Global Affairs and the Political Earthquake of January 2019 in Venezuela Juan Pablo Farah

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All views expressed in the Latin America Policy Journal are those of the authors or the interviewees only and do not represent the views of Harvard University, the John F. Kennedy School of Government at Harvard University, the staff of the Latin America Policy Journal, or any associates of the Journal. All errors are authors’.

©2019 by the President and Fellows of Harvard College. All rights reserved. Except as otherwise specified, no article or portion herein is to be reproduced or adapted to other works without the express written consent of the editors of the Latin America Policy Journal. LATIN AMERICA POLICY JOURNAL SPRING 2019 ARTICLES Plate Tectonics: Global Affairs and the Political Earthquake of January 2019 in Venezuela Juan Pablo Farah

Juan P. Farah is a Venezuelan joint Master in Public Administration in International Development / Juris Doctor candidate at Harvard. Before starting his graduate studies, Mr. Farah worked in finance and economics. Most of his career was spent at the Fiscal Affairs Department of the International Monetary Fund, where he worked extensively with resource- rich countries and fiscal distress situations. His research interests span macroeconomics, sovereign debt issues, and international relations.

The events that started in January 2019 infatuated with Venezuela’s geography in Venezuela are driven primarily by Ven- and natural resources. The Venezuelan ezuelans’ desire for change, but for many military repelled these incursions. Just international observers and social media over 30 years later, the island nation commentators natural resource wealth found the regional ally it yearned for took the spotlight. Whether it was a cri- when Hugo Chavez won the 1998 tique of the United States’ involvement or presidential election. a thesis to explain the interests of other neighbors and major powers, oil seemed Over the course of the following 20 to be on the top of everyone’s mind. To years, Chavez and his hand-picked succes- be sure, oil is indeed a major part of the sor, Nicolas Maduro, cultivated an ideolog- story of Venezuela, and a strong reason for ical project: Socialism of the 21st Century, global and regional powers to be interested which entailed a full reshuffling of Vene- in the country. However, it may not be the zuela’s foreign and military affairs. Vene- main reason. Oil is a resource—a means— zuela’s political and economic shift and its not an end in itself. Few observers followed alliance with Cuba changed the dynam- longitudinally the events that tied Venezu- ics of the region, and advanced steadily ela’s gordian knot. Ultimately, the events towards challenging the United States’ pri- that are still shaking Venezuela at the time macy in the region. of writing this piece relate to the security and stability of the Latin American region, Simultaneously, Russia resurged as well as the global balance of power. onto the world stage, eager to assert its status as a global power. China rose Energy and a strategic location have to become the largest economy in historically made Venezuela a geopoliti- the world,1 with the clear goal of being the cal prize. The Caribbean nation’s virtually dominant player in global trade. Lastly, limitless energy supply, natural deep-water American public opinion, and arguably bays, and advantaged position on the universal public opinion, grew suspi- Caribbean make it a perfect enclave from cious of the role of the United States in which to project power. The Panama Canal the world order—particularly during and as well as most islands of the Caribbean are after the George W. Bush administra- within immediate reach of its bases. tion. Soon after, the Obama administration took small steps to limit American In 1963 and 1967, Cuba attempted influence in other countries’ affairs— to take over or install an allied govern- with some notable exceptions, of ment by sending expeditionary forces to course. Tensions proliferated as one Venezuela. It was a coveted asset for the world power retreated slowly and two regional communist power, which was [re]emerged.

