Briefing BACKGROUND TO THE VENEZUELAN CRISIS FEBRURAY 2019
BACKGROUND Owing to vast oil reserves, Venezuela was once Latin America s richest country, and one of the region s longest running democracies. These reserves, however, have also burdened the country with a resource curse. Alongside a heavy reliance on the export of hydrocarbons, petrostates such as Venezuela tend to display a concentration of wealth and political power amongst an elite minority, emboldened by fragile and unaccountable institutions eroded by widespread corruption. Adhering to stereotype, the government of Nicolas Maduro Moros has overseen a period of administration damaging to both democracy and the economy. Inflation and currency debasement have plunged much of the country into poverty. Shortages of food and medical supplies are widespread, and public order is collapsing. Crime is rife and over 3 million Venezuelans have fled the country, representing around a tenth of the population. The resultant public outcry has been about more than the endemic corruption and mismanaged economy. Successively aggressive power consolidation by Maduro has effectively undermined democratic institutions. Graft, cronyism and the stifling of dissent have blocked any meaningful avenues through which to challenge the government. As a result, Maduro s re-election in May 2018 is widely regarded as fraudulent, both domestically and abroad. Calls for him to step down have been brushed aside, and he is being challenged by the leader of the national assembly, Juan Guaido. As will be shown, however, the current situation has been many years in the making and has been shaped as much by outside influence as domestic intransigence. CHAVISMO AND THE RISE OF MADURO In 1992, Hugo Chavez led a failed military coup in Venezuela. His actions, however, reflected a popular discontent with the political establishment of the time, and he went on to secure the Presidency in 1998. He implemented a series of popular, leftist policies that, ostensibly, were intended to tackle endemic corruption and poverty. Many of these policies, however, were imposed through Presidential decrees that effectively consolidated his own power base. By 2002, a global economic downturn had prompted anti-government protests. The Venezuelan military detained Chavez and imposed an interim leader. Forces loyal to Chavez soon restored order, and the coup dissolved. Chavez, however, returned to power scorned and convinced of the presence of enemies within the political and military strata that needed to be rooted out. As a result, between 2002-2013, he conducted a consistent campaign against Venezuelan institutions and civil society. Employing the very tactics he had railed against as part of his 1992 power grab, Chavez secured supporters and military allies through cronyism and handouts. Having served as Vice-President, Maduro came to power following Chavez s death in 2013. The candidate for the United Socialist Party, Maduro appealed to the masses by describing himself as the son of Chavez. Only winning by a slim margin of 1.6 percentage points, it was clear that lacked the popular support of his predecessor. To rule, Maduro relied upon an expansion of graft and handouts, the roots of which had been put in place in the 2000s. Hugo Chavez, however, had enjoyed high oil prices during his 14-year tenure; as such, deficits were controlled, and essential goods remained available. Unfortunately for Maduro, and the Venezuelan people, such Chavismo social policies became untenable in the challenging economic climate of lower oil prices. In a bid to secure the necessary funds, Maduro employed quantitative easing; effectively printing the money he required. This drove inflation up to over a million percent and made basic goods prohibitively expensive for the ordinary consumer. Reactionary price
controls and fixing of the exchange rate only exacerbated the problem, causing widespread shortages and pushing up the price of imports prohibitively. GDP has halved since Maduro took office. In the wake of such mismanagement, businesses have been forced to cease trading and scarcity of food and medical supplies has become the norm. It would appear that the only way in which total collapse has been averted is through the effective mortgaging of oil, gas and gold reserves with state-owned firms from Russia and China. Widespread poverty has ensued, with many members of the security forces turning to black market profiteering in order to supplement their meagre government income. Criminal gangs have seized control of urban areas and the homicide rate has exploded to one of the worst in the world. THE CRISIS OF 2019 Maduro was re-elected as result of controversial elections held in May 2018. These elections were boycotted by most opposition parties, with many of their representatives having been jailed, forced to flee the country or else barred from running. As such, his election was not recognised by the opposition led National Assembly. Unperturbed, Maduro declared that he would serve out his first term and be sworn in for a second term on 10 January 2019. It was following through on this intention that galvanised the opposition. The National Assembly asserted that because the 2018 election was undemocratic, Maduro s claim to the Presidency was baseless, and