Dispatch

Selling Crude to Los Imperialistas

Venezuela's president Nicolás Maduro blames Washington for all his problems. But that doesn't mean he can turn off the oil tap any time soon.

Venezuelan President Nicolas Maduro delivers a speech before supporters gathering outside the presidential palace in Caracas on March 18, 2015. Leaders from leftist Latin American regional bloc ALBA gathered Tuesday for a summit in Caracas, a show of support for Venezuela in its mounting standoff with the United States. AFP PHOTO/FEDERICO PARRA        (Photo credit should read FEDERICO PARRA/AFP/Getty Images)
Venezuelan President Nicolas Maduro delivers a speech before supporters gathering outside the presidential palace in Caracas on March 18, 2015. Leaders from leftist Latin American regional bloc ALBA gathered Tuesday for a summit in Caracas, a show of support for Venezuela in its mounting standoff with the United States. AFP PHOTO/FEDERICO PARRA (Photo credit should read FEDERICO PARRA/AFP/Getty Images)

CARACAS — Every other day a broad-hulled supertanker docks at the Venezuelan state oil company’s deep-water sea terminal at José in the state of Anzoategui. The ship loads up on crude oil en route to an unlikely destination: the South American country’s No. 1 enemy, the United States of America.

Washington and Caracas have been engaging in tit-for-tat insults and sanctions over recent weeks, with Venezuelan President Nicolás Maduro accusing U.S. President Barack Obama of plotting to overthrow his government. But behind the fiery rhetoric is a more complex reality: The United States and Venezuela have a commercial relationship that Maduro cannot afford to sever.

The United States remains Venezuela’s leading supplier of goods by a large margin and the largest export market for its oil, positions it has held for most of the last 100 years. That has led Maduro’s critics to question the president’s current round of Yankee-baiting, which has left relations at their lowest point since 1999 when the late Hugo Chávez was sworn in as president.

“If this government is so anti-imperialist, why do they continue selling oil to the U.S.?” opposition leader and Miranda state Governor Henrique Capriles Radonski asked during a public address on March 11. “They have a double discourse.”

Like his predecessor, the late Hugo Chávez, Maduro uses the United States as a scapegoat when his popularity begins to plummet. But he hasn’t moved to put restrictions on the countries’ commercial relations. Venezuela continues to export a little less than 800,000 barrels of crude oil to the United States per day. That has steadily decreased from a peak of 1.5 million barrels per day in the 1990s, but the amount is enough to make Venezuela the United States’ fourth- or fifth-largest supplier of crude. (That number changes on a monthly basis.) Last year, the value of those oil exports totaled close to $30.2 billion, according to the U.S. Census Bureau.

Meanwhile, U.S. exports to Venezuela came to $11.3 billion in 2014 — more than a quarter of the country’s total imports. And Venezuelans import upwards of 70 percent of what they consume, including agricultural commodities, processed foods, and manufactured goods. American companies, including General Motors, Ford, Procter and Gamble, Pepsico, and Yum Inc., all have large-scale operations in the South American country. Although some U.S. companies, such as Clorox and American Airlines, have closed or cut back operations in Venezuela, the majority have taken a wait-and-see attitude while delaying fresh investments.

Many doubt that Maduro is seeking a definite and lasting break with Washington, despite the rhetoric. Instead, analysts say, he is looking for a distraction from his own country’s economic woes.

On March 9, the Obama administration may have unwittingly handed him one when Washington declared the South American country a “threat to U.S. national interests,” and sanctioned seven Venezuelan officials for human rights violations. Maduro, whose support has fallen to 22 percent in the latest Datanalisis poll, called the sanctions an interference in his country’s national affairs, and requested that the National Assembly grant him special powers “sufficient to defend the peace, the sovereignty and integrated development of Venezuela” against the U.S. government.

The move was calculated to play on Venezuelans’ nationalism and give Maduro a much-needed respite from growing criticism of his handling of the economy, an area where critics say he has made many mistakes.

Venezuela’s economy is forecast to contract up to 7 percent this year, and inflation may end the year in triple digits, analysts say. A new government auction of foreign exchange failed to brake the soaring black market rate, which is now hovering around 254 “strong bolivars” to the dollar. The official exchange rate — which the government uses to pay for imports of food and medicines and to calculate the country’s minimum wage — is 6.3 bolivars to the dollar.

Shortages of basic foodstuffs, medicines, and spare parts have crippled the economy. Maduro announced on March 7 that the government would effectively ration food at 20,000 supermarkets in the country, which would set weekly limits on purchases, and require shoppers to have their fingerprints scanned before being allowed to buy their goods — some of which are imported from the United States.

Maduro has blamed the country’s woes on “an economic war” being waged against his government by Venezuelan expatriates in Miami as well as the U.S. government. But most analysts say the crisis is due to a combination of the precipitous drop in the price of oil in recent months along with the government’s economic policies — including nationalizations, and price and foreign exchange controls that have decimated domestic output.

Maduro has been baiting the United States for weeks, accusing Washington of backing an alleged coup attempt by junior Venezuelan Air Force officials who planned to bomb the presidential palace and other targets with one propeller-driven aircraft. On Feb. 28, he also ordered that the United States reduce the size of its embassy in Caracas by more than 80 percent (to 17 diplomats), which he said was equal to the number of their Venezuelan counterparts in Washington. The president also decreed that Americans will now need to apply in advance for visas to visit the country and barred a number of U.S. citizens, including former President George W. Bush, from entering.

