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Venezuela: Hand Grenades From A Helicopter

After almost three months of daily anti-government demonstrations, what Venezuela’s President Nicolas Maduro needed most was an excuse to impose martial law, or at least to use major violence and mass arrests to close the protests down.

On Tuesday, Maduro got his excuse. A stolen police helicopter flew over the Supreme Court building in Caracas – and dropped a couple of hand grenades near it.

As “terrorist” incidents go, it was so incompetent and downright silly that you begin to suspect that it wasn’t a “false flag” operation sponsored by the government after all. If Maduro’s people were aiming to give themselves an excuse for a crack-down, surely they would have come up with something more impressive than a guy in a helicopter dropping a couple of hand-grenades at random onto the Supreme Court lawn.

The man behind this attack was Oscar Perez, a police officer who announced in a video posted on Instagram that he was launching an armed struggle against tyranny.

“We are a coalition of military employees, policemen and civilians who are looking for balance and are against this criminal government,” Pérez said, and the four armed men standing behind him in the video tried to look fierce. The ski-masks helped a bit, but it was hard not to giggle. They really didn’t look very dangerous.

But you have to work with the material at hand, and President Maduro did his best to inflate the incident into a major terrorist attack. “I have activated the entire armed forces to defend the peace,” he said. “Sooner or later, we are going to capture that helicopter and those who carried out this terror attack.” (And while we’re at it, we’ll round up a lot of other people who support the opposition.)

Maduro can no longer stay in power by democratic means. There is no doubt that he won the presidency by a narrow but genuine majority (1.5 percent) in the 2013 election that followed the death of Hugo Chavez, the hero-founder of the United Socialist Party of Venezuela. But there is also no doubt that the opposition coalition, the Democratic Unity Roundtable, won a landslide victory in the parliamentary election of 2015.

What made the difference between those two elections was the price of oil. In 2013 it was around $100 per barrel. By 2015 it was in the low $40s, and it is still there today.

Venezuela is not a rich country, although most Venezuelans believe it is. It has a lot of oil, but it produces almost nothing else and imports practically everything it consumes. So it is rich when oil is at $100 – but it is very poor when it is below $50. The country is therefore now broke.

For reasons having nothing to do with alleged plots by the US or the wicked local elites, per capita income in Venezuela has fallen by more than half in the past two years. So people are angry, including many of the poor people who benefitted from Chavez’s generosity with the oil revenues back in the Good Old Days. There is a presidential election due next year, and as things stand now Maduro would probably lose by two-to-one.

The National Assembly has had a two-thirds majority of opposition members since the 2015 election, and it has been pressing hard to bring the presidential election forward to this year. Maduro had to stop that, and his first step was to have the Supreme Court, which is packed with Chavez and Maduro appointees, strip the National Assembly of all its powers and take them for itself.

This is what triggered the daily anti-government demonstrations that began in early April. The Supreme Court’s action was clearly unconstitutional, and after three days that also saw protests from members of his own party Maduro ordered the judges to backtrack on their decree. But the protesters, with the bit between their teeth, stayed out in the street. Despite 70 dead in the past three months, they are still there today.

So Maduro, desperate to sideline the National Assembly, then came up with the idea of rewriting the constitution. There was no referendum to test popular support for this idea, and the people in the “constituent assembly” are being chosen according to rules set by the Maduro government.

The new constitution will presumably prevent any further unfortunate accidents like the opposition parliamentary victory in 2015 – and by a happy coincidence (for Maduro), it also provides an excuse for not holding the scheduled presidential election in 2018. After all, new rules are coming. Why do it under the old rules?

Nobody is fooled by all this flim-flam, and it is no surprise that Oscar Perez, whether he is a deluded revolutionary or a secret government stooge flying false colours, chose to drop his little hand-grenades on the Supreme Court. It has become a symbol of the illicit manipulation by which Maduro clings to power, and therefore a natural target for those who oppose the government (or pretend to).