the position was vacant. In such a situation, the Venezuelan constitution states that the leader of the National Assembly assumes the role of interim President. On 4 January 2019, the Lima group of nations (comprising Canada and mostly Latin American countries) drafted a statement of intent to withdraw recognition for Maduro as President should he pursue a second term, urging him to relinquish control to the Venezuelan National Assembly. It is of note that Mexico, a member of the Lima group and under the influence of its new left of centre president Andres Manuel Lopez Obrador, was not a signatory. Emboldened by the Lima group statement, a hitherto ineffectual opposition re-organised. Guaido, a founder member of the Voluntad Popular (Popular Will) party, was installed as leader of the National Assembly. Viewed as one of Venezuela s most confrontational opposition parties, Voluntad Popular s leader, Leopoldo Lopez, has been placed under house arrest by the Maduro regime and is widely believed to be controlling events through intermediaries until such time as he can return to the public sphere. It was this manoeuvring that enabled Guaido to move from relative unknown to the centre of political intrigue in the country. His greatest contribution could be to ensure a democratic process of elections should Maduro be forced aside, ultimately paving the way for Lopez to campaign for the Presidency. On 23 January 2019 (the 61 st anniversary of Venzuela s revolution over its previous dictatorship) there were nation-wide protests against the Maduro led regime. These were the first such protests since 2017, when Maduro imposed a brutal crackdown. Seven protestors were reported to have been killed, though retaliations appeared to stop short of the brutality witnessed in previous years. Illustrating Voluntad Popular s talent for confrontation, Guaido declared himself interim president before the demonstrating masses. Such a move requires the backing of the military and international support to ensure legitimacy. In an apparently coordinated front, the US, Canada and many members of the Lima group; along with a number of European nations, countenanced Guaido s claims that the Venezuelan constitution allowed him to make such a move. The support of the Venezuelan military, however, was conspicuous in its
absence. Russia, China and Cuba voiced their support for the Maduro government, which was also backed by Iran, Syria and Turkey. THE INTERNATIONAL ANGLE In 2000, Chavez agreed to supply Cuba with cheap oil in return for a steady influx of Cuban migrants that included medical professionals, educators and engineers. By 2017 there were believed to be around 15 thousand such skilled Cubans living in Venezuela. Adding to this diaspora, reports suggest that Cuba has supplied the Maduro regime with a number of military and security professionals whose primary task has been to provide intelligence and curtail dissent amongst indigenous military ranks. President Trump stated that the US would use the full range of economic and diplomatic means at their disposal to ensure that democracy was restored in Venezuela. Severe sanctions have been imposed on the Venezuelan regime, including the freezing of the American accounts of PDVSA (Venezuela s state-run energy company). The Trump administration have asserted that the proceeds of any future sales will be diverted to an account that will only be accessible at the point that PDVSA is placed under the control of Guaido or an elected government. Maduro retaliated by ordering American diplomats to exit the country within 72 hours, raising the prospects of confrontation further. The US largely ignored the order. Calling on a collective memory of previous US interventions in Latin America, Maduro has appealed to established allies for support. The US, he declared don t have friends or loyalties. They only have interests, the nerve and the ambition to take Venezuela s oil, gas and gold. The US has a long history of interventionist policy both in Venezuela and wider Latin America. The Monroe Doctrine, originally intended to block European colonial expansion in the Western Hemisphere, has developed into an assumption of US supremacy in the region. This has often manifested in the disruption of the democratic process of Latin American countries through invasion, sanctions and support for coups. Whilst the US proclaimed the end of the doctrine in 2013, consecutive Republican and Democrat administrations have continued to exert influence over the region. In the case of Venezuela, much of this effort has been focused on the vast oil reserves the country nationalised in the 1970s. Such state control restricts exploitation by companies from other nations unless directed by the regime. As such, the US has long been the biggest consumer of Venezuelan crude, a situation that was complicated by the move to socialism brought about by Chavez s rise to power. Chavez promoted regional integration and nationalism, whilst seeking to eschew US influence. Until recently, however, the trade in natural resources continued unabated. In response to Maduro s appeals, Russia s deputy foreign minister warned against any military intervention and China has advised the US not to become involved in the crisis. On 7 February, USAID trucks loaded with