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SOCIALISM OF THE 21ST CENTURY AND administrations became, for all practical THE REGION purposes, one and the same. This fact was recognized by American politicians at the The first Sao Paulo Forum was held in 1990. onset of the Trump administration, which It was organized by the Brazilian Workers’ during its first two years consistently Party—Luiz Inacio Lula Da Silva’s party— pointed at Venezuela and Cuba as threats and originally named “Meeting of Left and to hemispheric stability. Anti-Imperialist Parties and Organizations of Latin America.” This movement came to Nicaragua had a similar relationship dominate much of Latin American politics with Cuba. It received operatives and train- for the better part of the first two decades of ing for many years. These three admin- the 2000s. Hugo Chavez’s Bolivarian revo- istrations constituted what John Bolton lution was undisputedly leading the charge. dubbed “the troika of tyranny.” Their political interests have been aligned more This period deserves extensive study. closely than those of any other countries in The whole of the movement should not the region, and they led the charge against be characterized exclusively by the policy the United States on multiple fronts. blunders of the Venezuelan administration that led to a humanitarian crisis. How- Most recently, several Latin American ever, it is true that the organizations in governments have turned away from attendance, many of which would become this current. Starting with the election of governments in the region or import- Mauricio Macri in Argentina, the region’s ant political actors, had some common politics shifted away from the Socialism denominators. of the 21st Century. Most importantly, Venezuela’s two largest neighbors, Colom- One of the dominant shared values was bia and Brazil, elected right-wing presi- anti-imperialism, which in Latin America dents. This pivot would prove crucial in has often been expressed as opposition to catalyzing the events of January 2019 in the United States and European powers. Venezuela. Chavez and Cuba set out to build a new regional paradigm leveraging this shared feeling and Venezuelan petrodollars: STRATEGIC PARTNERSHIPS: MORE THAN Unasur and ALBA were founded,2 and AN IDEOLOGICAL CONNECTION regional integration was by many stan- dards deepened. Mercosur was brought In addition to steering much of the region back to the fore, after losing much luster in into an adversarial position with the the early 2000s, as an alternative to foster United States, the Bolivarian Revolution trade within the region rather than with built bridges with other global actors to the US. Venezuela joined it, though it did undergird this position. Socialism of the so under dubious circumstances as Para- 21st Century armed Venezuela. It was of guay had not ratified its admission.3 paramount importance to the administration to seek military superiority in The main ideological architects of this the region. More importantly, pivoting movement were the Cuban and Venezuelan away from American armament was of governments. During these years, coop- the essence. The narrative, built around eration between them grew to a symbi- enmity for the empire, needed to be legit- otic level. Thousands of operatives from imized with actions. the island moved to Venezuela to man- age important security functions, nota- In an attempt to stimulate domestic bly intelligence and counterintelligence production of weapons, Hugo Chavez operations.4 The Cuban and Maduro heavily funded CAVIM, the state-owned

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weapons manufacturer. Cooperation BRAZIL: Brazil and Venezuela were agreements in diverse fields (military, aligned during the Lula-Chavez period. knowledge-sharing, agriculture) were However, Jair Bolsonaro’s win in the 2018 signed with Iran.5 The Iranian and Vene- elections and the refugee crisis along zuelan governments even formed several Brazil’s northern border turned the tables. joint ventures dedicated to manufactur- The southern giant is interested in a stable ing. Relations between Tehran and Cara- neighborhood and an alignment with the cas warmed up and, with them, alleged United States. ties with Hezbollah emerged. It has been pointed out that the Quds Force, Iran’s CUBA: Survival (or failure) of the Maduro elite fighting unit, was in Venezuela train- regime represents an existential threat for ing the Venezuelan forces and other sub- Communist Party rule in Cuba. The island versive groups in asymmetric war.6 relies on Venezuela for energy and economic aid. Also importantly, Cuba has used Vene- For Russian weapons manufacturers, zuela’s influence in the region, particularly Venezuela became a key market. Acquisi- in the Caribbean, to affect policy for almost tions from Russia included Su-30 fighter 20 years. President Díaz-Canel was one of jets, Mil Mi-28 and Mil Mi-35 attack heli- the four foreign presidents who attended copters, and S-300 mobile air defense Maduro’s inauguration on 10 January 2019. systems (a predecessor to the S-400, which made front-page news as Russia MEXICO: Former president Peña Nieto deployed them to create what the Wall maintained a position of relative diplo- Street Journal called “the new iron cur- matic pressure. However, Mexico declined tain”).7 More recently, Venezuela turned to join the Lima Group, led by Canada and to China for lighter weapon purchases and Colombia, which undertook a variety of new aircraft. diplomatic actions intended to pressure the Maduro regime to yield spaces to the dem- ocratically elected National Assembly and SOME PLAYERS AND THEIR INTERESTS to call for new presidential elections. The ideological affinity between the new Mexi- COLOMBIA: The “sister” republic, as it is often can president, Mr. Lopez Obrador, and the called in Venezuela, is arguably the coun- Chavez-Maduro pair is evident. However, try most directly affected by the Venezue- Mexico has ostensibly needed to maintain lan debacle. There are multiple estimates maneuverability in the face of what could for the number of migrants and refugees be a rocky relationship between the Lopez received there. Most point at a figure of Obrador and Trump administrations. one million or more.8 Colombia’s capacity to absorb such an influx is limited. Addi- CHINA: Ever the pragmatists, the Chinese tionally, Venezuela has offered haven to have insisted on their position of neutral- the guerrillas the Colombian government ity and non-interventionism. Their inter- fought against for over 50 years; among ests are mostly commercial. Close to $20 them, the ELN, which bombed a police billion was still owed by Venezuela on 1 academy on 17 January 2019.9 The Colom- February 2019, out of a total of $50 billion bian government thus opposes Maduro’s in loans taken over the course of 12 years.11 regime and played a protagonist role in Moreover, numerous investments have orchestrating the events that started on been made. Several joint ventures between 11 January 2019 in Venezuela.10 Colombia’s China and PDVSA own vast swathes of the embassy in Washington, DC served as a Orinoco oil belt, the world’s single largest center of operations for opposition rep- repository of oil. However, Venezuela is resentatives, and Colombian diplomats one out of a hundred countries that have brought to the attention of American polit- borrowed money from China over the last ical circles the risks of a rogue Venezuela. 16 years.12 It would be impossible to take

