Venezuela's big oil purge: Auto-extinction of a socialist enterprise

In a purge as dramatic as that of Saudi Arabia or the Hollywood-media industrial complex, Venezuela has booted the most powerful names in its oil industry, with 65 officials arrested for corruption.  Unlike the other purges, this one isn't about change or lawbreaking – just gang warfare to consolidate President Nicolás Maduro's socialist grip on power.

Powerful names in Venezuela's oil industry, people who've been in and out of the picture for years, went down like bowling pins in Venezuela this week.  Nelson Martínez, Venezuela's chief of the state oil company, Petroleos de Venezuela S.A. (PDVSA), was one.  Eulogio del Pino, the country's oil minister, was another.  Whoever was acting director of Venezuela's U.S. refiner and distributor, CITGO, isn't there, either.  A press release from Nov. 29 says Asdrubal Chávez is now running the U.S. operation, and many of the CITGO officials are now detained in Caracas.  Chávez is a cousin of Venezuela's late president, Hugo Chávez.  Even the press contacts' names are now different.

It's tempting to see this move as a bold measure by the government of Nicolás Maduro to be doing something to improve things, given the parlous state of Venezuela's oil industry, whose inability to pump its OPEC quota has been described as a "gift to OPEC" (most of the other OPEC members cheat and pump more than they are allowed) and whose bonds are in default.  Venezuelan oil output has dropped precipitously, falling below the 2-million barrel-a-day mark for the first time in 29 years.

An for sure, it's an oil industry plagued with corruption.  But Maduro's men, the people doing the busting, are, if anything, more corrupt than the miscreants under arrest.  Maduro's guys are the ones under U.S. sanctions for activities such as drug-dealing.  The oil officials, rich and corpulent as they are, haven't been accused of that.

Alek Boyd, a Venezuelan investigative reporter and blogger in London, has been watching these people for years and sums it up probably the best way:

Venezuela's criminal gangs power struggle continues: attorney @TarekWiliamSaab has @RRamirezVE first cousin Diego Salazar arrested. Salazar was key in theft / laundering billions in @RCIERCO & bro bank in #Andorra https://t.co/MkBLr2WnMA

— alek boyd (@alekboyd) December 2, 2017

Not exactly as classy as Lenin, Stalin, and Trotsky, the blood-soaked three who created the Russian Revolution and then went on to fight one another for power.  The Chavistas' version of such a socialist struggle for power is quite a bit lower on the fanatical principles scale than what animated the Russian group, and quite a bit higher on the venal money front.  But it's no less turbulent.

Oil production in the country has collapsed – meaning that the government is out of money.  Maduro hopes that by replacing this group of Chavistas who have badly mismanaged the oil industry and driven it to bankruptcy, he can get the oil industry back on course and bring the money back.

It's a clown's proposition.  The general Maduro named to replace the state oil company chief is even less knowledgeable than the one who was thrown out.  Even if he weren't corrupt as the people he replaces were, he's not going to turn that problem around.

It's a faulty decision premised on the idea that all of Venezuela's oil production woes are the result of corruption.

Actually, the problem in the Venezuelan oil industry is the primacy of politics over know-how.

There are people who know how to properly run Venezuela's vast oil enterprise (Venezuela has the world's highest oil reserves) but they were removed years ago on political grounds. Back in 2003, Chávez fired thousands of these workers in a disastrous oil strike over who would control the company by reading their names off on the radio to shame them – and those knowledgeable workers, having no place else to go, given that Venezuela's oil industry is a state monopoly, went on to help develop the oil industries of Canada (tar sands), the U.S. (fracking), Colombia, Peru, and Morocco.  Perhaps other places, too.

Incompetents put in place for their socialist loyalties replaced them, and now more socialist incompetents are replacing the current incompetents. The new group are generally linked to former oil minister and Venezuela's current United Nations ambassador Rafael Ramírez, the latter of whom is holed up in his luxury digs in Manhattan.  Ramirez was never as fanatical and nutty as Chavez but he was bad enough to ruin Venezuela's oil industry, which leads us to the current power struggle triggered by a ruined oil industry.

Is there any room for maybe asking why the failure happened in the first place?  The problem is socialism and the people who profess socialism, which is why the last two groups were put into power at all.

A few months back, there was intense debate on whether the U.S. should completely cut off Venezuelan oil imports based on the socialist government's failures to respect human rights and human needs.  The universal verdict was that an invasion was a non-starter (loads of criticism for President Trump for suggesting that it was on the table) and an oil cutoff would trigger a famine.

Sanctions were seen as crippling by oil industry experts and political bloggers. Francisco Toro writes:

One alternative would be imposing sanctions on Venezuela's oil industry, which accounts for 95 percent of the country's export earnings. But if imposing sanctions on individuals isn't nearly tough enough, going after the oil industry is entirely too tough. In a country where food and medicine are in short supply as it is, putting a hard stop to oil sales could set off a famine. It would also cause a politically untenable spike in gas prices in the United States.

The reality is, they've got a famine – and a ruined oil industry to boot.  The U.S. didn't do a thing to cause it.  Changing personnel as in this Chavista purge won't change the immutable laws of economics.  Only getting rid of the socialist model will make any difference.  Maduro's purge shows he still isn't buying it. So expect the gang warfare between socialist factions to continue.

