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06/12/2017 | Latin America - Venezuela: The Military Steps in at Venezuela’s PDVSA

Ross Dayton

Summary - Venezuelan President Nicolas Maduro is cracking down on officials in the PDVSA, the state-owned oil company, and placing military officers in charge. The government has arrested 65 oil industry officials on corruption and money laundering charges.

 

Maduro claims that the purge and the new appointments will help clean up and discipline Venezuela’s struggling oil industry. However, it’s far more likely the moves are meant to eliminate potential rivals and reinforce Maduro’s control over one of the key pillars of the state apparatus.

Background

Home to the world’s largest oil reserves, Venezuela’s oil industry is the government’s main source of revenue. Venezuela’s economy is highly dependent on oil, which constitutes 96 percent of its exports. However, depressed global prices, a lack of capital expenditure, and PDVSA mismanagement have driven Venezuela into a profound economic crisis. In October, crude oil output dropped to its lowest level in 28 years at less than 2 million barrels per day. Production facilities, exports, and crude oil quality are all deteriorating, and some believe that oil production could fall by another 10 percent in 2018.

Impact

The purge of the PDVSA. Despite the fact that the Venezuelan government previously denied any allegation of graft within the PDVSA, Maduro has suddenly launched a “crusade” against corruption and treason within the state oil company and the oil ministry. On November 30, Venezuelan prosecutor Tarek William Saab declared that Nelson Martinez and Eulogio Del Pino, both former heads of the PDVSA and the oil ministry, had been arrested. Diego Salazar, a relative of former PDVSA boss and former UN Ambassador Rafael Ramirez, was arrested as well and accused of laundering $2 billion of PDVSA funds in Andorra.

Maduro’s strategy has a political dimension as well. It casts former oil officials as scapegoats for the country’s economic woes, and the purge also allows Maduro to remove potential rivals and personnel deemed to be disloyal. Rafael Ramirez and Maduro have had a longstanding rivalry, and Ramirez was believed to have had aspirations to replace Maduro as president. Ramirez openly criticized Maduro’s government for its mishandling of oil production and the economic crisis. In response, Maduro removed Ramirez from his position as UN ambassador.

Military appointments to the PDVSA. Maduro appointed National Guard Major General Manuel Quevedo to head the PDVSA and the oil ministry. Quevedo, who is considered a close ally of Maduro, does not have any prior experience with the oil industry. Quevedo has said that he plans to appoint more military officers to senior management positions overseeing key areas of production in the PDVSA. In addition, Quevedo will be involved in the PDVSA’s foreign debt restructuring negotiations. Quevedo has been accused of committing human rights violations against anti-Maduro protestors in the past, and US Senator Marco Rubio included Quevedo on a list of Venezuelan officials who should be sanctioned. As of yet, the U.S. Treasury Department has not placed any sanctions on him.

The Venezuelan military, which regards itself as apart and above other state institutions, has been involved in politics throughout Venezuela’s history. Hugo Chavez entrenched the military’s influence in government shortly after being elected in 1998 in order to garner wider support for his left-wing Bolivarian movement. Former and active military officials were placed in charge of various government ministries and social programs. In addition, the Chavista government turned a blind eye to corruption and drug trafficking conducted by high and mid-ranking military officers. Unlike Chavez, Nicolas Maduro does not come from a military background. As the crisis in Venezuela has worsened, Maduro has needed to buy further support from the military to ensure their continued loyalty.

Forecast

As Maduro purges the oil industry and the military consolidates control, the future of Venezuelan oil hangs in the balance. Inexperienced military officers could further mismanage the ailing oil industry, making a bad situation worse. Furthermore, increased military influence also raises concerns over the future of civilian control over the country’s oil reserves and the further erosion of democratic governance.


**Source:

https://www.geopoliticalmonitor.com/the-military-steps-in-at-venezuelas-pdvsa/

Geopoliticalmonitor.com (Canadá)

 



 
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