Tug of war

Dictator Delcy and wannabe dictator Donald are locked in a tug of war (Source: here)

At first sight, it would seem that Trump holds all the cards in Venezuela. He just kidnapped the country's president and his tanker blockade prevents Venezuela from exporting oil, so the Venezuelan government will soon run is out of Dollars. When that happens, Venezuela will no longer be able to import consumer and investment goods. The economy will collapse and the Venezuelan army grow restless. This leaves Acting President Delcy Rodríguez with a simple if unenviable choice: do what Trump demands and open Venezuela's oil fields to the US oil giants, or risk the government falling, which could lead to new elections, a US-friendly government under Maria Corona Machado, and a return of the US oil giants. Both scenarios are bad for Delcy Both scenarios are great for Big Oil.

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Yet, things may not be quite this simple. It is interesting, for example, that so far Big Oil, which is no stranger to operating in dodgy postcodes, has been reluctant to commit in public to investing big in Venezuela. Today’s meeting between Trump and Big Oil is important, because it may throw more light on Big Oil's appetite for Venezuela. I suspect they will be lukewarm, at best.

If Big Oil hesitates, there may be several reasons. For one, Big Oil knows Chavismo is not just going to roll over and die. Trump just struck a deal with Caracas to get rid of President Nicolás Maduro, so Big Oil may conclude that Chavismo is relatively secure, at least for now.

Big Oil will also be aware that Delcy Rodríguez now has convenient 'evidence' that Chavismo's long-standing claim that US imperialism poses a real threat to Venezuelans was correct all along. After all, the gringos just abducted their president!

It is naive to imagine that a seasoned political operator like Delcy Rodríguez will not, if required, use the abduction to make the case that Venezuela is under siege, giving the government justification for imposing draconian austerity. Nor should anyone doubt Chavismo’s willingness to do so; they could hold on to power longer than anyone imagines.

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Why does that matter? In my view, Venezuela's ability to hold out against Trump's blockade is the critical variable here. The longer Venezuela holds on, the more likely it is to find alternative ways to export oil. If the stand-off extends into years, Venezuela could even develop ways to ship oil overland to Colombia, Guyana, and Brazil all of which are oil exporters, who could easily re-brand Venezuelan crude and sell it as their own.

No wonder Trump is suddenly warming to Colombia's socialist President Gustavo Petro.

Venezuela may even be able to sell oil via one or more of the guerrilla groups that grow coca in the jungles around Venezuela. We have seen such transactions in Northern Syria, in central Africa, and other places with weak governance, so why not in Venezuela, where the government is known to have excellent ties to the drug cartels?

Of course, the ability to export via neighbours and drug lords depends in part on the political leanings of the governments and drug lords in question. However, it matters at least as much how much Venezuela is willing to pay for assistance.

Quite a lot, I imagine.

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Iran is an interesting comparison here. Iran has been an international pariah for nearly five decades. The regime in Teheran is currently struggling with yet another domestic crisis, but it is worth remembering that dating back to 1979 Iran has dealt with numerous such revolts in addition to crippling sanctions and frequent attacks by foreign powers. Iran's regime even survived a devastating 8-year war with Iraq.

Iran survived through repression and by developing a range of clandestine methods for selling oil, including shadow shipping networks, product rebranding, applying deep discounts, and making use of very complex financing systems. What is to prevent Venezuela from doing the same, learning from Iran with which Venezuela happens to have very strong ties?

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The other thing to bear in mind is that Venezuela is not the only party under time pressure here. So is Trump. Trump needs to deliver quickly, especially in a mid-term election year. Big Oil will only be interested in Venezuela if it can make money. To this end, Big Oil must book proven reserves and sell Venezuelan oil, ideally in that order. However, Big Oil is currently a very long way from booking reserves in Venezuela, let alone producing oil (except for Chevron). US oil companies would have to plough enormous amounts of money into Venezuela over a long period before the first barrel of oil rises from the Orinoco Belt. Investment on such a scale is a pipe dream as long as Trump confiscates tankers, threatens air strikes, and maintains a blockade of Venezuelan oil exports.

Meanwhile, Trump's options are fewer than just a week ago. Following yesterday’s Senate vote, Trump is now required to obtain Congressional approval before further military adventures in Venezuela. It looks doubtful that he can secure political support for a fully-fledged invasion. Another Maduro-style abduction also looks doubtful, because every political leader in Latin America is right now putting measures in place to prevent precisely that.

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Which means we are in a tug of war. Big fat Donald Trump at one end of the rope and the slight, but tough Delcy Rodríguez at the other end. Time will tell who wins.

For now, Delcy Rodríguez has decided to buy time by playing along with Trump, offering him flattery, cosmetic gestures, and long-hanging fruits. Trump appears to be taking the bait. But make no mistake, being crooked criminals and world-class thieves the top leaders of Chavismo will go to the grave rather than give up control of PDVSA and power. They understand they are in an existential battle and that they have very little time. Delcy Rodríguez also understands that she is not entirely without weapons of her own; she can make life very difficult for Chevron on the ground in Venezuela and, ultimately, she can nationalise the company, if things get really bad.

In conclusion, the battle between dictator Delcy and wannabe dictator Donald is a market rather than a done deal.

Place your chips!

The End