Venezuela, the Oil-Rich Nation without Fuel

By Jorge Jraissati

Wednesday, June 03, 2020

 

There are just a handful of countries as blessed as Venezuela. It has the largest oil reserves of any country on Earth. It has abundant reserves of natural gas, coal, timber, and gold. And as if this weren’t enough, it also has miles of fertile land and an ideal geographical location to export all of its blessings. Yet, there is a popular joke around here that says: “Why was God so generous to us? He gave us everything, even perfect weather, and beautiful beaches. Well, because he also gave us our politicians and a society that has not been capable of taking care of its nation.”

 

Personally, I have always found this “joke” dangerously misleading, because it implies that Venezuela is a rich country in the first place. Countries are not rich because of their natural resources. Developed nations are rich because they have dynamic economies, with innovative private sectors, an impressive stock of human capital, and institutions that incentivize people to become responsible and productive citizens — plus governments willing to complement the market by providing infrastructure, collective security, a well-functioning educational system, and other public goods that are essential for economic development. In Venezuela, unfortunately, we have neither markets nor a well-designed and efficient public sector. This, rather than the gross mismanagement of our natural resources, is the reason we are undeveloped.

 

One need not look far for the proof. This year, Venezuela officially became the first resource-rich nation without fuel, in a crisis that has paralyzed the country like never before. Currently, fuel can only be procured on the black market, at a staggering price of nine dollars a gallon. This would be a worrisome situation for any country. But Venezuela’s minimum wage is less than five dollars a month, meaning virtually no Venezuelans can afford fuel. It’s the latest indignity in a years-long political crisis that has seen the country grow accustomed to daily power blackouts, an unreliable water supply, and chronic shortages of food and medicine.

 

According to the illegitimate Venezuelan government of Nicolas Maduro, Venezuelans should blame the United States for the fuel crisis. On repeated occasions, Maduro and his allies have declared that the United States’ financial sanctions have dramatically compromised Venezuela’s finances. Similarly, they say that sanctions have also blocked them from importing gasoline from abroad. This is an argument that has been used in the past to excuse other shortages. It ignores the fact that Venezuelans have been experiencing such shortages since 2013, long before the United States government even began talking about Venezuela.

 

To solve its fuel issue, the Maduro regime is partnering with another sanctioned nation. Just a couple of days ago, the Venezuelan government “welcomed” five Iranian vessels that sailed from the other side of the world just to bring about 1.5 million barrels of fuel to the country. This is an unholy alliance that the United States initially allowed but that it is now monitoring “with concern,” according to the head of the U.S. Military’s Southern Command, Admiral Craig Faller.

 

Washington’s “concern” is well-warranted, because Iran is not known for its geopolitical altruism; it usually has an ulterior motive for such actions. One hypothesis is that Tehran has designs on taking control of Venezuela’s oil industry, as it has already gained control of “El Palito,” the biggest refinery in the country. This would fit with Venezuela’s current Soviet-style “liberalization.” The Russians and Chinese are already operating in the Venezuelan oil industry. Perhaps Maduro has now added Iran into the mix.

 

Will the Iranian shipment solve Venezuela’s fuel crisis? Of course not. Iran’s 1.5 million barrels of gasoline will not last for long. If Venezuela maintains its current rationing system, which only supplies gas to officials, doctors, and privileged individuals, the shipment will be used up in 50 days. If the country attempts a return to the pre-rationing status quo, distributing the fuel more widely, it will last about two weeks. In both scenarios, the chronic Venezuelan shortage of fuel will continue after a brief interlude, and the Venezuelan economy will remain comatose.

 

The United States’ financial sanctions are not to blame for these intractable problems. The sanctions certainly decimated the finances of the Venezuelan regime, but they did not create this mess. Venezuela — with, again, the largest oil reserves on Earth — should be able to produce enough fuel not only for itself but also for regional export. Pre-sanctions, during the Hugo Chavez regime that lasted from 1998 to 2013, the oil revenues of the Venezuelan government exceeded 800 billion dollars. This is a staggering influx of capital for any developing nation of Venezuela’s size. Should we blame the United States for the mismanagement of those revenues also?

 

No. Instead, all roads lead to Nicolas Maduro, the corrupt elite that props him up, and the socialist economic system he inherited from Chavez and has done nothing to jettison. Venezuelans are now paying the price of years of corruption in their oil industry. Unless they find a way to achieve political change, the country will continue imploding, its migratory crisis will continue destabilizing Latin America, and its people, over 90 percent of whom already live in poverty, will continue to see their standard of living decline.