Written by Fakhrul Islam
This is the story of the rise of a dictatorship and fall of a country. A country, which was one of the richest countries on earth 50 years ago, one of Latin America’s oldest and strongest democracies boasting a strong social safety net progressing on its promise to deliver free health care and higher education to all its citizens being a model of social mobility and a magnet for immigrants from across Latin America and Europe... ...
It had a free press and an open political system; where opposing parties competed fiercely in elections and regularly alternated power peacefully and sidestepped the wave of military juntas that mired some of its neighboring countries in dictatorship also at the same time it shared a long political alliance and deep trade and investment ties with the United States and served as the Latin American headquarters for a slew of multinational corporations, supported by the best infrastructure in the entire South American continent. While Venezuela was still unmistakably a developing country, with its share of corruption, injustice, and dysfunction, but it was well ahead of other poor countries. But alas! This very country has been transformed to a place where law and order is virtually absent, if not lopsided for the pro-regime portion of the population resulting in an epidemic of violence which has made it one of the most murderous countries in the world, where doctors and nurses deny the free medicine to the patients only to sell them in the black market while the health system has been devastated by decades of under investment, corruption, and neglect; long-vanquished diseases, such as malaria and measles, have returned. Now it is a country where the schools are half-deserted due to waves of millions of its population escaping the country which lacks even the most basic needs in herdes to seek refuge in the neighboring countries, where a dictator who is disconnected from the people, elected by a sham election, where the small portion of the media not under direct state control still follows the official line for fear of reprisals by the regime’s loyal dogs, who also have turned the country and its state institution into a major cocaine-trafficking hub, and key power brokers in its political elite have been indicted in the United States on drug charges. These regime aligned criminals now have a free reign over everyone in the society and are now ruling supreme while throwing the economy to an hyperinflation which doubles the price of everything goes up upto double the previous every 25 days, while the country and its ruling elites are being subjected to multiple hostile sanctions from the United States which also includes some of these thugs.
A short, straight up explanation to this situation would be ‘Chavismo’. During the tenure of the late Hugo Chávez and his successor, Nicolás Maduro, the country has been treated with a toxic mix of wantonly destructive policies, escalating authoritarianism, and kleptocracy, all under a level of Cuban influence that often resembles an occupation. Singularly any of the above features would have created huge problems on its own. But banded together they hatched a catastrophe. Today, Venezuela is a poor country and a failed and criminalized state run by an autocrat beholden to a foreign power. The remaining options for reversing this situation are slim; the risk now is that hopelessness will push Venezuelans to consider supporting dangerous measures, such as a U.S.-led military invasion, that could make a bad situation worse. As an U.S.-led military invasion would likely have no problem overthrowing Maduro in short order but what comes next could be far worse, as the Iraqis and the Libyans know only too well: when outside powers overthrow autocrats sitting atop failing states, open-ended chaos is much more likely to follow than stability—let alone democracy.
Venezuela may not have been collapsing in 1998 at the advent of Chavez’s rise to power, being elected President in a landslide victory, but it had been stagnating and, in some respects, backsliding, as oil prices slumped, leading to a new round of austerity. As with all Communist scums, Chávez was brilliant at mining the resulting discontent and molding it to fuel his agenda and flock sympathizers to his cause. His eloquent denunciations of inequality, exclusion, poverty, corruption, and the entrenched political elite of the two parties who alternated power, struck a chord with struggling voters, who felt nostalgic for an earlier era, the 1970s, when the country was more prosperous. The inept and complacent traditional political and business elite who opposed Chávez never came close to matching his popular touch.
With all of it in line, Venezuelans gambled on Chávez in the elections. What they got was not just an outsider bent on upending the status quo but also a Latin American leftist icon who soon had followers all around the world. Chávez became both a spoiler and the star attraction at global summits, as well as a leader of the burgeoning global wave of anti-American sentiment sparked by U.S. President George W. Bush’s invasion of Iraq. At home, shaped by his career in the military, Chávez had a penchant for centralizing power and a profound intolerance of dissent. He set out to silence not just opposition politicians but also political allies who dared question his policies. His collaborators quickly saw which way the wind was blowing; as a result, all sorts of policy debates disappeared from the ranks, and the government pursued a radical agenda with little forethought and no real scrutiny like a one-eyed Cyclops.
A prelude to the impending doom due to this one-eyed approach was a 2001 presidential decree on land reform, which Chávez handed down with no consultation or debate, presented a taste of things to come. It broke up large commercial farms and turned them over to peasant cooperatives that lacked the technical know-how, management skills, or access to capital to produce at scale. Food production collapsed. In sector after sector, the Chávez government enacted similarly self-defeating policies. It expropriated foreign-owned oil ventures without compensation and gave them to political appointees who lacked the technical expertise to run them. The government then went on to nationalize utilities and the main telecommunications operator, leaving Venezuela with chronic water and electricity shortages and some of the slowest Internet connection speeds in the world. It seized steel companies, causing production to fall from 480,000 metric tons per month before nationalization, in 2008, to effectively nothing today. Similar results followed the seizure of aluminum companies, mining firms, hotels, and airlines.