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any position other than neutrality with within the United States are prohibited: a portfolio so large. It would be a diplo- . . . matic conundrum for China. (iii) the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any THE PLATES THAT COLLIDED entity in which the Government of Vene- zuela has a 50 percent or greater owner- While China is one of the most important ship interest.14 players and its influence in Venezuela and This means that any legal action to attach the region could be decisive, it remained CITGO shares borne from a default after largely focused on collecting what is owed May 2018 would be stopped. Later, General rather than expanding its relationship License 5 was issued to remove incentives with the Maduro regime. Cuba, Nicaragua, to default on the other debts collateralized and Venezuela launched a campaign that with CITGO shares by the Maduro regime; considerably reduced the United States’ that is, the PDVSA 2020 8.5 percent influence on the region and were joined bond.15 This general license allows for the by Brazil, Argentina, and Ecuador for attachment of assets of the government a time. Those regional dynamics were part of Venezuela by the holders of this bond. of the collision, but, at this ultimate stage, Additionally, the Treasury department not its driving force. The main forces on states that “OFAC would consider license either side of this conflict are Russia and applications seeking to attach and execute the United States. With the notable role of against such equity interests on a case-by- Colombia as a catalyst for the reactions of case basis.”16 Such a request by Rosneft is the hemisphere, other actors have either likely to be denied, particularly because fallen in line or tried to stay neutral. General License 5 is only applicable to holders of this particular bond. The Chavez-Maduro regime’s relationship with Russia has evolved from Rosneft also controls at least 13 percent weapons buyer, to debtor, to a sort of client of oil reserves in Venezuela.17 As mentioned state. There are two Moscow-based actors above, however, while oil is important, it is with different interests in Venezuela: the not everything. The Russian government’s Russian government and Rosneft. The for- strategy for Venezuela morphed into mer had military and geo-strategic inter- a two-pronged approach that became more ests, while Rosneft had north of $10 billion geopolitical in nature in recent years. Even in investments and loans, including a loan its oil interests were used as a strategic tool collateralized with shares of US-based but to change the balance of power, but oil as Venezuelan-owned CITGO.13 a tool for tilting the balance of power has its limits. The potential for 49.9 percent of CITGO falling in the hands of Rosneft On 10 December 2018, two TU-160 got some attention in Washington, DC in nuclear-capable Russian strategic bombers mid-2018. The sanctions imposed by the landed in Venezuela’s main international United States government on Venezuela airport as a show of force and support for starting in May 2018 served the dual pur- the regime. While US officials expressed pose of pressuring the dictator and insur- their anger at the move, the Russo-Vene- ing the US against a Venezuelan default on zuelan patrols over the Caribbean went the Rosneft loan (since CITGO is seen as ahead as scheduled. On 12 December 2018, a strategic asset). Section 1(a)(iii) of Execu- rumors circulated of Venezuela granting tive Order 13835 reads: Russian aircraft a de facto18 Caribbean (a) All transactions related to, provision outpost on La Orchila island.19 This news of financing for, and other dealings in the was surprisingly underreported despite its following by a United States person or great significance.

