Brief

Venezuela:

Centralization of Primary Oil Corporations Led to Militarization of State

For Deputy Assistant Secretary of the Political-Military Affairs Bureau: Brian Nilsson

10/09/2017

Key Judgements

By further centralizing the oil market essential to U.S. consumers, the government of Venezuela is distancing itself from the U.S. by using internally produced products to benefit its own regime.

Venezuela is attempting to eliminate direct American influence on South America by centralizing its largest industry, oil, as a means of strengthening the resolve of the government itself. Venezuelan militias in the Venezuelan capital have begun to march to demonstrate support for the centralization processes; but, also to share in a rising nationalistic sentiment—US forces must reinstall and strongly encourage the proliferation of strategic and tactical ties with Venezuela to strengthen the US sphere of influence in the region.

Venezuela has arrested the state oil company’s boss for the western region and eight other executives at Petroleos de Venezuela SA (PDVSA). It was not immediately clear why Gustavo Malave and the other employees were apprehended, though a series of corruption probes are under way at PDVSA. Venezuela’s new chief prosecutor Tarek Saab on Thursday announced he was investigating “spectacular” overpricing in a dozen contracts in the nation’s Orinoco oil belt. Venezuela is willing to utilize military force to centralize corporations. After the announcement of new U.S. economic sanctions, Venezuelan soldiers can be seen symbolically marching their forces in the capital of Venezuela’s Government. The large maneuver was to show the will to defend the country against “imperialist threats.”

Background

The U.S. has a long history of sanctions on Venezuela, but none that have caused a nationalistic wave like what is happening now.

After this incident, the U.S. maintained relative hegemony over the region for the better part of the century. The Chavez administration (1998-2013) was highly critical of U.S. intervention in the region. This led to presidents Bush and Obama creating policies designed to economically damage the country. (International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701-1706, National Emergencies Act (NEA), 50 U.S.C. §§ 1601-1651. Last year, the opposition-led congress said $11 billion was lost at PDVSA between 2004 and 2014. According to the CIA, the treaties that Venezuela participates in include: Caricom (observer), CD, CDB, CELAC, FAO, G-15, G-24, G-77, IADB, IAEA, IBRD, ICAO, ICC (national committees), ICCt (signatory), ICRM, IDA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM, IPU, ITSO, ITU, ITUC (NGOs), LAES, LAIA, LAS (observer), MIGA, NAM, OAS, OPANAL, OPCW, OPEC, PCA, Petrocaribe, UN, UNASUR, UNCTAD, UNESCO, UNHCR, UNIDO, Union Latina, UNWTO, UPU, WCO, WFTU (NGOs), WHO, WIPO, WMO, and the WTO meaning that Venezuela, despite attempts to separate itself from the influence of other states is still heavily involved with the actions of international relations. This is not to say, however, the state is not trying to emancipate itself from international influence.

Analysis

Venezuela is capitalizing on the economic advantages that it possesses in its region. With these capitalizations, the state itself will reap the benefits of greater regional hegemony.

Oil is the largest industry in Venezuela, producing over 2,240 barrels a day. To put that into perspective, the next highest producer in the region 2,062 barrels daily. The majority of this oil is exported out of the region, crippling potential hegemony Venezuela could claim over the region. With the centralization of oil, the regime within Venezuela can allocate this product as it pleases. This means greater oil reserves within the state and the possibility of allowing allocations of oil to go directly to local economies in the region. Rejection of American influence means that Venezuela can repurpose its own economy as it pleases.

Evidence

The arrest of Gustavo Malave symbolizes a move away from prioritizing private industry to a new government controlled industry.

Venezuela has arrested the state oil company’s boss for the western region and eight other executives at PDVSA, according to an internal company memo and a half-dozen sources in the OPEC member’s oil industry. The reputation of PDVSA has been tarnished in recent years by graft investigations involving high-profile staff. The company has blamed the problems on a small group of employees and executives, and promised a war on corruption. This mistrust has led to a purpose for the government to take control over the industry with the trust of people within the state.

Vulnerability Assessment

Venezuela’s aggression in this industry signals a distinct shift in the philosophy of the state towards the further centralization of the state itself.

 The primary threat to American relations in the region is the desire to separate from direct American influence. Venezuela has convinced the majority of its population that there is no longer a need for privatized industry due to the ways in which American influence has shifted the primary capital of industry away from Venezuela itself. This movement away from privatization could convince other regional powers to do the same, eliminating the economic hegemony the U.S. regionally.

Outlook

Venezuela continues to undermine American economic hegemony internally, meaning other states may follow.

 If the U.S. does nothing to acknowledge the nationalistic philosophy of Venezuela, it can be safely assumed that other powers within the region will follow suit and try to eliminate American influence within their states. This could lead to complete loss of American influence regionally, creating a vacuum for other global powers to take over the “American position” in the region. The United States must make an attempt to reestablish influence in the region via support of a loyal, militaristic regime. While, yes, states supporters have grown in numbers in Venezuela it is safe to say that these citizens are in pursuit of stability, not communist ideologies. If stability can be cultivated via American intervention, without a doubt, the region will fall behind America’s influence again.