With regards to what is happening in Venezuela – the NY Times columnist Brett Stephens calls it the result of Socialism – a Congressional Research Service report, Venezuela’s Economic Crisis: Issues for Congress, lays out exactly what is happening, but one needs to read it carefully.
Trump’s sanctions, supposedly levied “for increasingly undemocratic actions,” are deeply hurting Venezuela. And because of that, they are in danger of losing their state-owned oil company – to Rosneft, the Russian state-owned oil company.
So when Trump tells you that no one is tougher on Russia than he is, don’t buy it. Cui Bono? Vladimir Putin.
Venezuela is a major oil producer and exporter, and the 2014 crash in oil prices combined with years of economic mismanagement hit Venezuela’s economy hard. Venezuela’s economy has contracted by 35% since 2013, a larger contraction than the United States experienced during the Great Depression.
In response to the Maduro regime’s “increasingly undemocratic actions,” the Trump Administration imposed sanctions restricting Venezuela’s access to U.S. financial markets in August 2017 and increasing fiscal pressure on the government. In November 2017, the Venezuelan government announced it would seek to restructure its debt. The government and the state oil company, Petróleos de Venezuela, S.A. (PdVSA), subsequently missed key bond payments, leading credit rating agencies to issue default notices. Debt restructuring is expected to be a long and complex process, and it is unclear whether Venezuela will make coming debt repayments.
Here is the part that should raise a red flag…
In 2016, Venezuela’s state oil company PdVSA secured a loan from the Russian state-oil company Rosneft. PdVSA used 49.9% of its shares in CITGO as collateral. If PdVSA defaults on its Rosneft loan, it is not clear whether Venezuela’s portion of CITGO ownership would be transferred to Rosneft. Reportedly, Rosneft is negotiating to swap its collateral in CITGO for other PdVSA assets.
But let’s be clear: if things continue on this path, Rosneft will own Venezuela’s oil.
The idea of taking other people’s oil was a fairly constant drumbeat during the Trump campaign. But as deplorable as that idea – that the USA should take loot or tribute from those with whom we engage in conflict—it is even more disgraceful that Trump has also suggested taking assets—oil in this example–in exchange for doing the fighting, essentially turning our nation’s armed forces into a version of Erik Prince’s Blackwater mercenary force.
But even worse would be to allow Putin to benefit. That is a development that was never voiced. Yet it appears to be exactly what is happening. Even the John Boltons and Lindsay Grahams will be surprised and sickened when that happens.
Trump’s brand of disaster capitalism is especially vile considering the chaos that past incursions by the USA into the Caribbean and Central and South America have unleashed. If it is Russia that gains the oil, Trump will prove to be compromised as many suspect he is. But it will be a fait accompli.
Congress should look into this.