In one expropriated company after another, state administrators stripped assets and loaded payrolls with Chávez cronies. When they inevitably ran into financial problems, they appealed to the government, which was able to bail them out. By 2004, oil prices had spiked again, filling government coffers with petrodollars, which Chávez spent without constraints, controls, or accountability. On top of that were the easy loans from China, which was happy to extend credit to Venezuela in exchange for a guaranteed supply of crude oil. By importing whatever the hollowed-out Venezuelan economy failed to produce and borrowing to finance a consumption boom, Chávez was able to temporarily shield the public from the impact of his disastrous policies and to retain substantial popularity.
But not everyone was convinced. Oil industry workers were among the first to sound the alarm about Chávez’s authoritarian tendencies. They went on strike in 2002 and 2003, demanding a new presidential election. As a response, Chávez fired almost half of the work force in the state-run oil company and imposed an arcane currency-exchange-control regime. The system morphed into a cesspool of corruption, as regime cronies realized that arbitraging between the state-authorized exchange rate and the black market could yield fortunes overnight. This arbitrage racket created an extraordinarily wealthy elite of government-connected kleptocrats. As this budding kleptocracy perfected the art of siphoning off oil proceeds into its own pockets, Venezuelan store shelves grew bare.
It was all painfully predictable—and were widely predicted by the experts but the louder local and international experts sounded the alarm, the more the government clung to its agenda cause to Chávez, dire warnings from technocrats were a sign that his crooked ‘revolution’(!) was on the right track.
The roots of Venezuelan liberal democracy which produced the boom of the 1970s turned out to be shallow. Two decades of bad economics decimated the popularity of the traditional political parties, and a charismatic demagogue, riding the wave of an oil boom, stepped into the breach. Under these unusual conditions, he was able to sweep away the whole structure of democratic checks and balances in just a few years, at the same time decimating the economic infrastructure to accommodate his cronies.
Chávez had long looked to Cuba as a blueprint for revolution, and he turned to Cuban President Fidel Castro for advice at critical junctures. In return, Venezuela sent oil as energy aid to Cuba, sold in a deeply discounted price, was worth nearly $1 billion a year to Havana. The relationship between Cuba and Venezuela became more than an alliance. It has been, as Chávez himself once put it, “a merger of two revolutions.” Unusually, the senior partner in the alliance is poorer and smaller than the junior partner—but so much more competent that it dominates the relationship. Cuba is careful to keep its footprint light: it conducts most of its consultations in Havana rather than Caracas.
Chávez’s death in 2013 didn’t bolt his policies or the Cuban influence which was already prevalent in the state institutions of Caracas, rather it solidified the grip of Chávez’s cronies and the Cubans. It literally replaced one evil with a much bigger one, Nicholas Maduro.
As a teenager, Maduro joined a fringe pro-Cuban Marxist party in Caracas. In his 20s, instead of going to university, he sought training in Havana’s school for international cadres to become a professional revolutionary. As Chávez’s foreign minister from 2006 to 2013, he had seldom called attention to himself: only his unfailing loyalty to Chávez, and to Cuba, propelled his ascent to the top. Under his leadership, Cuba’s influence in Venezuela has become prevalent. He has stacked key government posts with activists trained in Cuban organizations, and Cubans have come to occupy sensitive roles within the Venezuelan regime. For example, the daily intelligence briefs Maduro consumes are produced not by Venezuelans but by Cuban intelligence officers.
Under Cuban guidance, Maduro has deeply curtailed economic freedoms and erased all remaining traces of liberalism from the country’s politics and institutions. He has continued and expanded Chávez’s practice of jailing, exiling, or banning from political life opposition leaders who became too popular or hard to co-opt. Periodic elections became farcical, and the government stripped the opposition-controlled of all powers. Maduro deepened Venezuela’s alliances with a number of anti-American and anti-Western regimes, turning to Russia for weapons, cybersecurity, and expertise in oil production; to China for financing and infrastructure; to Belarus for homebuilding; and to Iran for car production.
As per his Cuban master’s decree Maduro broke the last remaining links in Venezuela’s traditional alliances with Washington and other Latin American democracies, he lost access to sound economic advice. He dismissed the consensus of economists from across the political spectrum: although they warned about inflation, Maduro chose to rely on the advice of Cuba and fringe Marxist policy advisers who assured him that there would be no consequences to making up budget shortfalls with freshly minted money. Inevitably, a devastating bout of hyperinflation ensued.
