Before we go Down The Rabbit Hole, a little news and a flash back…In 2017 I saw S.O.S. Venezuela everywhere…soaped on car windows, spray painted on buildings… everywhere. It was the symbol for the massive protests against the Maduro regime. Hundreds of thousands filled the streets carrying shields to protect themselves from rubber bullets and wearing gloves to throw back the tear gas canisters.
The regime felt threatened and even stopped the importation of medical supplies so the protesters couldn’t bandage their wounds. Unfortunately for the Venezuelan people the international community never got behind the movement. They were distracted by Kim Jong Un firing rockets in North Korea. When the Maduro regime saw that rubber bullets weren’t discouraging the protesters the security forces switched to real bullets. 140 protesters were killed, thousands wounded, and many more imprisoned. After a few months things quieted down, the S.O.S. signs went away, and the Venezuelan people resigned themselves to being under the oppressive thumb of Nicolas Maduro and the Chavistas for at least a few more years…. but there was still hope.
Fast forward to today, we have a piece from CSIS asking the question, “Will The Venezuela State Fail?” It’s a reprint from 2015. The article went into great detail on the Maduro regime’s narco- trafficking and Diosdado Cabello’s (The second most powerful man in Venezuela, some say number one) narco- trafficking activities in particular. They said a narco- trafficking state and a failed state overlap. I guess it depends on how you define “failed state”.
Well, 96% of Venezuelans live in poverty, 75% in extreme poverty. These same people lack reliable access to fresh water and electricity. There is no independent judiciary and citizens Human Rights are violated every day. The Maduro regime’s security forces commit 1,400 extrajudicial killings per year (every year since he took power in 2013). 7.1 million Venezuelans have fled 21st Century Bolivarian Socialism with no end to the migration crisis in sight. Venezuelans die every day from starvation/malnutrition and lack of medicine….I don’t know…does that qualify as a “failed state”?
Then we had a piece along the same lines from the Wilson Center asking the question, “Is All Hope Lost In Venezuela”? According to the UN-FFM (United Nations Fact Finding Mission), which has been in the news a lot recently, Venezuelans suffer from extrajudicial executions in security operations in low income urban neighborhoods, the abuse of indigenous peoples, and the persecution, intimidation, and arbitrary detention targeting media workers, civil society organizations, Human Rights defenders, and lawyers. (They could have just said “everybody”)
Opposition politicians say Venezuela’s migrant crisis (7.1 million and counting) will only decrease if Nicolas Maduro is displaced from power. They might be right but opposition parties have failed to build a coherent, democratic alternative to the highly unpopular regime. (Maduro’s approval rating is 5%)
According to survey group Delphos 40% of Venezuelans don’t identify with the government or the opposition and 75% of the population favors a shift in Venezuelan politics. They went on to say not all hope is lost, society is still resisting. The 2024 presidential election provides an important opportunity for the opposition to reshape it’s domestic strategy and build momentum for democratization. Doesn’t sound too hopeful to me.
Then we have the Jamaica Gleaner telling us that a spokesman for the Prime Minister says the Cabinet has yet to discuss re-engaging Venezuela to rekindle it’s Petro Caribe arrangement. My guess is Jamaica may not like the new “Petro Caribe” deal although they’ve benefited in the past when Maduro needed money. In 2019 Jamaica was able to obtain Venezuela’s 49% share in the Petrojam refinery and before that, when Maduro found out about a bond issue in Jamaica and he was desperate for cash (as he almost always is), Jamaica was able to wipe out it’s debt with Venezuela by paying cash for 50% of the debt and the other 50% was forgiven.
And we have a piece from Lexblog about how to go about serving process in Venezuela for international court cases. It’s done through “The Hague” (you know, like the ICC, International Criminal Court). He described Venezuela’s government as “barely functional” and said even though he hasn’t been able to successfully deliver a Hague Request in Venezuela in years the court requires you still make the attempt. The various requirements all cause delays in things going forward but my favorite is what I’ll call the “no habla” clause. Even if the dispute is in an English speaking country, and the Venezuela government has plenty of English speaking lawyers, all documents must be translated to Spanish. He laughingly states that if you do manage to get a Hague Request delivered in Venezuela “Only Hugo Chavez knows how long a response will take…and he’s been dead for a decade.”
Now lets head Down The Rabbit Hole….
Chapter 3/ continued….
…Now that’s the oil business in general. For Venezuela it gets more complicated …and expensive. The existing oil fields in Venezuela are a combination of heavy and less heavy oil but not the light sweet crude found in many areas of the world. Most of the recently discovered reserves are of the heavier variety. They require mixing in some condensate before it’s usable which is expensive and limits which refineries can receive the oil. If you’ve been receiving light sweet crude from the middle east you can’t just switch to Venezuela crude. That limits the customer base or requires upgrading refineries, a very costly proposition.
As you might expect, PDVSA exploited the lighter and most easily extracted oil first leading to thousands of existing wells and reaching a high of 95 drilling rigs in operation in 2011. Now most of the existing wells have fallen into disrepair due to lack of maintenance and the rig count is 20, and that’s on a good day. Some days there are zero, yes – 0- rigs in operation.
While production dropped from it’s all time high (3 and 1/2 million bpd) to approximately 2 and 1/2 million bpd under Chavez, it didn’t fall off a cliff until Maduro came along and it now produces approximately 650,000 bpd, up from 400,000 bpd, which was as low as 200,000 bpd. Anyone who has ever owned a home, car, or almost anything for that matter, knows that without maintenance things break down. The Chavistas either failed to grasp this or simply didn’t care. They were too busy siphoning off the profits to fund their ever-expanding social programs, called “Missions”, or simply lining their pockets. Worse yet, as we discussed when we talked about hospitals, they engaged on an unprecedented (and unnecessary) borrowing spree.
Any rational person would see the outlook for the future wasn’t exactly rosy. Well, there are a couple of other factors to consider that would have a negative impact as well. Take, for example, Petro Caribe.
The Chavez vision of 21st Century Bolivarian Socialism wasn’t just about Venezuela being an economic power but a political one as well. He began engaging countries throughout Latin America and the Caribbean in multilateral organizations like ALBA, CARICOM, MERCOSUR, UNASUR, and so on.In order to ensure their support of Chavismo policies they set up Petro Caribe whereby Venezuela would use it’s ability to provide oil to the 17 members on unbelievably favorable terms in return for their solidarity with the “Bolivarian Revolution”.
The members, of which Cuba is a de facto member, were able to buy oil, per their various quotas and terms tailored to the country’s specific needs and ability to pay, for anywhere from 5% to 50% upfront, then a one or two year grace period, then finance the balance for a term of between 17 – 25 years at 1% interest. PDVSA would also allocate funds for member country’s social programs (while also funding Chavismo’s “Missions”) and partnering in various refining and power generation projects among member countries. While the available quotas were somewhat higher, Petro Caribe supplied, on average, approximately 100,000 bpd to member countries and another 98,000 bpd to Cuba. It’s worth remembering that Cuba paid nothing upfront in return for supplying medical, military, and security personnel to “The Revolution”.
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