humanitarian aid intended for distribution to the Venezuelan people arrived in Cucuta, Columbia. Located on the border with Venezuela, the aid was seen as providing a litmus test of sorts for the loyalty of the military to Maduro. Maduro decried the aid convoy as a trojan horse for military intervention, and the military followed orders to establish a crude blockade at the border with Colombia to prevent the aid from entering Venezuela. In response, the US has presented a draft resolution to the United Nations Security Council (UNSC) calling for international aid deliveries and democratic elections in Venezuela. The text of the resolution expresses full support for the National Assembly as the only democratically elected institution in Venezuela. Russia has proffered an alternative resolution, citing concerns over Venezuela s territorial integrity and political independence, criticising any
attempts to intervene in matters which are essentially within the domestic jurisdiction of Venezuela. Negotiations continue at the time of reporting. Russia has maintained a close alliance with Venezuela since 2006, when Chavez signed a $2.9billion arms deal that secured Venezuela a number of fighter aircraft. In return, Russia was granted access to belowmarket-rate oil. To date, Russia has supplied more than $10billion of military hardware to the country. The two nations have conducted joint training exercises, and Russian assets regularly make an appearance on Venezuelan soil. As recently as December 2018, two Tu-160 strategic bombers (capable of carrying nuclear armaments) were confirmed by the Russian defence ministry as having made a stop-over at Maiquetia airport, just outside Caracas. There are conflicting reports that suggest the presence of Russian private military contractors in the country, tasked with protecting Maduro. In 2017, a restructuring of debts to Moscow totalling more than $3billion enabled the Maduro led regime to divert funds to other creditors. Rosneft, a state-backed Russian oil company, is one of Venezuela s largest outside investors. The company has fronted approximately $2.5billion secured on future supplies, and maintains influence over a number of hydrocarbon projects being undertaken by PDVSA. Through establishing such ties, Russia has sought to entrench its positon in order to balance against US influence in the region. Holding a position on the UN Security Council enables Russia to veto resolutions that do not align with its interests, and the Kremlin has been vocal in condemning the support given to Guaido by the Trump administration and its allies. China is the third largest importer of Venezuelan oil (behind the US and India) and, ostensibly, Beijing supports the Maduro regime. China s own positon on the UNSC has thus far been used to object to UN intervention. However, such support appears to be contingent on Venezuela s ability to pay back debts owed. Having viewed Venezuela as an important regional ally, China has invested over $70billion into development projects in the country on a similar future return basis as Russia. Estimates place the current debt at around $13billion. However, there has been no move to restructure this debt and reports suggest that Beijing may be hedging its bets with Guaido s opposition in a bid to prevent Caracas defaulting. FROM HERE TO THE FUTURE US sabre-rattling regarding military intervention is unlikely to materialise. Such a deployment would take time to mobilise and does not appear to have the support of the US military, congress or electorate at this point. Further, any such action would illicit a backlash both internationally and from within Venezuela Maduro and the regime he presides over are not synonymous. Members of the regime could force Maduro to capitulate to domestic and international pressure. However, many of those in a position to do so have been complicit in the very corruption that has led Venezuela to its present point. They would lose privilege and the handouts that are standing between them and their families being subjected to the same deprivations as the majority of Venezuelans. Further, many fear they would face prison, or worse, should Maduro lose his grip over proceedings, despite assurances of a an amnesty from the Guiado-led opposition. There have been some reports of defections, but the majority of the military appear to remain loyal at the time of reporting. The military benefits from maintaining the status quo. Maduro s system of rule has allowed them to control the black market in the country, and many enjoy lucrative trading in natural
resources. This is exemplified by the decline of PDVSA, whose incumbent President is a major-general appointed by Maduro despite little or no experience in the oil industry. The historical record shows that governments struggle to maintain legitimacy without international recognition. Washington s recognition will provide Guaido with access to Venezuelan assets that have been frozen in the US, access that should then be transferred through a democratic process Guaido will be tasked with overseeing. As the crisis drags on however, questions remain about whether Maduro will be able to further entrench himself with military support, and how far the international community is willing to go to support the end of the Maduro regime.