A COMMON refrain among defenders of the Venezuelan regime is that the country’s problems are somehow caused by the USA. Precisely the opposite is true. The USA is the main source of the hard cash that keeps the Chavista regime afloat.
The issue of US-Venezuelan sanctions was in the news again this week after the US Government sanctioned for corruption Cilia Flores– leading Chavista and wife of President Maduro. It didn’t even stop her from travelling to the UN in New York together with her husband.
Some 45 per cent of Venezuelan crude oil is exported to the USA and analysts expect that proportion to rise, even as total Venezuelan production continues to fall. “US refiners are among the few customers that still remit cash payments for Venezuelan crude oil,” commented Lejla Viller, an analyst with the US Energy Information Administration. Another analyst concluded that “the US is currently the ATM cash machine for Venezuela.”
The main threat to the regime is in fact its own incompetent management of the Venezuelan oil industry. The Chavistas’ policies are killing the oil sector, despite Venezuela having the largest oil reserves in the world. Overall oil production has now fallen below the levels of 50 years ago and Venezuela now produces less oil and gas than the US State of Dakota.
The rot began with Chavez’s firing of 18,000 competent staff of the Venezuelan state oil company PDVSA and their replacement with untrained Chavistas, combined with the transfer of control of PDVSA to the President’s office. Rather than investing money in its essential oil industry, the Chavistas used oil funds to buy short-term support among the population and to enrich themselves personally.
The US Government could of course prevent anyone from buying Venezuelan oil in the USA. That would likely be the final blow to the weakening regime. But it has not done so, knowing that the humanitarian crisis would worsen and that US oil prices would rise. Moreover the US’s position as the main source of income for the regime gives it important leverage. Were the regime to move from merely starving its population to actively trying to kill them in large numbers, the US would be able to wield a big stick.
In the meantime, Venezuela receives over $1.1 billion every month from the US.
Supporters of the Chavista regime should stop peddling the fantasy that US sanctions are somehow to blame for Venezuela’s tragedy and instead appreciate that the US is the only reason why Venezuela’s regime has not already collapsed.
This article was first published on the Adam Smith Institute blog.