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How the US Can Keep Venezuela from Becoming a Failed State

The American government has already sanctioned Nicolas Maduro, but the U.S. must pursue a further, multilateral response.

How the US Can Keep Venezuela from Becoming a Failed State


18th May 2018 - Co-authored by Alex Entz - The Weekly Standard

On Sunday, Venezuelan president Nicolas Maduro will face his country’s hungry, impoverished voters. The election will be neither free nor fair, so another win for the corrupt Socialist party is almost guaranteed. Already, Western countries are rightly rejecting the outcome.

But those nations, especially the United States, have an interest in the outcome’s consequences, as well. Maduro’s bid to end democracy in Venezuela with heavy public spending and expropriation of private enterprise, including the oil industry, has brought near-total economic and humanitarian collapse. In the last two years, more than a million people have fled the country. More than half a million refugees are in Colombia, with migrants arriving at a pace rivaling that of Syrian refugees in Germany in 2015. Hunger is endemic: “Three-quarters of the population has lost an average of 19 pounds,” the Wall Street Journalreported. Inflation may hit 13,000 percent this year. Caracas has hollowed out.

The United States has responded incrementally, largely based on sanctioning Venezuela’s corrupt leadership. The Obama administration labeled the country a “national security threat,” and the Trump administration steadily ratcheted up sanctions on the regime in the run-up to a sham “referendum” in July 2017 that helped Maduro consolidate his power. After the vote, the United States sanctioned Maduro himself and issued extensive prohibitions on transacting in Venezuelan bonds, a move that has functionally prevented Maduro from restructuring his country’s debt burden as Venezuela has slid into default.

Pressuring Maduro Is Necessary

These efforts are important, because Venezuela poses three major threats to U.S. values and interests. The first is the ruling regime’s erosion of democratic norms and horrific disregard for human rights. Election fraud has been proven, and political dissidents have been jailed and killed without cause. Corrupt generals controlling the country’s food imports line their pockets while the country starves. Babies diefrom treatable diseases as access to medicines dry up—all for Maduro to continue his socialist experiment in power.

This humanitarian catastrophe has sparked the second threat to U.S. interests: regional instability that stems from government-supported drug trafficking and a heavy flow of migrants into neighboring countries. Droves of emaciated Venezuelans are causing upheaval in Brazil and Colombia as the governments strive to keep the peace in already impoverished border areas. The region’s fragile gains, including the recently achieved political peace in Colombia, may be at risk if Venezuelan migrants threaten the economic security of struggling Brazilian and Colombian citizens on the border.

The increasing presence of Venezuelan, Brazilian, and Colombian military officials on the borders has raised concerns of sudden escalation. Brazil has sent nearly 200 troops to its border with Venezuela as local government officials worry about diminishing medical supplies, food, and rampant crime. Similarly, Colombia has deployed thousands of soldiers to guard its border from migrant flows, and Colombian officials recently met with U.S. SOUTHCOM leadership to discuss regional security cooperation. And when President Trump refused to rule out a “military option” last year, Maduro ordered military exercises that conscripted civilians, and warned Venezuelans of an impending “imperialist invasion.”

Lastly, Venezuela is susceptible to falling deeper into Russia’s orbit. Bolivia and Cuba, staunch allies of Caracas and Moscow, already provide the diplomatic cover Maduro needs to escape full expulsion from the Organization of American States (OAS). As the country’s economy continues to collapse, Russia will increasingly become Maduro’s lender of last resort. For example, in November, Russia restructured billions in Venezuelan debt, and Russian oil company Rosneft received two offshore drilling permits from Venezuela in December. Most recently, Vladimir Putin provided a lifeline to Maduro with technological support for its state-backed cryptocurrency, the petro, a self-proclaimed sanctions evasion scheme. However, there likely are limits to Russian largesse. Given the likelihood of financial losses, China has already expressed frustration with the regime, and is currently playing only a minimal role.