A toxic combination of Cuban influence, runaway corruption, the dismantling of democratic checks and balances, and sheer incompetence has kept Venezuela locked into catastrophic economic policies. As monthly inflation rates top three digits, the government improvises policy responses that are bound to make the situation even worse.
When the decadelong oil price boom ended in 2014, Venezuela lost not just the oil revenue on which Chávez’s popularity and international influence had depended but also access to foreign credit markets. This left the country with a massive debt overhang; the loans taken out during the oil boom still had to be serviced, although from a much-reduced income stream. Venezuela ended up with politics that are typical of autocracies that discover oil: a predatory, extractive oligarchy that ignores regular people as long they stay quiet and that violently suppresses them when they protest. This tactic follows the Castros’ playbook. When people are going hungry and survival becomes a full-time job, who has the time or energy to rebel against an oppressive regime?
The resulting crisis is morphing into the worst humanitarian disaster in memory in the Western Hemisphere. Exact figures for Venezuela’s GDP collapse are notoriously difficult to come by, but economists estimate that it is comparable to the 40 percent contraction of Syria’s GDP since 2012, following the outbreak of its devastating civil war. Hyperinflation has reached one million percent per year, pushing 61 percent of Venezuelans to live in extreme poverty. About ten percent of the population—2.6 million Venezuelans—have fled to neighboring countries.
The Venezuelan state has mostly given up on providing public services such as health care, education, and even policing; heavy-handed, repressive violence is the final thing left that Venezuelans can rely on the public sector to consistently deliver, thanks to the Cuban controlled security apparatus and the local pro-regime gangs, the “collectivos”. In the face of mass protests in 2014 and 2017, the government responded with thousands of arrests, brutal beatings and torture, and the killing of over 130 protesters.
Meanwhile, criminal business is increasingly directly through the state. Drug trafficking has emerged alongside oil production and currency arbitrage as a key source of profits to those close to the ruling elite, with high-ranking officials and members of the president’s family facing narcotics charges in the United States. A small connected elite has also stolen national assets to an unprecedented degree. In August, a series of regime-connected businessmen were indicted in U.S. federal courts for attempting to launder over $1.2 billion in illegally obtained funds—just one in a dizzying array of illegal scams that are part of the process of looting Venezuela. The entire southeastern quadrant of the country has become an exploitative illegal mining camp, where desperate people displaced from cities by hunger try their luck in unsafe mines run by criminal gangs under military protection. The gold, thus obtained by these inhumane working conditions are moved away in private planes to seek cash for them. Turkey received some, explaining the Turkish President’s support for Maduro, and also Russia, picked up tons of Venezuelan gold allegedly. All over the country, prison gangs, working in partnership with government security forces, run lucrative extortion rackets that make them the de facto civil -authority. The offices of the Treasury, the central bank, and the national oil company have become laboratories where complicated financial crimes are hatched. As Venezuela’s economy has collapsed, the lines separating the state from criminal enterprises have all but disappeared.
The Current Scenarios
Venezuela’s opposition has raised the stakes against Maduro after head of National Assembly, Juan Guaidó swore himself in as interim head of state with the support of the United States and some major Latin American nations which was then joined at first by individual European countries and then eventually by the EU. Without the continued support of Russia, China, and Cuba, it is unlikely President Nicolas Maduro’s government will last for long.
In response to the escalation, stakeholders in the Maduro government, Russia, China, Turkey and Cuba along with Syria, Iran and North Korea has expressed their support for the Maduro government. Inside the country, even though most of the people are supporting Guaidó, the military and the supreme court firmly supports the Maduro regime. Venezuela’s military high command still has not recognized Guaidó as interim president or as commander in chief of the armed forces, despite this being the best option for avoiding internal war or international intervention. Most importantly, without the support of the military Guaidó cannot assume power.
The military is crucial to ensure a rather peaceful transfer of power from Maduro to Guaidó but there are several factors affecting that outcome. First, within the military high command, there is a deeply impregnated filial commitment to the late president Hugo Chávez and his ideology. This is partially because promotions are often based on such loyalties, and Maduro is known to occasionally purge disloyal members. These purges are ensured by the Cubans overseeing the military to ensure that there are no dissents in the ranks. Second, the armed forces receive privileges at the highest levels, such as promotions, bonuses and kickbacks. Third, many within the military are involved in illicit activities such as drug trafficking. Those in the higher ranks often direct those operations, and some have also committed crimes against humanity. They are afraid of being detained and convicted if Maduro falls. The military high command’s refusal to support Guaidó makes the armed forces appear, from the outside, to be a monolithic institution that is loyal to Maduro.
However, there is evidence of growing discontent among lower and middle military officials, many of whom are aware of Maduro’s illegitimacy. A large number of professionals and troops have left the barracks over the last year, either deserting or withdrawing from service. Also, over the last year, an increasing number of active members of the military have demonstrated in protests against Maduro. Hundreds of them have been detained as a result.
