Anti-government protesters in improvised riot gear on the streets of Caracas

Opinion: How not to resolve the Venezuelan crisis

  • The international community appears nearly united against the Venezuelan regime
  • External pressure and a failing economy could lead to a mediated settlement
  • A wild card allowing President Maduro to rally support would be a U.S. oil embargo

Until recent weeks, it seemed as if the standoff between the increasingly authoritarian government of President Nicolas Maduro and the fractured opposition would go on forever, even though the opposition had taken to the streets and there has been bloodshed almost every day for the past three months. At least 120 people have been killed. Neither side appeared able to defeat the other in political terms, and the international community appeared paralyzed.

Now, however, several developments suggest that the protracted crisis may be coming to a head. On July 30, the government held a vote for a Constituent Assembly to rewrite the constitution to keep Mr. Maduro in power and legitimize the repression of dissent. Only government supporters were on the ballot and the opposition did not participate. In the week since the vote, the Constituent Assembly was seated, fired the attorney general (who had denounced President Maduro’s authoritarian measures), and declared itself superior to all other institutions of government. It specifically denounced the democratically elected National Assembly, controlled by the opposition, as lacking authority.

International pressure

Nearly 40 countries, mostly in the Western Hemisphere and Europe, have refused to recognize the validity of the ballot and the Constituent Assembly. Another 40 have objected to the vote and called for negotiations between the government and the opposition to resolve the conflict.

Trying to forge a consensus for action, 17 nations from the region met in Lima on August 8. Twelve of the 17 – Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru – signed a declaration declaring the Constituent Assembly illegal and its acts illegitimate. They formed a permanent committee to monitor the situation and discuss further actions. They also set another meeting for September, in New York, at the UN General Assembly.

The U.S. has imposed personal sanctions on President Maduro and is threatening to cut off oil shipments between the two countries

A smaller group, led by Uruguay, El Salvador, Ecuador and the Dominican Republic, has resisted denouncing the Constituent Assembly in the hope of creating a group of “Friends” to mediate between the government and the opposition. Mercosur has already expelled Venezuela due to its violations of the constitutional order.

The United States has imposed personal sanctions on President Maduro and another dozen of his senior colleagues. Even more important, it is threatening to cut off all oil shipments between the two countries. This threat – together with the prospect of mass violence and chaos, the growing exodus of Venezuelans from their country and the risk of increased drug trafficking – is galvanizing the regional effort to push President Maduro into some form of negotiation. The UN Human Rights Office added its voice to the clamor for negotiations by denouncing the government’s use of “excessive force” in dealing with peaceful demonstrations and for its “unwarranted” detention of more than 5,000 people.

Wrong weapon

A U.S. embargo against Venezuela’s oil trade would be an unmitigated disaster. In the short term, shutting down the country’s oil industry would wreak havoc on the economy by depriving it of the last remaining source of export revenue. The poorest Venezuelans, who are already just barely clinging to life, would be hit the hardest. Such a cutoff would also deal a severe financial blow (estimated at somewhere between $5 billion and $10 billion) to U.S. refineries that specialize in refining Venezuelan heavy crude.

More significantly, such drastic steps would undercut international and regional efforts to mediate the crisis. Almost every country in Latin America would reflexively oppose any unilateral intervention by the U.S. Such action would lend the Maduro government the kind of legitimacy as a bulwark against Yanqui imperialism that has worked so well for the Castro regime in Cuba.

A U.S. oil embargo would allow the regime to justify any authoritarian excesses to the people and to the world

By rallying their nation against a foreign embargo, the regime can justify to the people and to the world any authoritarian excesses. Venezuelans themselves realize this, as an open letter signed by 50 NGOs to the foreign ministers meeting in Lima said it was crucial to return to democracy without intervention by the U.S.

Economic reality in Venezuela is exerting growing pressure on Mr. Maduro. The Venezuelan national oil company, Petroleos de Venezuela S.A. (PDVSA), is so cash-strapped that it cannot maintain production capacity – output has dropped by at least 25 percent over the past two years. Further complicating matters, PDVSA has fallen into technical default on its bonds and has offered the Russian state oil company, Rosneft – which already owns 49 percent of PDVSA’s North American subsidiary Citgo – an even larger stake in the U.S.-based company.

It is no accident that Venezuela’s two principal creditors, Russia and China, have either supported the Constituent Assembly (Russia) or remained silent on the matter (China). This geopolitical aspect of the crisis will only become more sensitive over time.

President Nicolas Maduro greets member of Venezuela’s Constituent Assembly
Aug. 3, 2017: Venezuelan President Nicolas Maduro (R) greets one of the 545 members of the new Constituent Assembly, which has been denounced as illegal by nearly 40 governments (source: dpa)

Dramatic collapse

President Maduro has won the political battle over the Constituent Assembly. The opposition has shown itself incapable of stopping the slide into dictatorship with its current strategy. But even if the Maduro government manages to dominate local politics in the short run, it has shown no capacity to resolve the country’s economic problems. With polls showing the regime commands the support of about 20 to 25 percent of the Venezuelan population, it will be difficult for Mr. Maduro to implement a strategy of marginalizing or eliminating dissent.

Venezuela’s slide since the death of Hugo Chavez in 2013 is the most dramatic economic collapse in the post-Cold War era, except for war-torn countries such as Libya, South Sudan and Syria. Gross domestic product has contracted by 35 percent in nominal terms, and by 40 percent on a per capita basis. Living standards have fallen by 75 percent. Four out of five Venezuelan households have two meals or less per day. This is not sustainable.

How long can the crisis last? Venezuela is now the most indebted country in the world. There is a question about whether it can repay the $3.5 billion of debt maturing this year or its obligations of $8.5 billion in 2018. PDVSA’s shrinking capacity suggests it cannot provide enough revenue to service Venezuela’s debt, much less meet the basic needs of the population, even if the U.S. does not try to choke off oil exports.

Three questions

The fast-deteriorating situation in Venezuela will hinge on three questions. The first concerns the effectiveness of outside pressure on Mr. Maduro to accept some form of mediation. This task has been made more complicated by the president’s appointment of nearly 2,000 military officers to senior government posts, including lucrative positions managing the distribution of subsidized food.

Currency-exchange privileges have made many of Venezuela's generals millionaires

The generals' privileges included the right to exchange local currency into dollars at a special rate, making many of them millionaires in the process. Many government officials, including Diosdado Cabello, the co-chair of the Constituent Assembly, are involved in corruption and drug trafficking. The exit costs for this leadership group are much higher than they were even six or 12 months ago.

The second question is how the internal power struggle plays out within the ruling United Socialist Party of Venezuela (PSUV). Will President Maduro cling to power or will he be pushed aside by the radical wing, led by Mr. Cabello? In the latter case, the regime could take an even harder line and try to suppress the opposition completely, abolishing all government institutions except for the executive.

Finally, it is by no means clear that Venezuela’s opposition can come together to offer the country a real political alternative. Meanwhile, the bloodshed increases daily and the lower ranks of the officer corps appear to be splintering, breaking away from the generals and preparing to create an armed resistance.

We should have the answers to all three questions within the next two months.

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