Monday, June 1, 2020

OPINION AND ANALYSIS | 02-09-2017 08:15

An oiled US exit for Maduro?

If there is to be an epilogue to this long stretch of agony, when will it take place?

Is there a way out for Venezuela? If the regime led by Nicolás Maduro steps down or is ousted, will anybody be willing to take the reins of the failed Bolivarian utopia that has plundered the oil-rich country for nearly 20 years? Production is falling and a brief look at output shows how much. In 1998 Venezuela was producing 3.2 MMB/D (million barrels per day); production today is at 1.8 MMB/D. And by the way, US$11 billion from crude sales has gone missing. 

If there is to be an epilogue to this long stretch of agony, when will it take place? And yet another if: which country would dare to let the dictador and his henchmen take refuge if they were to flee from Venezuela? If your guess is that Cuba would, think again: in an interconnected globe no state will risk granting asylum to Venezuelan officials sanctioned by the Drug Enforcement Agency and the US Treasury and described as corrupt or criminals by the Organisation of American States and the United Nations. Not even North Korea’s Mr Kim and his ring of nukes would dare. So, is there a way out? And what about across the domestic aisle? The Mesa de Unidad (Democratic Unity Roundtable), the opposition’s coalition, is sentenced to death. Splintered again into different factions, no-one is leading the anti-Maduro team. After six months of fierce opposition-led rallies and protests, the brave Venezuelans are fading into silence, tamed by the brutal responses of the regime and by the scarcity of groceries and medicines. Fear has gripped Caracas and the main cities. It is said that about two million Venezuelans have fled the country in the last 24 months. 

To be added to this pile of dismay is a fresh decree voted for by the National Constituent Assembly (ANC), which has charged opposition leaders with high treason for their alleged support of US economic sanctions against the country. The illegitimate ANC was hurriedly elected and sworn in last month, so as to take over the opposition-led Legislature (National Assembly, AN), eject Prosecutor General Luisa Ortega from her post and to rule over the presidency, placing the drawing of a new Constitution in the realm of chimeras. Today, the ANC is the supreme power that rules through the orders of the Executive orders, with Nicolás Maduro its puppet. If any, where is the way out? 

“A riddle wrapped in a mystery inside an enigma.” Winston Churchill’s words on Russia fit so well to describe the current situation in Venezuela. Perhaps the key to understanding it is not in “Russian national interest” (Churchill dixit in 1939) but in oil, which covers 90 percent of Venezuela’s exports, thus being its main national interest and lifeblood. Yes, crude used as a geopolitical token could show a way out. 

Let me explain. The Supreme (meaning the ANC) can now act with the prerogatives of the almost deceased National Assembly: it can approve financial transactions, loans and joint ventures. So regardless if the international markets recognise its decisions, today the 500-bolivariano-strong ANC could authorise what the NA denied to Maduro in March: the approval of a second loan from Rosneft, Russia’s state-owned oil company. In 2016 PDVSA, Venezuela’s flagship oil firm, borrowed (at the brink of default) almost US$1.5 billion from the Russian company and sought to add a further US$1 million in April this year (a move rejected by the AN). Russia did save PDVSA from default but as collateral for those loans, Rosneft now owns 49.9 percent of shares in PDVSA’s subsidiary in the US, CITGO, plus a 40 percent stake in the Petromanagas (gas) project. 

Enter the US. Last week, an executive order from the Donald Trump administration was issued that barred trading new debt issued by PDVSA and the Venezuelan state. But it was really aimed at officials in the Venezuelan government, who are suspected to be the main beneficiaries of Venezuelan bonds. CITGO, with three large refineries in the US, was exempted, however. Why?  CITGO refines 800,000 barrels a day of Venezuelan crude and serves 6,000 gas stations across the United States. And while the order specifically allows US citizens to buy securities from CITGO or deal in new equity issued by the company, Washington has also stressed that it will challenge any attempt from Rosneft (meaning Russia) to seize the CITGO assets located in the US. “America First,” of course. 

Now Rosneft is trying to swap its collateral in CITGO with oil concessions in PDVSA fields and perhaps, according to Reuters, provide another US$5 billion in cash or credit. These new financial moves will surely be swiftly approved by the Madurista ANC. But what will be Washington’s reaction? 

A source on Capitol Hill tells this journalist that another executive order is being drafted and that his time it does not come from one of the doves (to be read Tom Shannon) but from the hard-line (Senator Marco Rubio, Secretary of State Rex Tillerson and President Trump). With this, the US would prohibit selling additives, which are key to refining and a fundamental for transporting the Orinoco Basin’s heavy crude. If drawn up, it would almost certainly put Venezuelan oil exports on hold, freezing the flow of cash and compromising bond payments due to be met by PDVSA in November. Could these orders that push PDVSA to a default open a way out for Venezuela? The response from the source in Washington was blunt: “Army officers, government officials, businessmen and even opposition politicians rely on PDVSA’s bonds for income. Period.” He then pointed out that neither Nicolás Maduro nor his wife Cilia Flores have been sanctioned (13 members of his administration have) by the US. I repeated: “The way out?” He said that Maduro could lead it, and Venezuela would be the safest haven for him.

* Former editor of the Buenos Aires Herald. (2010-2013)

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Carolina Barros

Carolina Barros

Former editor of the Buenos Aires Herald. (2010-2013)

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