Tag Archives: Venezuela

THE HIDDEN ECONOMIC WAR ON VENEZUELA

The political right has monopolised the conversation about Venezuela in print and on TV. Its case is well rehearsed and follows the party line of the United States that President Maduro is a cruel illegitimate dictator and his corrupt government has mismanaged the economy to sink the country into a humanitarian disaster. The left has countered this by defending the gains of the Chavista revolution and attributes the current situation to the steep fall of oil prices and the US sanctions.

This confrontation was well captured by Andrew Neil’s This Week political review when Ken Livingstone valiantly defended the gains of the Chavez revolution whilst Andrew Neil put the opposite case with the assistance of Alan Johnson and Esther McVey.  Regrettably Ken Livingstone was rinsed by Neil because he could not answer how the sanctions had affected Venezuela or which sanctions were imposed when, whereas Neil with his selective briefing notes pointed out the oil sanctions were recent and reinforced the US line on mismanagement by the Maduro government. Kenan Malik in The Observer  castigated Livingstone for ‘bullshitting’. This was instructive to those on the left – if we are going to defend Venezuela, then we need to be armed with facts and be well briefed.

The starkest glimpse of US sanctions policy is Eisenhower’s memorandum in the 1960s, that stated “a line of action which, while as adroit and inconspicuous as possible, makes the greatest inroads in denying money and supplies to Cuba, to decrease monetary and real wages, to bring about hunger, desperation and overthrow of government.”

Over the last four decades, with the micro-electronics revolution, the world economy has become more integrated. With the dollar as a reserve currency and a monopoly over the world financial system through bank credit and clearance, the US is the nerve centre of monetary power in global commerce. Jack Lew, the  the former Treasury Secretary during the Obama Administration, declared that “economic sanctions have become a powerful force in service of clear and coordinated foreign policy objectives—smart power for situations where diplomacy alone is insufficient, but military force is not the right response. They must remain a powerful option for decades to come.”

The legal cover for intensifying economic warfare on Venezuela began with the passage of the Venezuela Defense of Human Rights and Civil Society Act passed by  the US Congress on 18th December 2014. The Act directed the President to block assets and apply exclusion sanctions to any person, including current and former Venezuelan government officials who are involved in violating human rights, curtailing civil freedoms and hindering democracy in the country. The Act was extended further from the end of 2016 to 2019 under the Trump administration which intensified sanctions on Venezuela.

Within three months of this enactment, on March 8 2015, the Obama administration issued the new Executive Order 13692,  declaring a national emergency with respect to the unusual and extraordinary threat to the national security and foreign policy of the United States posed by Venezuela. It also empowered the Treasury Department to set in place surveillance of Venezuela’s financial transactions in the United States. Even though the executive order deceptively stated that there was no intent to target the people and the economy of Venezuela, by blocking the personal and business accounts of seven Venezuelan officials, it fired the first shots for the imposing constraints on Venezuelan individuals and businesses operating in the US financial system.

Concurrently the major financial rating agencies ranked  Venezuela as a high risk country akin to countries in armed conflicts in spite of the fact that the Venezuelan government had been making regular debt repayments. This aimed to push the country towards default by preventing debt restructuring , creating disincentives for international investments and provided a pretext for impounding Venezuelan assets.

The banks and financial institutions took their cue, and they stopped extending credit to Venezuela state and institutions. Over the following year well into 2016, Venezuela accounts were shut down by the major US banks. Banks across Europe followed suit. This diminished the capacity of Venezuela to make payments in dollars and added costs when making payments by other means. Russian firms and Chinese banks also baulked at carrying out contracts because of the pressure from the US securities and exchange commission.

The hammer blow was struck by Trump on August 25, 2017 by the issue of Executive Order 13808 which prohibited new financial dealings with the Venezuelan government and its oil company Petroleos de Venezuela, S.A. (PdVSA). In the following twelve months, there was a dramatic decline in oil production. The loss of credit prevented PdVSA from obtaining finance for investing in or maintaining the oil industry infrastructure.

