By raising gas prices, the Ukraine war helped Venezuela

Just three years ago, Venezuela was a country on the verge of collapse.

Grocery shelves were empty, the national currency was virtually worthless, millions of people were fleeing the country, and the hostile US government was practicing a “maximum pressure” strategy designed to overthrow its socialist president.

Motorists wait to fill up at a gas station in the Caricoao neighborhood of Caracas, Venezuela, in early 2021.

(Matthias Delacroix/The Associated Press)

Although Venezuela has one of the The world’s largest oil reserve, motorists often waited 24 hours or more in miles-long lines to fill up on what was almost free petrol.

Today, the sense of despair has faded very slightly as President Nicolás Maduro’s government has retreated from leftist orthodoxy, and the war in Ukraine has boosted oil prices and given him more influence on the international stage.

Few here would say times are good – not when 90% of Venezuelans remain mired in poverty, the minimum wage is around $15 a month, and inflation recently exceeded 200%.

But many have noticed improvements: wider availability of food, more electricity, water and phone service, an adequate supply of gasoline, and fewer fleeing people.

“Although my personal situation is still difficult, it has improved,” said Tepes Ramos, 29, who recently found a job cleaning homes here in the capital, after a long period of unemployment.

She still relies on public assistance to help care for her two children, 9 and 11, but for the first time in years, she can feed them meat and fish.

“I was able to buy everything my children needed for school,” she said. “And now I can serve them breakfast before they leave in the morning.”

Behind the changes is a radical shift in economic policy. Starting around 2019, Maduro lowered price controls, reversed the nationalization of private companies and began allowing citizens to do business and shop with US dollars. At the same time, higher oil prices boosted revenue, despite US sanctions. Oil production, while still well below its peak in past decades, has risen by about 27% in the past two years, and China is believed to be the main buyer.

A man carrying a bundle of bananas.

A man carries a load through the Quinta Crespo neighborhood in Caracas, Venezuela.

(Matthias Delacroix/The Associated Press)

The International Monetary Fund projects a 6% growth rate in 2022 – the largest in 15 years.

It wasn’t long before Maduro’s days in power seemed numbered. In 2019, as protesters filled the streets, the US branded him a dictator at the head of a mafia state, cut diplomatic ties and declared he was no longer the legitimate president, instead recognizing young legislator Juan Guaido.

Improved economic prospects helped Maduro bolster domestic support, overcoming his opponents and reversing his political fortunes.

“The opposition is in complete disarray and divided,” said Francisco Rodriguez, a Venezuelan economist at the University of Denver. “The economy is growing. Right now, frankly, if there are free and fair elections, Maduro may win.”

Rising demand for oil as the world seeks an alternative to Russian supplies has raised hopes for better times in this South American nation of 28 million people, once among the richest in Latin America. Washington is considering easing the crippling Trump-era sanctions on the Venezuelan national oil company. US regulators have already allowed two European companies to export some Venezuelan crude.

“We’re seeing what is tentative but still evident for a US re-engagement with Venezuela,” said Theodore Kahn, a senior analyst in Bogota, Colombia, with consultancy Control Risks Group. “The new geopolitical reality after the invasion of Ukraine is certainly an important driver of this and creates urgency.”

In recent months, senior US officials have twice visited Caracas and met with government representatives. In October, the two countries announced a prisoner exchange.

Venezuela's President, Nicolás Maduro Moros, center, at the UN's COP 27 climate summit, in Sharm el-Sheikh, Egypt.

Venezuela’s President, Nicolas Maduro, center, stands next to European Commission President, Ursula von der Leyen, center right, as leaders prepare for a group photo at the United Nations climate conference in Sharm el-Sheikh, Egypt, on November 3. 7, 2022.

(Nariman Al-Mufti/The Associated Press)

Last week, the jovial Maduro – under a US indictment of alleged “drug terrorism,” a charge he denies – was seen at the UN climate forum in Egypt shaking hands and speaking with John F. Kerry, the former secretary of state who serves as President Biden’s special envoy on climate. The State Department, which in 2020 offered a $15 million reward for information leading to Maduro’s arrest, said Kerry was “surprised” at an “unplanned interaction”.

