How One US Oil Company Is Wrecking Venezuela

Today’s video was super tough to put together. Back in the early days of this channel I had a gloriously scatter-shot approach. I would just put up a video on whatever bugged me that week. I would jump around from exciting poverty solutions in Colorado, to how much I disliked Rick Santorum and Mike Huckabee, to in depth theories about the fascist underpinnings of Batman V. Superman. I’m honestly a bit surprised by how well all of these hold up. I think it’s because so much of how issues (and films!) are covered is so surface and superficial, that bringing any context at all to them makes for pretty good videos. That said, I’ve got a video or two, on Iraq specifically, that I don’t think holds up all that well.

In recent years the focus of the channel has changed. I dive in deep on what’s going on in certain countries like Turkey, Saudi Arabia, Syria or Yemen. This new, in depth approach has been great for the channel, and I think it also makes for much better videos. When something comes up with one of those countries, I usually have a pretty good idea of what I want to say, and I usually have some good, under-covered context to add to the conversation. Writing those scripts rarely takes more than 5 or 6 hours. My research on those countries is constantly on-going, and I don’t have to think too hard to put together something I’m proud of.

This one was different. I don’t claim to be an expert in anything, I only promise to do a better job than any cable news channel. This is super easy with the countries I’ve been covering for years. Venezuela is new for me. For years I’ve wanted to do more Latin America coverage, but I haven’t had the time to do the in depth reading that is necessary. It’s impossible to avoid having an opinion on Venezuela of course, but they are not really “MY” opinions. It’s what I’ve been force fed by other news sources. That made writing this one super tough. I had to try to cut through the layers of bullshit and say something original. The story of what’s really behind Venezuela’s drop in oil production was one I’ve wanted to tell since May, but the framing was super difficult. I just don’t have the necessary context, which I hope I made clear… Today’s video went through multiple drafts over multiple weeks. I hope you think it was worth the wait!

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Video Transcript after the jump…

Hey there. Today we’re going to be talking about an aspect of the Venezuela crisis that hasn’t gotten enough attention. The country has been in trouble for years now. The model of government that the Venezuelan people chose simply doesn’t work in the world of low oil prices. The US reaction has mostly just been to gloat. But in recent months, Venezuela has become a region wide crisis. The country is literally starving, and it is estimated that 2.3 Million Venezuelans have fled the country potentially destabilizing it’s neighbors. The conversation in the United States is shifting, and the war hawks are now circling.

We really have to question, how long can this be sustainable? At some point Maduro is going to have to be dealt with. I have long said that it’s time for Maduro to go, but you can look at all of these people. You can look at the thousands of people that escape Venezuela every day, and you can realize that they are begging for help. They are begging for a change. They are begging for Maduro to go, and they need help…

In that interview US Ambassador to the United Nations Nikki Haley stopped short of saying what she means, but noted Republican war hawk Marco Rubio made this explicit in a Spanish-language interview just a couple weeks back.

This statement is very carefully worded as well, but it makes it clear that Rubio now views Venezuela as a threat to the United States. And if it’s a threat, then armed force can be used. Intervention is now very much on the table. Trump is reportedly open to this idea as well, and last week it was revealed that his officials have already been meeting with rebel officers of the Venezuelan military. Any kind of intervention in Cuba is a horrifyingly stupid idea.

We’re still in the early days, the war hawks are just floating the idea to see how it plays. But we need to shut this kind of talk down, and shut it down now. A military intervention would cost tens of billions of dollars, and destroy the US’s already abysmal reputation in Latin America. It would also turn Chavez and Maduro into heroes, completely validating everything they said about the US Imperialists. The US war hawks are beginning to claim that there’s no alternative to invasion. That claim depends on a very incomplete story about what has happened to Venezuela. In the US mass media it’s all about the government, but the financial news tells a very different story.

Now I’m not going to weigh in on the Bolivarian Revolution in Venezuela, or the legacy of Hugo Chavez. My experience of Middle East politics tells me that what the New York Times and Fox News tells us about a country is rarely the whole truth. There’s a lot more going on in Venezuela than just Socialism, and I can’t bring to myself completely condemn Chavez, a guy who seems to have been legitimately loved by many of his people. Maduro is a lot easier to condemn. I may do a series on Venezuela at some point, but I’d have to read a whole bunch of books first.