Perhaps even more important was a letter of guidance issued by the Financial Crimes Enforcement Network (FinCen) on September 20, 2017, warning financial institutions that “all Venezuelan government agencies and bodies, including SOEs (State Owned Enterprises) appear vulnerable to public corruption and money laundering” and `red-flagging’ several transactions originating from Venezuela as potentially criminal. Fearing that it was too risky to participate in money laundering inadvertently, many financial institutions proceeded to close Venezuelan accounts. Venezuelan payments to creditors got stuck in the payment chain, with financial institutions refusing to process wires coming from Venezuelan public sector institutions.

The US has been engineering the collapse of the  Venezuelan currency, the Bolivar, for years, firstly by preventing the inflow of dollars to Venezuela and secondly by facilitating the outflow of dollars. The shortage of dollars drives up the value of the dollar and pushes down the value of the Bolivar. The prices of imported goods (medicines, critical food commodities, business commodities, spare parts) rise rapidly. Domestic businesses cut back on production leading to mass layoffs and lower wages which in turn led to collapse of consumption. For several years, US policy has been to ensure that US businesses in Venezuela repatriate their dollars back to the US or divert them to their subsidiaries elsewhere. It has also encouraged richer Venezuelans to bank their dollars in Miami or to invest them in financial vehicles set up in Colombia. With a shortage of dollars, the black market thrives.The manipulation of exchange rate by publication of pernicious exchange rate not grounded on factual purchase and sale transactions using a website in DolarToday based in Miami, has been used to artificially drive up inflation levels since 2010. Taking all this together, not only the foreign exchange market is affected but also the price levels in the economy, leading to the loss of purchasing power and distorting production and the marketing of commodities.

Venezuela is a gold producer and exporter. Gold is a substitute for the dollar and to stop Venezuela using its gold reserves, in November 2018, the US imposed sanctions on the gold sector of the Venezuelan economy. The Bank of England was asked and complied by freezing Venezuelan gold deposit worth $1.2bn. Countries like Abu Dhabi where gold is traded globally have been asked to stop trading Venezuelan gold.

On 28th January 2019, the Trump administration imposed further wide ranging and stringent sanctions on the oil sector of Venezuela which exported $12 bn of crude oil and oil products to the US in 2018. US companies are prohibited from buying and selling any oil products from and to Venezuelan PdVSA or any entities it has a majority stake in. At a single stroke, this move deprived Venezuela of a major source of foreign exchange revenue leaving it at risk of not being able to import vital food and medicines.

Venezuela does not have any capacity to refine the oil it produces to enable it to have economic independence. The oil refineries owned by the state-owned CITGO Petroleum Corporation are in the southern US gulf coast. This leaves it at the mercy of US oil companies and the US government. The recent seizure of CITGO by the US blocked assets worth $7 billion deprived the government of dollars which could be used to import food and medicines. Furthermore Venezuelan crude requires diluents such as Naphtha which the PdVSA imported from Houston based subsidiaries of the Indian Reliance Industries. This has now been halted.

The cruelest move in all this is the deliberate blocking import of vital medicines and equipment that are a matter of life and death for many patients in Venezuela. In July 2017, Citibank refused to process Venezuela payments for the import of 300,000 insulin doses. In October 2017, the entry of vaccines to the country was delayed for four months because the US blockade made it impossible to make payments in the Bank Swiss UBS. In November 2017, to tackle a malaria outbreak, Venezuela made a payment to purchase primaquine and chloroquine, to the BSN laboratory Medical in Colombia. The Colombian government blocked the dispatch of tai-malarial drugs. In the same month, the European company Euroclear, founded by JP Morgan, seized $1.65 billion that were destined for the purchase of food and medicine. The following year in May 2018, the payment of $9 million was blocked for the acquisition of supplies for dialysis equipment.

