Originally published on January 29, 2019 by TraderStef at CrushTheStreet.
The Trump administration announced new sanctions against Venezuela’s state oil company PdVSA yesterday. The additional sanctions are no surprise, as the country quickly deteriorated after a fraudulent election secured Nicolas Maduro’s second presidential term. The new sanctions followed a statement by Maduro that Venezuela will continue selling oil to the U.S. despite the recent break in diplomatic relations.
In case you missed it, here is the White House press conference from Jan. 28.
If the Army Stands With Maduro, What Is Plan B?… “For the political survival of this former bus driver and union boss hangs upon whether Venezuela’s armed forces choose to stand by him or to desert him and support National Assembly leader Juan Guaido.” – Patrick J. Buchanan, Jan. 29
As Venezuela’s two presidents face off, children scavenge for food, soldiers out of patience – CNN, Jan. 28
Many assume an imperialistic West rather than homegrown recklessness and stupidity perpetrated Venezuela’s slow train wreck. The reality is that a socialist regime carried out one of the greatest train robberies in history. The regime expropriated the prosperity from businesses across the country for the benefit of a few privileged leaders, it decapitalized the state oil company PdVSA and its infrastructure, and destroyed its currency through hyperinflation that the IMF projects will reach 10,000,000% this year. The regime’s propaganda and Western socialist media forums are full of fake news that blames everything under the sun except for the incompetence of yet another utopian disaster added to the waste bin of socialist history replete with failures.
It is a coup d’état by the West: the only coup is Maduro’s fraudulent election, confirmed as a fraud by the company that managed the voting process (Smartmatic), and a majority of Western nations do not recognize the election results. A good place to begin research into the election results is at price-controlled, government-run supermarkets. Every day by 7am, a line of starving people stretches around the block who hope to purchase a few staples such as rice, flour, cooking oil, and detergents, with a currency that devalues by the minute, to find mostly empty shelves and rotten meats. Meanwhile, the Ministry of Defense is in charge of importing, producing, selling, and distributing all food in Venezuela. Retired General Cliver Alcala describes the black market by saying “food is now a better business than drugs.”
Starving villagers randomly stone cattle to death for food – Jan. 2018
Price of oil: OPEC nations are relatively stable, with the exception of Venezuela, which is suffering an incredible humanitarian and hyperinflationary crisis. Venezuela wasted record oil revenues generated during its first decade of Chavismo fantasy by not reinvesting the windfall from the highest oil prices on record. Instead of distributing the wealth to the people and developing the nation’s infrastructure, the profits were squandered amongst the elite power structure.
Financial “blockade”: United States citizens can provide food, medicine, and other humanitarian aid to the Venezuelan people. The U.S. is Venezuela’s largest trading partner, which chimed in at $16.1 billion in 2016, the last year of available data, and has bilateral trade agreements with more than 70 other countries. In 2017, the U.S. sanctioned more than 40 Venezuelan individuals, including President Maduro, due to corruption and undermining of its society. Additional sanctions were levied that prohibit U.S. persons from participating in any new debt and equity that supports the Venezuelan regime or state oil company, certain bonds owned by the Venezuelan public sector, and any dividend payments to the Venezuelan government. The financial sanctions deny the Maduro regime critical sources of financing it uses to maintain tyranny, disallows the Venezuelan government from using U.S. systems to restructure debt, and protects the U.S. financial system from complicity in corruption and starvation of the Venezuelan population. As with Castro in Cuba, Chavismo manipulated followers into believing that sanctions against the regime and fraudulent use of the country’s wealth equate to a blockade.
It is not real socialism: the Venezuelan regime applied socialist policies by the book with a continuation of President Chavez’s Bolivarian action plan of disarming its citizenry, eliminating property rights, nationalizing the means of production in agriculture and manufacturing, eliminating entrepreneurial commerce, and implementing price controls and monetary policy ruled by an inept Ministry of Finance.
The question on market watchers’ minds is what will happen to the price of oil as this geopolitical game of chess plays itself out. Venezuela is a glaring example of how to destroy a resource-rich nation that has the largest proven oil reserves in the world.
What Venezuelan turmoil could mean for Canada’s oilpatch – CBC, Jan. 24
U.S. Oil Sanctions on Venezuela Look Like Iran 2.0 – Bloomberg, Jan. 29
What you need to know about the US imposed sanctions on Venezuela oil – CNBC, Jan. 29
In my humble opinion, if Venezuela returns to a functional democracy, expect a Latin American black gold rush by major Western oil companies to recapture, recapitalize, and revitalize Venezuela’s oil infrastructure and build out domestic refineries to process its heavy oil while leaving Russia, China, and Iran at the nearest exit.
- $BP – formerly British Petroleum
- $COP – Conoco Phillips
- $CVX – Chevron
- $XOM – Exxon Mobil
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