In either case, Maduro has his pretext, and will now clamp down harder and try to terrify the opposition into submission. It is probably going to get much nastier yet in Venezuela.
To shorten to 725 words, omit paragraphs 3 and 14. (“As…lawn”; and “The new…rules”)

Venezuela: Drifting Towards Civil War

“I am no Mussolini,” insisted Venezuela’s beleagured President Nicolas Maduro on television early this month, but if things go on this way he could end up like Mussolini. That would be very unfortunate for him, and also for Venezuela.

The daily street protests against Maduro’s rule are now in their second month, and around forty people have already been killed, most of them by the police. “Molotov cocktails” (fire-bombs) are old hat; the new fashion is for “poopootovs” – containers of human or animal excrement that are thrown at the security forces. Nobody knows when it will all end, but most people fear that it will end badly.

It didn’t begin all that badly. Hugo Chavez, a radical former army officer who had led a failed coup attempt in 1992, was elected to the presidency quite legitimately in 1998. Venezuela was the richest country in South America because of its oil wealth, but most of the 31 million Venezuelans were very poor, and Chavez proposed to change that.

He had strong popular support – majorities of around 60 percent in the 2002 and 2006 elections, and still 55 percent even in 2012 – and he had lots of money to give to the poor. But he died of cancer in 2013, and his successor, a former bus driver called Nicolas Maduro, got barely 50 percent of the vote in a special election later that year. He has not had a quiet moment since.

The problem is money. Chavez ran up massive deficits to finance his spending on health, education and housing, which really did transform the lives of many of Venezuela’s poor, but the bills only came in after he died. The world price of oil collapsed, Venezuela’s income did too, and everything went sour.

Now Venezuela has the highest inflation in the world (700 percent this year), and the economy has shrunk by almost one-fifth. There are chronic shortages of food and medicines: three-quarters of Venezuelans say they are eating less than two meals a day, and the child death rate is up by 30 percent. And a lot of people, including former Maduro supporters, are very angry.

Maduro’s response has been to blame all the problems on the local business elite, who he claims are hoarding goods to cause shortages, and on the United States, which he says is plotting with the local opposition parties to overthrow the elected government. But plots are hardly necessary: he barely scraped into office in the 2012 election, and he would lose massively in an election held today.

To stay in power, Maduro must avoid an election, and the next presidential election is due next year. The opposition had already won a two-thirds majority in the National Assembly in 2015, so Maduro’s first move, in late March, was to have the Supreme Court (packed with his supporters) simply declare that the National Assembly was “in contempt” of the country’s laws and shut it down.

That was what brought the protesters out on the streets in such numbers that three days later Maduro lost his nerve and the Supreme Court revoked its decree. But the protests, fueled by the growing shortages of practically everything, just kept going, and now the demonstrators were demanding that the next presidential election be brought forward from 2018 to this year.

Maduro is cornered. He could not win a presidential election this year, or in 2018 either. It’s not even certain that the rank-and-file of the security forces can be relied on to defend him forever. So he has played his last card: a new constitution.

The last constitution was written by Chavez himself and adopted in 1999. At the time, he said it was the best in the world and promised it would last for centuries, but on May 1st Maduro said the country needs a new one. He is going to call a “constituent assembly” to write it, although he was vague on how its members would be chosen. Some might be elected, and others would be chosen from “social organisations” (i.e. his cronies).

The Chavez constitution does not give Maduro the authority to do this, but the man is desperate. He needs an excuse to postpone elections he knows he would lose, and this is the best he can come up with. It won’t work, because the opposition understands his game and will not accept it. The country is drifting towards civil war.

“I don’t want a civil war,” Maduro said while announcing his constituent assembly, but he is laying the foundations for one. He might even win it, in the short term, if the army and police stay loyal to him. But in the longer run he really does risk ending up like Mussolini: executed without trial and hanging upside-down in a public square.
To shorten to 725 words, omit paragraphs 7. (“Maduro’s…today”)

The End of the Venezuelan “Revolution”

The Venezuelan opposition’s victory in Sunday’s election exceeded even their own hopes: they won more than two-thirds of the seats in the National Assembly. It may be the beginning of the end for the “Bolivarian revolution” launched by the late hero-leader Hugo Chavez seventeen years ago – but it will also plunge the country into a prolonged period of conflict and crisis.