According to a Latin American Geopolitical Strategic Centre (CELAG) study,  US economic war on Venezuela since Maduro’s April 2013 election through 2017 cost the country $350 billion in lost production of goods and services. If Maduro had received international financing from the IMF, Venezuelan GDP growth from 2013–17 would have exceeded Argentina’s.

This hidden war of monetary imperialism has seriously damaged Venezuela’s economy. The shortage of essential food commodities and medicines has led an economist aligned to the opposition, Francisco Rodriguez to call for a oil-for- food programme similar to that for Iraq in 1990s. Readers may recall that sanctions on Iraq led to an estimated death of a 500,000 infants.

The economic warfare on Venezuela is worse than what was done to Iraq and a portent of the shape of things to come for those countries which are in US cross-hairs, such as Cuba, Nicaragua and Iran unless countervailing forces develop to contain US hubris. The unity and the resistance of the working class, the rural classes and the military against the oligarchy backed by the US will determine the outcome of this struggle. International solidarity in challenging the corporate media’s narrative for regime change and the Tory government’s sanctions policy is vital in this struggle.

First publishes in Labour Briefing March 29 2019 https://labourbriefing.squarespace.com/blog/2019/3/29/the-hidden-economic-war-on-venezuela

The counter-revolution in Venezuela

Hugo Chavez (1954-2013)

The United States is putting in place its long planned intervention for regime change in Venezuela with serious consequences for the future of its people

The wave of the so called ‘pink’ tide that washed the shores of Latin America in response to the post-1970s neoliberal straitjacket of privatisation, low tariffs, reduced social spending, weakened labour laws and increased social inequality, has receded. Following the uprising in Venezuela in 1989, left leaning governments were elected in Brazil, Argentina, Ecuador, Bolivia, Uruguay, Chile, and El Salvador. But now, in Brazil, Dilma was deposed and Lula jailed with neofascist Bolsonaro crowned, in Ecuador Correa’s successor Lenin Moreno has reversed policies, in Argentina, Christina Kercher’s replacement Macri is beholden to IMF for his survival, in Chile after Pinochet is in the hands of a business man Sebastian Pinera after two staggered terms of Michelle Bachelet. Only Evo Morales and Maduro remain. In Nicaragua Ortega faced a street movement to remove him has so far survived. In Cuba the Castro era has ended with the leadership of a new generations facing immense pressures from the United States after 60 years of blockade.

It is inconceivable that the US, with its dense military, surveillance and political networks, with deep financial pockets, has been a passive agents in this shift towards the right in a region which it has long regarded its backyard. It has a reputation to seek to restore its power even after a severe defeat such as in Vietnam. It has been firmly ensconced in Colombia both economically and militarily for decades where the right wing as consolidated under Duque. It condoned the removal of President Manuel Zelaya 2009 by American trained generals and the subsequent murders of thousands of indigenous activists, peasant leaders, trade unionists, journalists, environmentalists, judges, opposition political candidates, and human rights activists. The removal of the left wing President Lugo through impeachment by the Paraguay’s Senate had implicit support of the US.

In Venezuela, Hugo Chavez came to power in the wake of the great uprising by the poor in 1989, the Caracazo against the IMF-brokered austerity that was suppressed by the military killing more than a thousand people. Chavez, a career military officer led a revolt against corruption in 1992, only to be jailed but this catapulted him to hero status. Release in 1994, he won the presidential vote 1998 by a landslide. The triumph of Chavez promised hope for improvement to the poorer classes with his embrace of Bolivarianismo, after Simon Bolivar, the iconic leader of the war of independence from Spain in the early 19th century who promoted social reform and unity in Latin America. For the first five years in power, Chavez was forced to fight rearguard action from the reaction of the elite and the oligarchy supported by the US. In 2002, he luckily survived a coup attempt by the military who abducted him and only mass action from thousands of his supporters enabled him to return to power in two days. This was followed by a war of attrition with attempts to shut oil production down and a recall referendum. He survived numerous assassination plots to triumph and achieved great success electorally.

