Negotiations for Venezuela’s November 2021 regional elections, which are being brokered by Norway, kicked off this week in Mexico. The talks between the authoritarian regime of Nicolas Maduro and opposition leaders aim to establish a memorandum of understanding for further detailed discussion in September 2021. The goal of the talks is to ultimately establish the terms for holding the November regional elections for governors and mayors. It is also hoped that if an acceptable agreement can be achieved it will bring the opposition boycotts of Venezuela’s elections, which have occurred for the last five years, to an end. Since being elected Venezuela’s president in April 2013, Maduro has actively and violently suppressed democracy, human rights, and opposition to his regime. Last December he was finally able to remove the U.S.-recognized interim president Juan Guaido from the National Assembly where he had been the law-making bodies leader. That significantly undermined Guaido’s legitimacy as interim president and eventually saw the European Union no longer recognize him in that role. Maduro achieved this by winning 256 of the legislative body’s 277 seats in an election heavily tainted by allegations of vote-rigging and labeled by the opposition as neither free nor fair. That gave Maduro the last government body not under The United Socialist Party of Venezuela’s control. This was a particularly important development because the National Assembly is the only legislative body constitutionally able to approve petroleum projects. This saw Maduro firmly cement his grip on power and essentially remove all viable opposition to his authoritarian rule.
Despite this success, Maduro’s position is becoming increasingly fragile because of the unraveling of the Venezuelan state, with his regime possessing little power outside of the capital Caracas. This can be blamed on the collapse of Venezuela’s economically crucial oil industry which is the only source of income for an essentially bankrupt Caracas that is unable to fund basic public infrastructure and social goods. The lack of a government presence in many regional centers has seen the void left filed by armed non-state actors that pose a threat to Maduro’s regime. Reviving Venezuela’s near failed oil industry is key if Maduro is to successfully rebuild the crisis-riven country’s shattered economy and generate the capital required to rebuilding and conduct maintenance on severely corrode energy infrastructure. The only that can be done is by attracting foreign investment to fund the significant capital, estimated by national oil company PDVSA to be $58 billion, required to conduct crucial long-neglected maintenance, refits, and repairs. Nevertheless, it should be noted that many economists and industry experts believe it could take anywhere between $100 billion and $220 billion spent over 10-years to rebuild Venezuela’s petroleum industry.
Related: Can ‘Nuclear’ Hydrogen Become Competitive? Caracas’ growing desperation to reverse what appears to be an inevitable economic and social decline, which has triggered the world’s second-largest humanitarian crisis, saw the Maduro regime consider privatizing assets. That included PDVSA considering the sale of various energy assets to the private sector. Then earlier this year Maduro announced that Venezuela was open for business and that his regime would consider private ownership of oil projects in Venezuela. Those events are in stark contrast to decades of state control of the oil industry after Hugo Chavez took office in February 1999 and his aggressive nationalization of privately owned petroleum assets between 2007 and 2011. It is Maduro’s control of Venezuela’s National Assembly which forms a key element of his plan to open the petrostate’s energy sector to private ownership and even control of assets. This is because the National Assembly is the only national body constitutionally authorized to permit energy projects.
While Russia, China, Iran, and Turkey continue to aid Venezuela, their efforts in the face of crippling U.S. sanctions have failed to trigger any sustained recovery for Venezuela’s oil industry or prevent the OPEC member’s economy from imploding. The situation is so severe that the Venezuelan state is rapidly crumbling with a range of armed non-state actors including Colombian Marxist guerillas, elements of Iran-backed Hezbollah, and criminal gangs assuming control of swathes of national territory. The growing strength of those non-state actors and Venezuela’s hastening slide into chaos, where a near-bankrupt state is incapable of providing basic public goods, poses a direct threat to the Maduro regime’s grip on power. It is this descent into chaos, rather than U.S. sanctions, which is fueling Maduro’s desire to negotiate with Venezuela’s opposition and Washington to prevent the failure of the state. If a state of anarchy were to emerge, Maduro and leading members of his regime would become key targets for various armed non-state groups seeking revenge for his government’s violent repression of civil dissent and various opposition groups over the last eight years. The only way Maduro can prevent Venezuela’s collapse is by reaching an accord with the opposition and getting Washington to ease sanctions thereby allowing his authoritarian regime to rebuild the economically crucial petroleum industry.
It is for these reasons that Maduro has eased his hardline approach to Western governments as well as Venezuela’s opposition. This has seen the authoritarian socialist leader undertake unilateral measures aimed at building political capital with the Biden administration. These have included releasing from jail the Citgo 6, six former Citgo executives convicted of corruption and embezzlement, to house arrest, and agreeing to humanitarian aid. Maduro also established a five-seat National Electoral Council with two permanent seats for prominent opposition members Enrique Marquez and Roberto Picon. That final measure coupled with Maduro’s latest willingness to negotiate with the opposition indicates there is the potential for the implementation of incremental reforms that would edge Venezuela closer to a restoration of democracy.
It is Washington’s stringent sanctions, cutting Caracas off from international energy and capital markets, which are the key impediment to rebuilding Venezuela’s energy sector and hence economy to prevent the state’s inevitable collapse. This is because the harsh penalties associated with breaching those measures are preventing western energy companies from operating in Venezuela, thereby deterring critical and urgently required investment in the OPEC member’s rapidly corroding energy infrastructure. It is only western energy supermajors such as Chevron and major oil service companies like Halliburton which possess the required capital, technology, and expertise to revive Venezuela’s shattered petroleum industry.
The near implosion of Venezuela and considerable suffering of the population coupled with the thawing of Maduro’s hardline stance and the rising power of non-state armed groups makes it time for the Biden administration to act. By implementing a more pragmatic and humanitarian approach to the crisis in Venezuela, Washington will reduce the influence of U.S. designated terrorist groups in Latin America, boost regional stability, and alleviate considerable human suffering thereby bolstering its regional reputation.
By Matthew Smith for Oilprice.com
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