Credit where credit is due: the election was conducted in an exemplary fashion although the government knew it was going to lose. And even when the scale of the opposition’s victory became clear, President Nicolas Maduro took the high road: “I call on all of our people to recognise these results peacefully, and to re-evaluate many political aspects of the revolution.”

However Maduro, who took over when Chavez died in March 2013, does not intend to preside over the funeral of Venezuelan socialism. When he said “our people”, he meant the Chavistas who still support the “revolution”, and the fact that they were now obviously a minority of the Venezuelan people went unmentioned. As did the fact that it was not actually a revolution at all: Chavez came to power legally and peacefully in the 1998 election.

The real question is whether Maduro and those around him will consent to leave power the same way. His vague rhetoric – “We have lost a battle today but now is when the fight for socialism begins” – is designed to leave that in some doubt. And it may be a real fight, perhaps including violence in the streets, because many Chavistas will feel duty-bound not to let this historic experiment fail.

Excuse the deliberate lapse into antique Marxist-speak, but that’s how they talk, and it illustrates how misleading the revolutionary rhetoric is. Because the Chavista era in Venezuelan history was not an historic experiment at all – not, at least, unless you think that building a welfare state with oil revenues is a revolutionary idea (in which case Saudi Arabia also has a revolutionary ideology).

True, the Chavistas are rather bigger on the notion of equality than the Saudi royal family, but what they were actually doing was not controversial in principle. They sought and won power through democratic means. Like left-wing politicians in early 20th-century European states, they then set about improving the income, health, housing and educational level of the bottom half of society, as they had promised they would.

The work of social uplift went a lot faster in Venezuela because of the oil money. (It has the world’s biggest oil reserves, and only 30 million people.) Chavez accomplished in a decade what took countries like Britain, France and Germany two generations. But by the end of that time the European countries had diversified industrial economies that could pay for a welfare state. All Chavez left his successors was oil.

So long as the oil income held up, Chavismo was invincible. Mismanagement and corruption grew, as they often do when money is plentiful. Arrogance grew too, as it usually does in governments long in power, and protests were increasingly met with physical or legal violence. Still Chavez and his successor Maduro won elections – until the oil price collapsed.

In the past eighteen months the world price for oil has fallen from $140 a barrel to only $40. Venezuela was already facing serious unemployment and very high inflation. Government-imposed price controls were already creating predictable shortages of staple goods like milk, rice, coffee, sugar, corn flour and cooking oil. But when the government’s income collapsed, all those problems went ballistic.

OF COURSE Maduro lost the election. In these circumstances, Chavez himself couldn’t have won it. Even Simon Bolivar couldn’t have won it. So now the challenge that both the Chavistas and the opposition face is how to manage an orderly transition that respects democracy, avoids violence, and preferably also preserves some of the social and educational gains of the past seventeen years.

The sheer scale of the opposition victory makes this tricky, since it has a “super-majority”: more than two-thirds of the seats in the National Assembly. In theory, that lets it do radical things like rewrite the constitution. In practice, however, the temptation to do that may not be very great. The opposition’s super-majority is vulnerable as it depends on a single seat (it holds 112 out of 167 seats).

The first order of business of the new National Assembly will be to pass an amnesty law freeing some seventy leading lights of the coalition’s various parties who were jailed on highly questionable grounds – but once freed they will try to reassert their leadership of those parties, which will probably undermine the fragile unity of the coalition.

Nothing the new opposition-dominated legislature does in the short term can change the dire economic situation. Maduro will still control the executive branch, with a presidential mandate that extends into 2019 – unless the opposition forces a recall referendum on his presidency, which it can legally do by next April. The “experiment” is over, but the crisis isn’t.
To shorten to 725 words, omit paragraphs 7 and 11. (“The work…oil”; and “The sheer…seats”)

How Long Will the Oil Stay Cheap?