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Russia already has considerable forces The line that the Bolivarian Revolution on the Arctic Circle, and a variety of national pushed left was pushed back by a coali- security experts have warned the US about tion of countries which, in this instance, the perils of that buildup.20 Deployment agreed strongly with the US and Canada. of strategic bombers to the Caribbean Mexico’s conspicuous neutrality remained would dramatically change the balance a source of uncertainty at the time of writ- of power. It would open up the possibility of ing, and Cuba’s options looked limited as Russian power projection onto the western the Trump administration set its sights on hemisphere and set up a potential pincer reasserting a modernized version of the movement on the US from north and south. Monroe Doctrine. This is especially critical as both countries have considered withdrawing from the Ultimately, two powers find them- intermediate-range nuclear forces treaty selves at odds. In recent years, tensions of 1987. The door to a renewed Cold War is between the United States and Russia being opened. have flared up around the globe and on many dimensions. It may be that this time On 15 December 2018, the bombers Russia pushed too far. Tectonic plates set their course back to Russia. Interest- can move for a long time until a collision ingly, on 19 December 2018, President triggers an earthquake, and while colli- Trump suddenly announced the US was sions normally happen along fault lines, withdrawing from Syria. It is provok- epicenters may vary. Latin America, with ing to think that the two most recent its natural affinity for the left and geo- stages on which US-Russia tensions sur- graphic proximity to the United States, has faced are connected, though nothing been a fault line since the Cold War. The other than the order of events suggests it. epicenter this time just happened to be One month later the Venezuelan parlia- Venezuela. Whatever the undercurrents, ment, based on the Venezuelan constitu- most Venezuelans welcomed the shift. tion and supported by the US, the Lima Our answer to all the realpolitik framing Group, and others, declared Maduro a the actions taken by much of the interna- usurper and demanded a transitional tional community can be summarized in government and free and fair elections. a phrase: Well, happy coincidence then, we Actions from the US and Russian fronts want Maduro out. followed to legitimize their preferred leader for Venezuela. NOTES FINAL THOUGHTS 1Using PPP dollars. International Monetary Fund, World Economic Outlook Database, updated Octo- ber 2018, https://www.imf.org/external/pubs/ft/ The actions taken by the international weo/2018/02/weodata/download.aspx. community at the dawn of 2019 with 2These two are intergovernmental organiza- respect to Venezuela do not exclusively tions championed by Hugo Chavez to foster obey interests in Venezuelan oil. The focus South American and Caribbean integration for the main regional actors has been through trade, culture, finance, and education. the pursuit of stability and security. This ALBA is particularly interesting as it hosts the charge is being led by Colombia, which Petrocaribe arrangement, under which Vene- undoubtedly has taken the heaviest toll zuela supplies a number of Caribbean nations from the Venezuelan humanitarian crisis. with oil. Commercial and energy considerations 3In 2012, Paraguay was temporarily suspended are imperative for some countries, but the and Venezuela’s admission went ahead. The move struggle will ultimately be about the balance coordinated by Argentina, Brazil, and Uruguay was called by some observers “the second war of the Tri- of power in the region and the world. ple Alliance,” in reference to the War of the Triple

