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Venezuela And the "Curse of Oil"

15 March 2014

By Amir Taheri

With attention focused on dramatic events in Ukraine, another anti-despotic uprising at the other end of the earth has not received the media treatment it deserves. And yet the struggle in this second battlefield for freedom, Venezuela, could have a greater impact on reshaping international politics. Democratic change in Venezuela could reverse the Leftist-autocratic trend that started in Latin America almost two decades ago and inspire change in Argentina, Ecuador, Nicaragua and Bolivia, and even reorient the political trajectory of neighboring Brazil and its soft-Left regime.

At first glance, Venezuela should be one of the world's most prosperous nations. It owns the world's fifth-largest oil reserves and a fair share of the North American energy market. It also has great agricultural potential in high-value cash crops. Its population of around 25 million is neither too big to pose problems in dealing with deep-rooted mass poverty nor too small to preclude the emergence of a strong internal market.

And yet, today Venezuela is an example of under-achievement, if not outright failure. As the bloody events of last week showed, it may even be heading for civil war.

I first visited Venezuela in the 1970s to interview then-President Carlos Andrés Pérez and was shocked by the belt of poverty that surrounded the capital, Caracas. The ruling elite, mostly of Spanish and Italian descent, behaved as the European upper classes are said to have done in the 18th and 19th centuries, regarding the mass of the poor with a mixture of fear and disdain.
As I learned more about the Venezuelan paradox I began to wonder whether it was not yet another victim of the notorious "curse of oil".

According to an adage attributed to France's top oil man, Christophe de Margerie, the ideal oil country is one that "has big oil reserves and a small population." In the 1970s Venezuela fit that definition. However, what de Margerie presumably did not take into account was the nefarious effect of a huge oil income controlled by narrow elites in conjunction with transnational cartels. Thus, the more oil Venezuela exported the poorer its people became in relative terms.

The ruling elites had no incentive to take risks by attempting industrial and agricultural development. They didn't need the people as a workforce because oil production requires a small number of employees, mostly foreigners. Nor did they need the people to vote for them because there were either no elections or if such exercises were attempted the results could be fixed. Worse still, the rentier elites did not need the people as taxpayers to finance the state. Oil income paid the expenses of the military, the security and the bureaucracy. It also kept the gravy train running at top speed. Finally, the people were not even needed to fight for the country when necessary. That would be done by the forces of big powers interested in the free flow of oil.

So in 1999, when Colonel Hugo Chávez was swept to power on a tide of popular legitimacy, some of us hoped that Venezuela might get a better deal. How wrong we proved to be.

The same oil income that fed the monster of arrogant corruption under Pérez was now used to lubricate the wheels of Chávez's Socialist Bolivarian fantasies. Chávez realized that as long as oil income kept pouring in, he too did not need the people. He started with Robin Hood socialism, robbing from the rich to give to the poor. Soon, however, he noticed that it was now he and his extended entourage who were the rich who ought to be robbed. He turned to Stalinist centralized socialism sugar-coated with anti-Imperialist banalities.

Fifteen years later, and under Chávez's successor as president, Nicolás Maduro, Venezuela looks more like the scene of a car crash than a country. With inflation at 57 percent and unemployment topping 20 percent, the national economy, if there ever was such a thing, is adrift in uncharted waters. More than half the country suffers from food shortages and power cuts and water rationing are becoming the norm in some provinces.

Over the past 15 years more than 2.2 million Venezuelans have emigrated, among them hundreds of thousands of professionals. Instead, Venezuela has imported tens of thousands of people from Cuba, along with fugitive Colombian FARC terrorists. The Chavista regime also depends on support from a security network set up by Cuban intelligence, a 1,200-man Iranian military mission, and Hezbollah "volunteers" recruited among Middle Eastern communities across Latin American.

Despite its huge oil wealth, Venezuela is bottom of the list in terms of growth, development and diversification. In broader terms it is even behind chronically poor Islamic nations such as Pakistan and Egypt. However, there are areas where Venezuela is a world leader. Last year it registered more than 25,000 murders, making it first for homicides, ahead of Honduras and South Africa. And with 113 Cabinet ministers, Venezuela has robbed China of its top position as far as a top-heavy bureaucracy is concerned.

No one knows how the current Venezuelan crisis might end. The vast network of security and militia created could still be deployed to crush the popular revolt of unarmed civilians. However, one thing is certain: even though Maduro might not know it yet, the Chavist "revolution" is dead. A majority of Venezuelans, including many of those who initially backed Chavez, wish to move on. There are signs that the armed forces might not be prepared to kill people to keep Maduro in power. At the same time, however, an Egyptian-style military move in response to public protests might not be in the cards.

The best solution would be for a chunk of the ruling establishment to break away and promote a power-sharing formula with the opposition. This is what Maduro pretended to be aiming at when, earlier this week, he offered a national dialogue.

Getting out of the swamp of Chavismo, however, is only the first step. The real challenge Venezuela faces is how to get rid of the curse of oil.

Amir Taheri was born in Ahvaz, southwest Iran, and educated in Tehran, London and Paris. He was Executive Editor-in-Chief of the daily Kayhan in Iran (1972-79). In 1980-84, he was Middle East Editor for the Sunday Times. In 1984-92, he served as member of the Executive Board of the International Press Institute (IPI). Between 1980 and 2004, he was a contributor to the International Herald Tribune. He has written for the Wall Street Journal, the New York Post, the New York Times, the London Times, the French magazine Politique Internationale, and the German weekly Focus. Between 1989 and 2005, he was editorial writer for the German daily Die Welt. Taheri has published 11 books, some of which have been translated into 20 languages. He has been a columnist for Asharq Alawsat since 1987. Taheri's latest book "The Persian Night" is published by Encounter Books in London and New York.

 

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