I’m in Alberta, the province that produces most of Canada’s oil, and there’s only one question on everybody’s lips. How long will the oil price stay down? It has fallen by more than half in the past nine months – West Texas Intermediate is $48 per barrel today – and further falls are predicted for the coming weeks.

This hits jobs and government revenues hard in big oil-producing centres like Alberta, Texas and the British North Sea, but its effects reach farther than that. “Clean” energy producers are seeing demand for their solar panels and windmills drop as oil gets more competitive. Electric cars, which were expected to make a major market breakthrough this year, are losing out to traditional gas-guzzlers that are now cheap to run again.

Countries that have become too dependent on oil revenues are in deep trouble, like Russia (where the rouble has lost half its value in six months) and Venezuela. Countries like India, which imports most of its oil, are getting a big economic boost from the lower oil price. So how long this goes on matters to a great many people.

The answer may lie in two key numbers. Saudi Arabia has $900 billion in cash reserves, so it can afford to keep the oil price low for at least a couple of years. The “frackers” who have added 4 million barrels/day to US oil production in the past five years (and effectively flooded the market) already owe an estimated $160 billion to the banks.

They will have to borrow a lot more to stay in business while the oil price is low, because almost none of them can make a profit at the current price. Production costs in the oil world are deep, dark secrets, but nobody believes that oil produced by hydraulic fracturing (“fracking”) comes in at less than $60-$70 per barrel.

The real struggle is between the frackers and Saudi Arabia, because the latter is the “swing producer” in OPEC (the Organisation of Petroleum-Exporting Countries), the cartel that has dominated the global oil market for the past fifty years.

All oil exporters want to keep the price high, but Saudi Arabia was the one OPEC member that could and would cut its production sharply for a while when an over-supply of oil in the market was driving prices down. It could afford to do that because it has a relatively small population, very large savings – and a cost of production so low that it can make some profit on its oil at almost any price.

But even the Saudis cannot work miracles. They can aim for maximum production or maximum price; they cannot do both at the same time. Normally they would cut production temporarily to get the price back up. This time they refused to cut production and let the price collapse, despite the anguished pleas of some other OPEC members that need money NOW.

The Saudis are thinking strategically. OPEC only controls about 30 percent of world oil production, which is a very low share for a cartel that seeks to control the price. If fracking continues to expand in the United States, then OPEC’s market share will fall even further. So it has to drive the frackers out of business now.

At first glance the Saudis look like sure winners, because they can live with low prices a lot longer than the deeply indebted frackers can. The banks that have lent the frackers so much money already won’t get it back if the industry implodes in a wave of bankruptcies, but they don’t want to throw good money after bad.

The real wild card here is the US government, which wants the “energy independence” that only more domestic oil production through fracking can provide. Will it let the American fracking industry go under, or will it give it the loan guarantees and direct subsidies that would let it wait the Saudis out?

Stupid question. Of course it will do what is necessary to save the fracking industry. Ideology goes out the window in a case like this: you can get bipartisan support in Washington for protecting a key American industry from “unfair” foreign competition. That will certainly be enough to keep the frackers in the game for another two or three years.

Meanwhile, the OPEC members that depend on oil income to keep large populations well fed and at least marginally content (e.g. Iran, Nigeria and Venezuela) will be facing massive public protest, and possibly even the threat of revolution. Their governments will be putting huge pressure on Saudi Arabia to save them by cutting production and driving the price back up.

It’s impossible to say how this game will end, but it’s pretty easy to say when. Two years ought to do it. Once the outcome is clear, the price of oil will start going back up no matter which side wins, but it will go up relatively slowly. We are unlikely to see $100-a-barrel oil again before 2020 at the earliest.
To shorten to 725 words, omit paragraphs 9 and 13. (“The Saudis…now”; and “Meanwhile…up”)