92 LATIN AMERICA POLICY JOURNAL SPRING 2019 ARTICLES Alliance, which pitted Paraguay against the three as Loan Collateral,” Reuters, 23 December 2016, aforementioned nation-states in 1864. https://www.reuters.com/article/venezuela-pdv- 4Kirk Semple, “With Spies and Other Operatives, sa-idUSL1N1EI1FO. a Nation Looms Over Venezuela’s Crisis: Cuba,” 14Office of the President of the United States, “Pro- The New York Times, 26 January 2019, https://www. hibiting Certain Additional Transactions With nytimes.com/2019/01/26/world/americas/venezu- Respect to Venezuela,” Executive Order 13835, Fed- ela-cuba-oil.html. eral Register 83, no. 101 (21 May 2018). 5Leopoldo E. Colmenares, “Las relaciones entre 15Department of the Treasury of the United States, Irán y Venezuela: implicaciones para el gobierno Office of Foreign Assets Control, “General License venezolano,” Friedrich Ebert Stiftung Policy Paper No. 5—Authorizing Certain Transactions Related no. 35, p. 10, https://library.fes.de/pdf-files/bueros/ to the Petroleos de Venezuela SA 2020 8.5 Percent la-seguridad/08265.pdf. Bond,” 19 July 2018; Department of the Treasury of 6Sean Goforth, Axis of Unity: Venezuela, Iran & the the United States, “OFAC FAQs: Other Sanctions Threat to America (Sterling, Virginia: Potomac Programs | What Does Venezuela-Related General Books, 2011). License 5 Authorize?” updated 11 February 2019, https://www.treasury.gov/resource-center/faqs/ 7Thomas Grove, “The New Iron Curtain: Rus- Sanctions/Pages/faq_other.aspx#595. sian Missile Defense Challenges U.S. Air Power,” 16 The Wall Street Journal, 23 January 2019, https:// Department of the Treasury of the United States, www.wsj.com/articles/russias-missile-defense- Office of Foreign Assets Control, “General License draws-a-new-iron-curtain-against-u-s-mili- No. 5—Authorizing Certain Transactions Related tary-11548255438. to the Petroleos de Venezuela SA 2020 8.5 Percent Bond,” 19 July 2018; Department of the Treasury of 8United Nations High Commissioner for Refugees, the United States, “OFAC FAQs: Other Sanctions “Number of Refugees and Migrants From Venezu- Programs | What Does Venezuela-Related General ela Reaches 3 Million,” 8 November 2018, https:// License 5 Authorize?” updated 11 February 2019, www.unhcr.org/news/press/2018/11/5be4192b4/ https://www.treasury.gov/resource-center/faqs/ number-refugees-migrants- Sanctions/Pages/faq_other.aspx#595. venezuela-reaches-3-million.html. 17Anthony Faiola and Karen DeYoung, “In Ven- 9InSight Crime, “ELN in Venezuela,” updated 17 ezuela, Russia Pockets Key Energy Assets in November 2015, https://www.insightcrime.org/ Exchange for Cash Bailouts,” The Washington venezuela-organized-crime-news/eln-in-venezu- Post, 24 December 2018, https://www.wash- ela/; “Carro bomba en Bogotá: el ELN reivindica la ingtonpost.com/world/national-security/ autoría del atentado que dejó 21 muertos en Bogotá,” in-venezuela-russia-pockets-key-energy-as- BBC News, 21 January 2019, https://www.bbc.com/ sets-in-exchange-for-cash-bailouts/2018/12/20/ mundo/noticias-america-latina-46944984. da458db6-f403-11e8-80d0-f7e1948d55f4_ 10Cesar A. Sabogal, “Así planeó Colombia la estrate- story.html?noredirect=on&utm_term gia contra Maduro,” El Espectador, 2 February =.f871ba525a50. 2019, https://www.elespectador.com/noticias/el- 18Venezuelan law does not allow for foreign bases; mundo/asi-planeo-colombia-la-estrategia-con- however, it can “temporarily host” a foreign force. tra-maduro-articulo-837534. 19“Russia eyes Venezuela base for aircraft—Neza- 11Jeremy Page, “China Counts the Costs of Its visimaya Gazeta,” Reuters, 12 December 2018, Big Bet on Venezuela,” 1 February 2019, The Wall https://www.reuters.com/article/media-russia- Street Journal, https://www.wsj.com/articles/chi- eyes-venezuela-base-for-air/media-russia- na-counts-the-costs-of-its-big-bet-on-venezu- eyes-venezuela-base-for-aircraft-nezavisima- ela-11549038825. ya-gazeta-idUSL8N1YH1KC. 12Carmen Reinhart, “Exposing China’s Overseas 20Robbie Gramer, “Here’s What Russia’s Military Lending,” Project Syndicate, 31 October 2018, Build-Up in the Arctic Looks Like,” Foreign Pol- https://www.project-syndicate.org/commentary/ icy, 25 January 2017, https://foreignpolicy.com/ china-opaque-foreign-development-loans-by-car- 2017/01/25/heres-what-russias-military-build- men-reinhart-2018-10. up-in-the-arctic-looks-like-trump-oil-military- 13“Venezuela’s PDVSA Uses 49.9 pct Citgo Stake high-north-infographic-map/.