Understanding Maduro

These threats compel the United States to keep pressuring the Venezuelan government. And since Maduro isn’t going anywhere, U.S. policymakers must understand his strategic thinking for American policy to be effective. Bolivarian socialism is the bedrock of the Venezuelan state, and it requires continuous consolidation of power to sustain itself, an objective Maduro is pursuing in three ways.

 

First is the ideological dimension: Maduro is seeking to maintain a socialist mythos within Venezuela by delivering anti-U.S., anti-Western propaganda to its citizens, which blames the United States for ills brought on by the socialist leadership itself. Second is the legalistic dimension: Maduro jails his political adversaries with a phony anti-corruption drive and seeks to change the country’s constitution to further entrench authoritarianism. And third is the military dimension: Maduro seeks to further enmesh the military into politics as a way to subdue the populace, cow his political rivals, and satisfy generals who pose the most immediate threat to his regime’s survival.

Maduro’s strategy has inherent weaknesses. Chief among them his isolation and declining ability to buy support. The United States is not alone in its desire to see Venezuela’s democratic and humanitarian crises ended, and we should work in concert with Brazil, Colombia, Argentina, Peru, and other states to exploit those weaknesses with the intention of driving Venezuela to the negotiating table.

Next Steps: A Multilateral Response

To start, a consortium should be arranged between the United States and like-minded OAS countries with the general principle of isolating Maduro as much as possible. The formation of such a consortium lends broader regional legitimacy to what would otherwise be perceived as unilateral U.S. actions.

 

The consortium could direct relief to Venezuelan refugees and provide any support possible to the International Criminal Court’s nascent investigation into the regime. Additionally, the consortium should create and publicize a roadmap detailing an off-ramp for the Maduro regime. This plan could promise relief in exchange for concrete steps toward re-establishing democracy and allowing international aid organizations into the country. This would provide a credible commitment that may tilt Venezuelan domestic politics, turned increasingly desperate by economic ills, toward engagement with the outside world. In this vein, the United States and its allies should support the Venezuelan opposition’s ongoing attempts to bring democracy and humanitarian aid to their country.

Hyperinflation and a sovereign debt crisis will squeeze Maduro’s legitimacy and endanger his reign. The country’s oil production is its lowest since the 1980s, and is set to fall further; the country’s foreign reserves are at a 15-year low, and also are expected to fall. To quell hyperinflation, Venezuela slashed three zeros from its banknotes by executive fiat, as Zimbabwe once did, but Maduro has no serious, credible plan for fiscal stabilization or monetary restraint. (His only opponent in the next election has suggested adopting the U.S. dollar). In light of such weaknesses, the consortium should apply more economic pressure. For example, members could pool intelligence resources to help identify foreign bank accounts maintained by senior officials under false names, which could then be frozen. A unified stance against corrupt Venezuelan officials would lessen the odds of illicit financing for the regime.

Lastly, defaults by the Venezuelan government and by its national oil company, PDVSA, have opened the door for unpaid creditors to seize assets. ConocoPhillips recently seized a PDVSA facility in the Caribbean, and a Canadian firm is angling for a similar judgment on CITGO, a PDVSA subsidiary based in the United States. The Trump administration should support the claims of creditors while ensuring that no assets in the United States end up controlled by a hostile foreign power. Venezuela is clearly worried about losing desperately needed capital via asset seizures; this month alone, PDVSA redirected nine shipments of crude oil to avoid seizure.

Sunday’s election is almost a guaranteed win for Maduro. If left unchecked, Venezuela’s economic and geopolitical crisis will spiral further into decay. There will be an ever-worsening humanitarian nightmare, increased waves of migrants destabilizing the region, increased drug trafficking hitting U.S. borders, and an increased likelihood that Venezuela becomes a Russian client state. All of these vulnerabilities will bring the consortium leverage to restore a peaceful, free Venezuela.

Michaela Frai is a research associate at the Foundation for Defense of Democracies. Follow her on Twitter @MichaelaFrai.

Follow FDD on Twitter @FDD. FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy.

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