At the height of his power from 2005 to his final election in 2012, the social gains as a whole were spectacular: greater employment, more and better housing, better nutrition, better medical care, height life expectancy and increased literacy through better education. Over the whole 14 year period of his rule to his death by cancer in 2013, Chavez never deviated from improving the lot of the poor through a redistribution policy using part of the proceeds of the oil revenue.

Nicolas Maduro, Chavez’s successor, on taking power of his first term in 2014 was to see the collapse of oil price. In 2014 Venezuelan oil was still 88 US$ a barrel . In 2015 it halved to $44. In January 2016 it had reached its lowest level for over 10 years, at $24. Additionally there was pressure from the US when Obama declared Venezuela as a ‘national security threat’ and imposed sanctions in 2015 later to be intensified by Trump precipitating a severe economic crisis.

Over the last five years, Venezuela’s per capita income shrunk by 40 percent, a decline that parallels war torn countries such as Iraq and Syria. Whereas, it earned $100bn in oil revenues in 2012, by 2017 this fell to $32bn, a decline of about two thirds. Whilst part of this could be explained by the collapse of the oil prices in January 2016, the lack of investment in oil production because of cash shortages, but the drastic fall in production can be attributed to the US financial sanctions imposed in August 2017 barring US persons from providing any financing to the Venezuelan government or the oil company PDVSA.

At the security council meeting on Sat 26 January, Ms. DiCarlo, the UN Under Secretary-General of Political and Peacebuilding Affairs described the situation in Venezuela as “dire”, and as having both an economic and political dimension. “The population is affected in a systemic way, nearly all 30 million Venezuelans are affected by hyperinflation and a collapse of real salaries; shortages of food, medicine and basic supplies; deterioration of health and education services; deterioration of basic infrastructure such as water, electricity, transport and urban services,” she told the Council. Whilst there were calls for political solution, at no stage the sanctions that has strangulated Venezuela were mentioned.

 

In August 2018 Alfred de Zayas the first UN rapporteur to visit Venezuela for 21 years criticised the US for engaging in “economic warfare” against Venezuela which he said is hurting the economy and killing Venezuelans. According to him the US sanctions on the country are illegal and could amount to “crimes against humanity” under international law. All economic measures taken by the Maduro government have not been effective and led to a black market and corruption. Facing such a serious crisis, the government has become more authoritarian.

The financial strangulation over three years prepared the ground for toppling the Maduro who faced an intractable war of attrition with the opposition from 2014 onwards with violence including three assassination attempts. When the opposition won the National Assembly elections in March 2016, it challenged the executive power of the president through legislative means. This confrontation led to the Venezuelan Supreme Court repeatedly annulling laws made by the National Assembley. Attempts were then made to shorten the presidential term and to initiate a recall of referendum. The Maduro government called a referendum to elect a constituent assembly which the opposition boycotted. The Presidential election of May 2018 was boycotted by the main opposition saw Maduro win the election with 68 percent of the vote on a low turnout of 46 per cent against some minor opposition figures. The domestic opposition, United States and Lima Group of mostly right-leaning Latin American governments say they do not recognise the results even though from US President Jimmy Carter declared that Venezuela’s electoral system is the best in the world.

This was the juncture when a cascade of well coordinated actions were launched by the US government and the opposition with tightening of the noose around Venezuela by imposing sanctions on its oil companies and withholding its gold reserves in the UK. John Bolton’s targeted Venezuela, Cuba and Nicaragua as a troika of tyranny that need to be dismantled in the name of freedom and democracy. This was followed by Juan Guaidó, the President of the National Assembly declared himself as the President on 23 January and was immediately recognised so by Trump, the US allies in Latin America, UK and European powers. Vice President Pence incited the Venezuelan population to go out in the streets against Maduro. As expected an intense public relations campaign in the media followed with a selective narrative and images in support Juan Guaidó as someone that 80% of Venezuelans had never heard of until last week. Research into Guaido’s background reveals is the product of more than a decade of assiduous grooming by the US government’s agencies as a part of a cadre of right-wing student activists set up to undermine Venezuela’s socialist government, to destabilise the country and one day seize power. He participated in violence organised by the Popular Will party which led to the arrest and exile of its leaders.