I have skimmed a few of the defenses of Chavez and Maduro though, and I have got to say, they are not very convincing. They try to sell falling oil prices as some kind of US conspiracy against Venezuela, which is ridiculous. For one thing, the US is now the world’s top oil producer, which means we don’t want rock bottom prices. For another, the idea that billions of the world’s poor, in places like China and India, are obligated to keep paying peak oil prices for Venezuela’s socialist experiments strikes me as deeply wrong. But there is something that the United States definitely is doing to Venezuela right now, that also strikes me as pretty screwed up.

I think we need to separate the What Happened to Venezuela question into two separate questions. The first question is why is Venezuela failing? The second is Why is there a catastrophe in Venezuela right now? This question is worth asking because the crisis has gotten dramatically worse over the past year. From inflation, to crime, to oil production 2018 has been a whole lot worse than all the years before it.

My answer to the first question would be yes, Chavez and Maduro are almost certainly responsible for the country’s long-term decline. Venezuela would not be in this situation without their government’s policies. But when we turn to the second question, what happened to create this year’s crisis, the answer is not so straightforward.

Oil prices have recovered a bit from their 2016 lows. It’s not enough to fund a 2008 style spending spree, but Venezuelans should not be starving. The root of the right now crisis is the collapse of PVDSA, the Venezuelan state oil company. Venezuelan oil production has been plummeting in 2018. This is not because of socialism, or PVDSA mismanagement, this is something different, that should be much easier to fix.

To be clear, much of what I’ve read leads me to believe that Chavez and Maduro did ruin PVDSA. They killed the golden goose. It was once a very well run company. Venezuela’s leaders politicized it, reduced its independence, and diverted the funds it needed for maintenance and expansion to other uses. Venezuela’s skilled oil workers are apparently now all working in Mexico. The long term fall of Venezuelan oil production is the Venezuelan government’s fault. But that’s not the cause of this year’s calamitous drop. And it’s that calamitous drop that has created the Venezuela crisis.

2018 isn’t a nightmare because of Venezuela’s government, it’s a nightmare because of a few court cases outside of Venezuela. In April of 2018, ConocoPhillips, an oil company, won an arbitration related to Venezuela’s nationalization of its projects in 2007. In May, ConocoPhillips seized PVDSA terminals and inventories in Curacao, with the permission of the courts there. Curacao is an important hub for Venezuela’s oil export industry. Venezuela’s oil production has been falling for a couple years now, but this action sent it off a cliff. Just last month, another court in the US state of Delaware ruled that a Canadian company can go after Citgo, the PVDSA owned company that distributes its products in the United States. This could make things much much worse.

Both of these court actions are the result of nationalizations that happened about a decade back. It’s clear to me that they are proceeding now because Venezuela is weak and easy to take advantage of. I’m no fan of nationalizing industries, but it’s worth thinking about what an incredible double standard these cases represent. Almost every petro-state in the world has nationalized foreign assets at some point, including many US allies. Some of them may have done a better job of compensating foreign companies than Venezuela, but not all of them did. These actions are the reason Venezuela is starving in 2018, and nobody outside of the financial press is talking about this.

ConocoPhillips and the other companies are succeeding. Venezuela is scraping together what little money it has to pay the companies off in a desperate attempt to get the oil flowing again. Who knows, maybe these companies have a right to this money, I’m no energy lawyer. But I’m pretty sure it’s deeply messed up that they are getting this money now. It’s creating a humanitarian crisis and a political crisis across an entire continent. This may not be a crime, but it’s definitely an atrocity.

Washington, DC’s war hawks are currently plotting to make this crisis infinitely worse. Like I said, I’m not an energy lawyer, but there should be a simpler solution here. Nobody’s looking for it. As we watch this disaster unfold, let’s be clear why the US military industrial complex will be doing whatever it’s going to do. It’s not because Venezuelans are starving, or because refugees are destabilizing other countries. It’s because a few oil and mining interests want to get paid.

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