Mar 17, 2019 6 min read

Editor’s note: This is the first of two parts.

Although the people of Venezuela are suffering under the regime of Nicolás Maduro, he is not solely responsible for their suffering, and U.S. military intervention would be a huge mistake. Venezuela suffers from high unemployment and inflation, violent crime, a shortage of food and medicine, and an oppressive, authoritarian government. While there is currently bipartisan support in Congress for doing something about this situation, the Trump administration’s goal, immediate regime change, is more likely to cause harm than good.

The Trump administration is not concerned about the suffering of the Venezuelan people; that is just a pretext for other goals. There are many countries around the world that have humanitarian crises (Yemen, where we have been supporting the Saudis in their devastation of that country, would be the most obvious candidate for our humanitarian concern). Maduro’s political oppression is also not really the problem, either; there are many dictators who violently oppress their people, most of whom Trump admires and has befriended (Russia’s Vladimir Putin, North Korea’s Kim Jong Un, Rodrigo Duterte of the Philippines). There are two reasons that the Trump administration wants to be involved: one is to strike a blow against “socialism,” which is the new bogeyman the Republicans use to energize their base. The Trump administration wants the Venezuelan model to collapse, so that no other countries try to emulate it, since it limits opportunities for U.S. investment. The second, and probably primary reason, is oil. Venezuela has the largest proven reserves in the world, and the oil interests in the U.S. want to make money extracting it, which is unlikely if Maduro remains in charge.

Conservative pundits argue that Venezuela is a catastrophe because that’s what socialism does (and if we elect any of the Democrats currently running for president, that will be the fate of the U.S. as well). But it’s not that simple. The Bolivarian Revolution began under Hugo Chavez, a political outsider who was surprisingly elected president in 1998. He won because Venezuela, which had been the richest country in South America, had begun to experience economic difficulties. Chavez created a devoted following among the poor and dispossessed because he criticized the Venezuelan government for being run by elites who sold out Venezuela’s natural wealth for their own benefit, and promised to share the wealth more equally. Venezuela’s economic decline began before Chavez, and helped bring him to power.

Once elected, Chavez kept his promise by devoting oil money to help the poor of Venezuela, as well as in other areas of the world (he even sent 8 million gallons of subsidized heating oil to helped impoverished residents of NYC in 2005, a political stunt aimed at George W. Bush, who was president at the time and had backed an unsuccessful coup attempt against Chavez in 2002). Chavez was personally popular, and loved by a majority of Venezuelans (not the elites), but he died of cancer in 2013, when he was only 58 years old.

After the death of Chavez, Maduro, his chosen successor, was elected in a close election, but he lacks Chavez’s charisma. He also had the misfortune to be in power when the worldwide price of oil collapsed, dropping from almost $100 a barrel in 2014, down to under $30 a barrel in 2106, which cut off the funding for many of the programs that had been helping Venezuela’s poor, and had been a source of support for the regime.

Problems in the oil industry are a major cause of the humanitarian crisis. Following a classic capitalism model, in order to develop economically, Venezuela focused on its comparative advantage in oil, and used oil exports to pay for much of the country’s consumer goods. Critics argue that the policies of the Chavez and Maduro regimes decimated the oil industry. But the problems are more political than economic. The oil industry was one of the major sources of resistance to the regime; it tried to reduce the revenue going to the regime by using transfer pricing and overseas investments to get money out of Venezuela (royalty payments from the oil industry to the government went from 79 cents/dollar of gross earnings in 1981 down to 38 cents/dollar in 2000). In December 2001, the oil industry reacted to the efforts of Chavez to get more revenue from oil by instigating a series of lockouts, in an attempt to cripple the regime by cutting off its major source of revenue. In April 2002, they went much farther, when they instigated a coup (supported by the U.S.), that removed Chavez. The coup only lasted two days, as Chavez’s supporters and loyal troops forced his return. To limit the power base of his opponents, Chavez fired more than 18,000 employees in the oil industry, and installed his political supporters in leadership positions.

In 2007, Chavez demanded higher royalties and put additional restrictions on foreign corporations working in the oil industry, so many of them left, taking with them expertise and sources of investment. Oil production, which had held relatively steady for the first 10 years of the Chavez regime, began a mild decline in 2008, and a more rapid decline in 2016.

While critics claim the government did not invest enough in the oil industry, the decline in oil production was not just due to inept management. Venezuelan crude oil is very heavy, and it must be mixed with lighter petroleum products (naptha, e.g.) to be able to transport and process. Venezuela had been importing naptha from Citgo, its subsidiary in the U.S., but the U.S. cut off those shipments in 2017 (which limits Venezuelan production). Additionally, Venezuela’s source of electricity to process its oil is hydroelectric power, and in recent years, drought has diminished that source of power. Finally, since Venezuelan oil has high production costs, low prices make it uneconomical to extract.

The oil industry is not the only cause of the humanitarian crisis in Venezuela, though it is the primary cause. In part 2, I will discuss other aspects of the crisis in Venezuela, as well as the recent efforts to accelerate regime change there.

Kent James in an East Washington resident and has degrees in history and policy management from Carnegie Mellon University.