The external support by Russia, China, Turkey and the usual suspect, Cuba, with each having their own stakes in this high-stake game are vital for the survival of the Maduro regime. Even though the Cuban involvement in the crisis had been outlined throughout the others would require some elaboration.
There’s a political perspective to it for Russia as Russia is run by and is synonymous to President Vladimir Putin, who also uses heavy-handed tactics to crackdown on dissent, has built his reputation at home on his ability to project Russia’s power into parts of the world where the Soviet Union once held sway. Putin would look weak in the eyes of the Russian people if he failed to defend one of his friends against the United States, and it’ll be tough to explain to the Russians, who are historically fond of ‘strongmen’, defeat, which can even weaken his position in the Russia thus giving him a personal stake in all of this.
To that end the Russians have dispatched 400 mercenaries from the notorious Wagner Group to protect Maduro from harm. The mercenaries associated with Wagner group, employs more than a thousand former Russian soldiers. The shadowy group has reportedly fought for Russian interests in Syria and Ukraine, although the Kremlin describes them as unaffiliated volunteers, they are described by many as an extension of the muscle of the Russian external intelligence service, the SVR.
Then there’s an economic perspective to this too as Russia has reportedly poured more than $17 billion into Venezuela in loans and investments since 1999, according to reporting from The Associated Press. Venezuela has paid back much of that debt, but it still owes Russia approximately $3.15 billion. Russia and Venezuela agreed to a 10-year repayment plan for that debt in November 2017, thus it is imperative for Russia to have Maduro to ensure the repayment of debt.
The U.S. has tried to cut off Maduro’s ability to repay that money by sanctioning the state-owned oil company, PDVSA. The sanctions are expected to cost Maduro $11 billion in lost export proceeds next year, and will block him from accessing PDVSA assets worth $7 billion, White House national security adviser John Bolton said last month.
Venezuela’s state-run energy company, PDVSA, operates the largest underground oil reserves in the world, and Russia is heavily invested in maintaining access to those reserves. Rosneft, Russia’s No. 1 oil producer, has loaned PDVSA billions and pre-purchased a vast amount of oil to help keep it afloat. Rosneft is also one of several foreign oil companies operating in Venezuela. PDVSA currently owes Rosneft $2.3 billion, the Russian oil company said on Tuesday. Rosneft says PDVSA made its last debt payment on time, reducing the amount owing by about $800 million.
American sanctions aim to prevent PDVSA from exporting roughly 500,000 barrels of crude oil per day to the U.S., which is one of its primary customers. American refineries can buy the oil but the money gets locked away in an escrow account until Maduro is no longer in control of PDVSA.
Then there’s the military perspective. The Russian military entanglements with Venezuela must also be taken into account, which it views as a strategic ally in the Western Hemisphere. Venezuela has bought more than $4 billion in weapons from Russia since 2005, including approximately 50 helicopters, 24 fighter jets and 100,000 Kalashnikov rifles. Kalashnikov Concern, the Russian-based gun manufacturer behind the original AK-47, is slated to open a new rifle factory in Venezuela at the end of the year, according to Russia’s Interfax news agency.
China on the other hand has only economic and political imperatives in this. The economic one is that China has been Venezuela’s other major financial crutch. It views the socialist regime in Venezuela as a geopolitical ally and an important trading partner. Over the past decade, Beijing has lent Caracas some $70 billion, mostly for development projects, in exchange for future oil shipments. Analysts estimate the Maduro regime owes China about $13 billion. China is behind only the United States and India as an importer of Venezuelan crude. However, President Xi Jinping has thus far refused to restructure Venezuela’s outstanding loans, and some experts suggest China could shift its support to Guaido if he were to guarantee full repayment of Chinese loans.
The political dimension lies in the fact that while Beijing has continued its support for Maduro in recent years, its loyalty largely depends on Caracas’s capacity to pay its debts. In recent years, China has grown increasingly wary of Venezuela defaulting on its payments, and it has opened communication channels with the opposition. Even so, China—which, like Russia, has a permanent seat on the Security Council—objects to UN intervention in Venezuela’s political affairs.
This crisis makes two things evident, first, that we have stepped into a New Cold War or Cold War 2.0 for which the Russians seems to have prepared since the very fall of the Soviet Union and America seems to have ignored that specific threat vector as obsolete and has come across this nightmare scenario where it has affecting millions of people. All because America went on to hound other threats assuming the Communist threat to be dead. Russia, in its effort, is not making alliances or pacts but rather has made contact and increased involvement with countries which are belligerent to the Westerners and slowly but surely is garnering support from these dictators which is better described by the old saying, “The enemy of my friend is a friend of mine.”
Second and the most dangerous one: Communists and Communism is not dead yet and still has pretty sharp fangs.