. The wasteful expenditures
in the country have robbed Petroleos de Venezuela, the state-owned
oil company, of funds needed for investment and maintenance.
As the cow is over-milked and under-fed the company has lost
about 800,000 barrels per day of production capacity. When
combined with its poor management and politicized environment
the company can no longer be considered a reliable supplier
to the U.S. The alignment of Chavez with Iran poses an increasing
threat to global petroleum supply, as these two countries
are the source of almost four million barrels of oil per
day. If there were a politically motivated interruption of
this supply the world would receive a major economic shock
that could lead to global war. Another main outcome of Chavez’s
strategies has been the increasing political friction existing
in the hemisphere between countries aligned with Chavez,
essentially Bolivia, Nicaragua and Ecuador and countries
which oppose his authoritarian style, particularly Mexico,
Peru, Colombia and most of Central America.
6. Implications for U.S. national security.
The supply of Venezuelan oil to the U.S. has been decreasing
in the last four years but is still significant, some 1.4
million barrels per day of crude oil and products. It is
also becoming very unreliable due to the loss of production
capacity by Venezuela and to Chavez’s political inclinations
to interrupt this supply. At this time, such an initiative
by Chavez is unlikely because he has no immediate direct
export alternatives for the bulk of this oil, which is of
a nature that can only be refined in U.S. based, special
refineries. In a few years’ time, however, Chinese
refineries might have been built to process this oil and
Chavez would be able (and probably willing) to cut oil supply
to the U.S. This means that any strategic initiative by the
U.S. regarding Venezuela has to be taken sooner than later,
certainly before Chavez has developed his alternatives. The
development of a contingency plan for the replacement of
U.S. oil imports from Venezuela is of vital importance to
the U.S. In fact, if and when such a plan is in place, the
U.S. should take the strategic initiative of cutting Venezuelan
oil imports, although this would be a delicate and somewhat
risky maneuver.
7. Weak strategic flanks of the U.S.
Today the U.S. has some weak flanks that might limit its capacity
to act strategically against Chavez: the Iraq war, its significant
oil dependency, the lurch to the left being taken by governments
in Latin America, the growing Iranian threat. Some of these
weak flanks are closely related to the role Chavez is playing
and might play in the future. There is no doubt, therefore,
that Chavez represents a major problem for U.S. national
security. At present the policy of the U.S. government is
to do nothing about Chavez, to let the Venezuelan internal
political process take its course, in the hope that Chavez
will fall of his own weight. Given the international blunders
committed by Chavez, his wasteful expenditures, the chaotic
manner in which he is managing the economy and the increasing
opposition his policies find domestically, this posture of
the U.S. has some merit. However, the risks of a major, Chavez
induced international crisis are very much present while
he is in power and actually increase as his political position
deteriorate. I believe that Chavez is determined to go down
in history either as the conqueror of the empire or as its
martyr. Both scenarios probably include a violent global
crisis that would be of much greater cost to the U.S. than
the cost of an earlier initiative.
7. The Venezuelan mid-term outlook.
Chavez has a 40% chance of becoming a socialist dictator, Fidel
Castro style and a 60% chance of self-destructing or of being
toppled by frustrated Venezuelans. This chance would increase
if the opposition to Chavez could agree on a common strategy
of intense, popular confrontation against his regime. So
far this is not happening, as some sectors of the opposition
insist in playing by traditional democratic rules (elections)
while it is obvious that Chavez has long abandoned such rules.
Chavez controls all government agencies, including the Electoral Council. Therefore,
elections are no longer a valid option in our country. Now the people must
act to restore democracy by other means. This is not the easy way but it seems
to be the only way.
Gustavo
Coronel is a 28 years oil industry veteran, a member of
the first board of directors (1975-1979) of Petroleos de
Venezuela (PDVSA), author of several books. At the present
Coronel is Petroleumworld associate editor and advisor
on the opinion and editorial content of the site. All Coronel's
articles can be read at its blog lasarmasdecoronel. Petroleumworld
not necessarily share these views.
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