In a purge as dramatic as that of Saudi Arabia or the Hollywood-media industrial complex, Venezuela has booted the most powerful names in its oil industry, with 65 officials arrested for corruption.  Unlike the other purges, this one isn't about change or lawbreaking – just gang warfare to consolidate President Nicolás Maduro's socialist grip on power.

Powerful names in Venezuela's oil industry, people who've been in and out of the picture for years, went down like bowling pins in Venezuela this week.  Nelson Martínez, Venezuela's chief of the state oil company, Petroleos de Venezuela S.A. (PDVSA), was one.  Eulogio del Pino, the country's oil minister, was another.  Whoever was acting director of Venezuela's U.S. refiner and distributor, CITGO, isn't there, either.  A press release from Nov. 29 says Asdrubal Chávez is now running the U.S. operation, and many of the CITGO officials are now detained in Caracas.  Chávez is a cousin of Venezuela's late president, Hugo Chávez.  Even the press contacts' names are now different.

It's tempting to see this move as a bold measure by the government of Nicolás Maduro to be doing something to improve things, given the parlous state of Venezuela's oil industry, whose inability to pump its OPEC quota has been described as a "gift to OPEC" (most of the other OPEC members cheat and pump more than they are allowed) and whose bonds are in default.  Venezuelan oil output has dropped precipitously, falling below the 2-million barrel-a-day mark for the first time in 29 years.

An for sure, it's an oil industry plagued with corruption.  But Maduro's men, the people doing the busting, are, if anything, more corrupt than the miscreants under arrest.  Maduro's guys are the ones under U.S. sanctions for activities such as drug-dealing.  The oil officials, rich and corpulent as they are, haven't been accused of that.

Alek Boyd, a Venezuelan investigative reporter and blogger in London, has been watching these people for years and sums it up probably the best way:

Venezuela's criminal gangs power struggle continues: attorney @TarekWiliamSaab has @RRamirezVE first cousin Diego Salazar arrested. Salazar was key in theft / laundering billions in @RCIERCO & bro bank in #Andorra https://t.co/MkBLr2WnMA

— alek boyd (@alekboyd) December 2, 2017

Not exactly as classy as Lenin, Stalin, and Trotsky, the blood-soaked three who created the Russian Revolution and then went on to fight one another for power.  The Chavistas' version of such a socialist struggle for power is quite a bit lower on the fanatical principles scale than what animated the Russian group, and quite a bit higher on the venal money front.  But it's no less turbulent.

Oil production in the country has collapsed – meaning that the government is out of money.  Maduro hopes that by replacing this group of Chavistas who have badly mismanaged the oil industry and driven it to bankruptcy, he can get the oil industry back on course and bring the money back.

It's a clown's proposition.  The general Maduro named to replace the state oil company chief is even less knowledgeable than the one who was thrown out.  Even if he weren't corrupt as the people he replaces were, he's not going to turn that problem around.

It's a faulty decision premised on the idea that all of Venezuela's oil production woes are the result of corruption.

Actually, the problem in the Venezuelan oil industry is the primacy of politics over know-how.

There are people who know how to properly run Venezuela's vast oil enterprise (Venezuela has the world's highest oil reserves) but they were removed years ago on political grounds. Back in 2003, Chávez fired thousands of these workers in a disastrous oil strike over who would control the company by reading their names off on the radio to shame them – and those knowledgeable workers, having no place else to go, given that Venezuela's oil industry is a state monopoly, went on to help develop the oil industries of Canada (tar sands), the U.S. (fracking), Colombia, Peru, and Morocco.  Perhaps other places, too.

Incompetents put in place for their socialist loyalties replaced them, and now more socialist incompetents are replacing the current incompetents. The new group are generally linked to former oil minister and Venezuela's current United Nations ambassador Rafael Ramírez, the latter of whom is holed up in his luxury digs in Manhattan.  Ramirez was never as fanatical and nutty as Chavez but he was bad enough to ruin Venezuela's oil industry, which leads us to the current power struggle triggered by a ruined oil industry.

Is there any room for maybe asking why the failure happened in the first place?  The problem is socialism and the people who profess socialism, which is why the last two groups were put into power at all.

A few months back, there was intense debate on whether the U.S. should completely cut off Venezuelan oil imports based on the socialist government's failures to respect human rights and human needs.  The universal verdict was that an invasion was a non-starter (loads of criticism for President Trump for suggesting that it was on the table) and an oil cutoff would trigger a famine.

Sanctions were seen as crippling by oil industry experts and political bloggers. Francisco Toro writes:

One alternative would be imposing sanctions on Venezuela's oil industry, which accounts for 95 percent of the country's export earnings. But if imposing sanctions on individuals isn't nearly tough enough, going after the oil industry is entirely too tough. In a country where food and medicine are in short supply as it is, putting a hard stop to oil sales could set off a famine. It would also cause a politically untenable spike in gas prices in the United States.

The reality is, they've got a famine – and a ruined oil industry to boot.  The U.S. didn't do a thing to cause it.  Changing personnel as in this Chavista purge won't change the immutable laws of economics.  Only getting rid of the socialist model will make any difference.  Maduro's purge shows he still isn't buying it. So expect the gang warfare between socialist factions to continue.

RECENT VIDEOS