For its part, the Obama administration has repeatedly denied Maduro’s charges of plotting a coup before taking action on sanctions. “Venezuelan officials past and present who violate the human rights of Venezuelan citizens and engage in acts of public corruption will not be welcome here,” said White House spokesman Josh Earnest on March 9. “And we now have the tools to block their assets and their use of U.S. financial systems.” Earnest called on Maduro to release political prisoners, including opposition leaders Leopoldo López and Caracas Mayor Antonio Ledezma. López has been jailed for a year waiting for the conclusion of a trial on charges of arson and inciting riots. Ledezma was arrested on Feb. 20 for being part of the coup plot. Both are being held in a military prison.

“I’m not sure why [Washington] decided to move now as relations have been bad for some time,” says Susan Kaufman Purcell, the director of the University of Miami’s Center for Hemispheric Policy. “Maybe Obama is concerned about his legacy on human rights.”

Whatever the motivation, Maduro reacted immediately to Washington’s call that Caracas represents a threat to U.S. national interests. “No one can believe that Venezuela is a threat to the U.S.,” Maduro said in a nationally televised address on March 11. “It’s false. It’s a lie. Venezuela isn’t a threat to any country.”

Maduro called on the National Assembly — where his United Socialist Party of Venezuela (PSUV) holds a two-third majority — to grant him special powers in a so-called Anti-Imperialist Enabling Law. The legislature complied on March 15; the president can now issue legislation by decree until Dec. 31. Venezuelans are supposed to go to the polls later this year to elect a new congress, and some fear that he may ask that that powers extend well into the next legislature’s term.

Maduro also ordered his country’s armed forces to start drills on March 14 to improve their readiness to repel any American invasion. One hundred thousand persons, including 80,000 soldiers and 20,000 civilian militias are participating in the exercises. And the president also announced a nationwide petition drive aimed at gathering 10 million signatures to demand that Obama revoke his order.

Washington’s new sanctions and Maduro’s Enabling Act have left Venezuela’s opposition grappling for a response. Capriles Radonski tweeted just minutes after Maduro’s request for expanded power, “Nicolas, will your request an Enabling Law make soap, diapers, medicine appear and lower inflation? More hot air!” The opposition leader also brushed aside charges of U.S. interference in Venezuela’s affairs, noting that the seven sanctioned officials are “corrupt” and don’t represent the country. But other opposition figures were less accepting. Officials from Capriles’s own Primero Justicia party decried the U.S. measure, as did the opposition Copei party.

But despite the bluster, Maduro has been careful not to antagonize Washington too much because he knows he can’t afford to do so. Venezuela’s crude oil, which is heavy in sulfur, coke, and other minerals, can only be processed in a few refineries in the world, most of which are located in the United States.

Caracas is also dependent on its U.S. exports for much-needed foreign currency. “The U.S. also pays in dollars for the oil its buys,’’ says Fernando Sanchez, the vice president of Venezuela’s Society of Petroleum Engineers. “That isn’t true for Venezuela’s other customers. Although oil exports to China are growing, those sales are in payment for loans taken out by the government. Venezuela doesn’t receive any more cash.”

The Obama administration has said it doesn’t plan to curtail oil purchases from Venezuela, but the potential threat of a cutback is enough to make sure that Maduro doesn’t go too far.

Though the Venezuelan president may have friends in the region, they’re not about to bail his country out. Venezuela’s regional socialist initiatives have not provided economic leverage to counter Washington. If anything, they’ve cut into Caracas’s coffers. The Bolivarian Alliance for the Peoples of Our America (ALBA), a Caracas-led trade association, has produced few dividends for its members, despite billions of dollars of Venezuelan investment. Petrocaribe, which offers Caribbean and Central America countries subsidized oil, has similarly flopped. The initiative has resulted in member countries racking up a debt of $20 billion since it began in 2005. Venezuela recently sold more than $4 billion in debt obligations from the Dominican Republic for $1.9 billion, taking a 50 percent haircut.

“If Maduro would try to cut back the trade relationship with the U.S., he would be committing suicide,” says Sanchez. “Maduro may criticize the U.S., but right now he needs the U.S. far more than the U.S. needs Venezuela.”

Risa Grais-Targow, an analyst with Eurasia Group, notes that Maduro’s vociferous anti-American stance will have a short shelf-life unless he moves quickly to resolve the country’s problems. She predicts that the government may try to move up congressional elections to June or July from November or December. The National Election Council, run by Maduro loyalists, has yet to set a date.

But even party stalwarts have their doubts about how the elections will turn out. Melisa Robles, a 51-year-old housewife in the industrial city of La Victoria, is a member of the country’s people’s militia, a Chávez-era initiative to protect the country’s revolution.

“I loved Chávez,” she says. “I believe in the revolution, and Chávez’s policies. But Maduro…. I don’t know. He blames everyone for all the problems we face and doesn’t seem to be able to resolve any of them. Maybe Obama is to blame, but not for everything.”

FEDERICO PARRA/AFP/Getty Images

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