Republican lawmakers have warned the White House against striking any deal with Maduro.

Senator Rick Scott (R-Fla) tweeted in March after Washington sent a high-level delegation to meet the Venezuelan president: “The only thing Musharraf Biden should discuss with Maduro is when to resign.”

Talks between the Maduro administration and the fragmented Venezuelan opposition – facilitated by the government of Norway – are expected to resume within weeks in Mexico. The US-backed opposition is seeking guarantees that national elections scheduled for 2024 will be fair and democratic.

Given Maduro’s newfound strength, many observers have indicated that he has little incentive to agree to electoral reforms.

Maduro also encouraged the election of left-leaning governments this year in neighboring Colombia and Brazil. In August, three years after cutting diplomatic ties, Colombia and Venezuela restored it.

Colombian President Gustavo Petro, left, and Venezuelan President Nicolas Maduro, review a guard of honor

Colombian President Gustavo Petro, center left, and Venezuelan President Nicolas Maduro review a guard of honor at the Miraflores Presidential Palace in Caracas, Venezuela, on November 1, 2022.

(Jesus Vargas/The Associated Press)

Analysts said such developments may provide a boost to Maduro, but do little to revive a country that has lost up to 80% of its economic capacity over the past decade.

“predictable [Maduro] “He would calculate that the international climate gives him more wiggle room,” said Patrick Doody, a former US ambassador to Caracas who now heads Duke University’s Center for Latin American and Caribbean Studies. “But deep-rooted problems will not go away.”

The prospects for a broad recovery are bleak “without addressing the current corrupt and deeply authoritarian government,” said Jeff Ramsey, director of Venezuela at the Washington Office of Latin America, an advocacy group.

“Dollarization has brought relief to some, but the reality is that Venezuela is still in the midst of a deep humanitarian emergency,” he said.

One of the big problems is that most Venezuelans get paid Bolivarthe national currency, and do not have easy access to dollars.

“The mechanic, the plumber, the electrician — they all want dollars,” said Natalie Marquez, 45, a financial advisor in Caracas. For those of us from the middle class, who do not receive government aid, daily life is very difficult. …we can’t even pay to fix a faucet in our bathroom right now.”

The dominant issue is inflation — even if it has fallen from its estimated peak of more than 1 million percent in 2019.

A woman walks past signs displaying product prices in US dollars outside a grocery store in Caracas, Venezuela.

A woman walks past signs displaying product prices in US dollars at a grocery store in Caracas, Venezuela, in January 2022.

(Matthias Delacroix/The Associated Press)

“Inflation … is evaporating, burning practically all one’s earnings,” said Alejandra Rodriguez, 43, a single mother and office manager. “I am always one month late for my bills. My salary is simply not enough to cover basic expenses.”

Even if sanctions are fully lifted, experts said, it could take years to repair the country’s dilapidated oil infrastructure. Venezuela, a founding member of the Organization of Petroleum Exporting Countries, or OPEC, is currently pumping around 700,000 barrels a day – down from 2.8 million as recently as 2013.

Frustrated by US sanctions, Venezuela turned to Iran – hard hit by sanctions – to prop up its oil industry. Besides technical assistance, refinery equipment and tankers, Tehran has provided gasoline and extra light crude to help lift Venezuelan heavy oil to export grade.

The gas is no longer empty. These days, motorists have a choice: buy up to 32 gallons a month for about $0.15 a gallon at subsidized stations, where there may be lines, or buy unlimited gas for $1.90 a gallon at dollar stations, without delay.

“It works better for me — I don’t have to wait in line,” said Alfredo Mendoza, 51, a gardener and father of three who was buying gasoline for his red Ford truck at a dollar station in DC recently. morning. “If you have green coins, you can fill your tank every time you want.”

Special correspondent Mogolon reported from Caracas, and writers Wilkinson and McDonnell reported from Washington and Mexico City, respectively..

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