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Venezuela´s opposition targets state assets abroad

 


 

By Argus

CARACAS
Petroleumworld 01 15 2019

Venezuela´s emboldened political opposition is seeking to leverage its newfound international recognition to pursue state assets abroad and possibly intervene in debt disputes.

The elected opposition-controlled National Assembly headed by Juan Guaidó is moving swiftly to consolidate its constitutional authority after winning widespread recognition as Venezuela´s only legitimate governing body following the controversial 10 January re-inauguration of autocratic president Nicolas Maduro. Guaidó is now seen by some countries as an "interim president" who will usher in fresh elections.

The young leader was briefly detained by Venezuela´s military intelligence (Sebin) on 13 January in what the government deemed a rogue operation. The incident further galvanized Maduro´s opponents in the run-up to a planned 23 January national protest aimed at compelling him to resign.

In a series of initiatives today, the assembly approved a resolution that would seek to "guarantee the protection of the assets of the Venezuelan state" by petitioning foreign governments and financial institutions abroad. The latter could theoretically pave the way to redirect oil revenue away from the Maduro government, a path seen as ambitious unless the US government formally recognizes the assembly´s executive authority.

Washington has described Maduro's regime as illegitimate and the State Department said it supported Guaidó after he declared he would assume the interim presidency under the constitution's authority until new elections are held.

But White House national security adviser John Bolton is the only US official to state that the US "does not recognize Venezuelan dictator Nicolas Maduro's illegitimate claim to power." US secretary of state Mike Pompeo said in Abu Dhabi on 12 January that the "Maduro regime is illegitimate and the US will work diligently to restore a real democracy" in Venezuela, but demurred on whether that implied a formal recognition of Guaido's interim presidency.

The opposition is forging ahead in the hope of nudging Washington toward formal recognition. Elements of the opposition are now starting to approach creditors in anticipation of possible judicial interventions or even a debt restructuring proposal, but their overtures are considered premature.

"President Guaido needs the official international recognition of his interim presidency to assume control of all discussions with Venezuela's international creditors and make it clear to foreign governments and oil companies that legally they must deal only with President Guaido and the National Assembly until democracy is restored," an assembly aide said.

The aide tells Argus that the assets resolution seeks to block the Maduro government from refinancing debts and securing new loans, both of which are effectively thwarted by US financial sanctions anyway. The measure also aims to prevent the government from awarding upstream contracts and transferring or selling overseas assets such as Citgo. Such moves are already supposed to require legislative approval under the 1999 constitution that Maduro has ignored.

The assets protection proposal would enlist the help of foreign governments in locating and recovering nearly $400bn in funds allegedly stolen by government officials since 1999.

Among the many obstacles standing in the way of the assembly´s effective authority is its lack of control over the Official Gazette, where all government resolutions or decrees are published. It is unclear whether the assembly's initiatives will have any practical impact because the legislature is "isolated and fenced in by the Maduro government," a lawmaker close to Guaidó acknowledged privately. "Our only option is to promote measures based on our constitutional legitimacy and continue working to achieve the military's support for a democratic change of government as soon as possible."

Senior assembly leaders are hopeful that a blanket amnesty decree will encourage elements of the armed forces and national security services to turn against Maduro. But the senior ranks are seen as unlikely to flip. Military officers hold almost half of Maduro´s cabinet posts, and the military has a firm grip on the oil industry, gold, diamonds, coal and strategic industries such as aluminum, steel, agriculture and construction, according to civilian defense analyst Rocio San Miguel.

Maduro has dismissed the new opposition leadership as "little children". In a rambling speech yesterday before the government-controlled National Constituent Assembly, he announced a slew of measures that are likely to exacerbate the economy´s freefall and hyperinflation. He increased the minimum wage to the equivalent of $5.50 per month at today's black market exchange rate; revalued the so-called petro currency instrument; increased mandatory capital reserve deposits at the central bank; and vowed to maintain across-the-board price controls. He also pledged to raise taxes significantly on wealthy individuals and large corporations.

Maduro also promised to reach 5mn b/d of crude production by 2025, reiterating a longstanding official target. Output is currently running around 1.1mn b/d, with 900,000 b/d lost over the past year.

 


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