The US has embarked on a strategy of setting up a parallel government in Venezuela in order to bring about a counter revolution. European countries become accomplices in this by issuing a ten day ultimatum for Maduro to call elections with the threat of recognising Guaidó as interim president. As expected this has been rejected. Now an economic crisis has been compounded by a political crisis. The outcome of this is difficult to foresee. There could be widespread civil unrest with violence and even a civil war. Intervention by the Venezuelan military could be decisive. Mercenary proxy forces funded by the CIA could enter the country from Columbia and Brazil. There is a possibility of US invasion on humanitarian grounds. Guaido has rejected negotiation with Maduro. Several countries have offered mediation. This could be a way forward to resolve the political crisis. The US is showing little interest in such mediation. International security requires patient diplomacy and conflict resolution. For this to happen, we need to set in place internationally a system of checks and balances where no country is able to act in extreme ways.

It has been argued that all this is about the US wanted to grab hold of Venezuela’s immense oil reserves. Whilst this is only partly true, there are elements of geopolitical competition when Venezuela because of US sanctions turned to Russia and China for investment. Both these countries have made significant investment in Venezuela. Above all, the US seeks to erase the legacy of Chavez’s Bolivarian revolution which not only asserted national sovereignty but sought to counter the neoliberal order and create alternative institutions for Latin American unity.

It is risible that many media outlets including those who claim to be liberal have claimed that this is about democracy. Historical experience attests that the US foreign policy has blocked democracy across the world by supporting dictatorships, invasions, counterinsurgencies, proxy wars, assassinations and regime change amongst many other nefarious strategies. In Latin America the memories of the overthrow of the President Árbenz of Guatemala (1954), the overthrow of President Allende in Chile(1973), the support for military dictatorships across Latin America ant the ‘dirty wars’ in Central America, are still fresh. The US has inflicted immense pain on the people of Latin America and blocked the development of democracies in all the countries continually.

The appointment of Elliot Abrams as a special envoy to Venezuela bodes ill the country. Elliot was the architect of the “dirty war” in Central America where death squads murdered at least 250,000 people in Nicaragua, El Salvador and Guatemala. The victims were overwhelmingly unarmed and poor civilians as well as teachers, doctors, peasants, workers, students, women, nuns and priests, including bishops such as El Salvador’s martyr Oscar Romero.

It is best to see Venezuela in the wider context of a US led imperialist system which has, after the collapse of the Soviet Union, asserted monopolistic power over world security. This freer play has enabled Trump to usher an era of bullying in international relations where Mike Pompeo, the Secretary of State and John Bolton the National Security Adviser issues threats to vulnerable countries. They represent the ugly face of imperialism. With the blocking of Venezuelan crude to refineries in the US, they are throttling Venezuela to make it submit to their yoke, to their dictation. This is unforgivable because the suffering of the Venezuelan people will be horrifying.

The mass of Venezuelan people, the bottom 99 percent, face extreme danger. Any takeover of the country by proxy of US will lead to the privatisation of the resources of the country, their looting, the dismantling of the social security, education, housing and education provision. The mobilisation of the mass of Venezuelan people will be critical. Although exhausted by the economic warfare they are by no means subservient because of their historic experience of Chavez’s revolution in spite of the distortions it has undergone over time because of internal and external threats.

The US intervention in the name of democracy must be opposed and resisted without reservations. We need to counter the propaganda blitz in the mass media which supports intervention with a counter narrative that is grounded in history to show how imperial interests have destroyed societies across the world. We need to defend the rights of the Venezuelan people to sovereignty and self determination. We must oppose all sanctions that are starving Venezuelan people. This is the time to speak out critically and boldly in public to oppose our government’s support for intervention in Venezuela. To express your solidarity and oppose US intervention, you can join the Venezuelan Solidarity Campaign and Stop the War Coalition.