Hugo Chávez and the Oil Elite

MICHAEL BUSCH

Caracas, Venezuela

The following excerpt is Part Two of a two part series on Hugo Chávez’s Venezuela.

As I argued in these pages a month ago, the truly revolutionary dimension to Hugo Chávez’s Bolivarian politics is his aggressive sponsorship of social welfare “missions” to Venezuela’s poorest communities. Missions represent a victory for hardline revolutionary factions within the government. According to their logic, missions allow Chávez to circumvent the ineffective, corrupt institutions of previous regimes. While moderate chavistas argue that mission work should be of short duration, and complementary to existing state structures serving the public welfare, revolutionary members of the movement argue that these parallel structures will come to fully dislodge the old order. Were this to come to pass, Chávez could reasonably lay claim to completion of a peaceful revolutionary process.

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Of course, no discussion of Venezuelan politics is complete without the mention of oil. Indeed, the lifeblood of Bolivarian politics flows through the arteries of underground oil belts crisscrossing the country. While rumors circulate that the Orinoco River belt, in the southern reaches of Venezuela, possesses the largest petroleum reserves in the world, the heart of Venezuelan oil production sits firmly beneath South America’s largest lake. At roughly 13,000 square kilometers, Lago Maracaibo cuts a gigantically distinctive tear-drop outline from the country’s northern coast. Its waters host hundreds of oil rigs, which churn around the clock to extract heavy crude from the basin below. In all, the lake currently yields nearly two thirds of the country’s total oil production.

Firmly ensconced at the lake’s northernmost tip, the city of Maracaibo holds court over the entire region. Long a dreary colonial outpost, Maracaibo transformed virtually overnight into a seat of regional power at the start of 1914. As nations the world over rushed to engage in mutual slaughter following the assassination of Austrian Archduke Franz Ferdinand, Venezuelan speculators were busy striking oil in the lake, and getting rich. Needless to say, the discovery of oil in Venezuelan territory almost immediately opened the doors for wholesale plunder of the country’s natural resources by foreign corporations. No sooner had laws been drafted to ensure that Venezuela would reap the primary benefits of what was rightfully theirs than politicians began auctioning off gigantic swathes of oil-rich land to outside interests. Within 15 years of oil’s discovery in the country, Shell and Standard Oil controlled nearly 90% of Venezuela’s oil production. Populist governments since then have periodically made efforts to take back their country’s oil, but foreign influence continues to dominate Venezuela’s petroleum industry.

The fingerprints of massive foreign direct investment into Venezuela are all over Maracaibo. Today, the city serves as a model modern major metropolis. I arrive in Maracaibo on an overnight bus from Caracas. As the ancient Pullman labors across the bridge spanning Lago Maracaibo, the city’s skyscraper-rich skyline reflects the radiant brilliance of first light. The buildings seem as if they are in flames, their glass exteriors burning pink with the dawn sun. Yet if it resembles a collection of towering infernos from afar, the city itself feels as if it was built atop hell’s furnace. The mid-afternoon heat and humidity overwhelms everything. As the temperature shoots over 100 degrees Fahrenheit, stores and restaurants close, the markets shutter their gates, and residents retreat to the cooler confines of their homes. Maracaibo transforms into that deserted city of post-apocalyptic sci-fi thrillers.

The city is comprised of two separate districts: the older historic center and its fancier “new town” sibling the north. On my second day in the city, I make the mistake of walking from my hotel in the historic district to the new center at noontime. The heat is unrelentingly brutal, and no shade can be found along the way. To make matters worse, I’ve run out of water, and no bodegas are open to replenish my stock. I finally find a tiny storefront manned by a group of children, who sell me a small bottle of water. The kids are clearly amused by my decision to walk the streets at this time of day, and chide my stupidity. “You’re going to die,” they laugh. As I walk out the door, I hear the youngest of the group say I’m crazy.

Perhaps. But nevertheless, I arrive in new town — haggard, dehydrated, but alive — where I meet Eva at a snazzy, heavily air conditioned internet café. Eva’s father is originally from Colombia, but came to Venezuela’s northern coast to work in the oil industry. As a member of a moderately wealthy family, she has the luxury of attending university in order to pursue a master’s degree in business administration. Not surprisingly, Eva hopes to leave Venezuela for life in the United States. “I like Miami,” she confesses over coffee. I ask about life in Maracaibo, and what I receive in response is more a sharp political analysis than the casual conversation I had expected.

“The city is a perfect representation of all of Venezuela,” she says. “Here, in the commercial center, you see the rich side of my country. Everything is neat, orderly, and clean. The wealth from our oil can be seen in the banks that are on every corner, the expensive clothing stores, the car dealerships, the cell phone outlets, and the American-owned restaurants. Most people are white. In the historic district, you see the poor side of Venezuela. You need to be very careful while you are there. The streets are filthy, the buildings are falling apart, and crimes are committed in the middle of the day. But what is interesting about the historic center is that it is filled with markets. So in the northern part of Maracaibo, you see the formal economy which generates all the wealth, but is actually very small. In the historic district, you see the informal economy of the country, which does not produce any wealth, but is much bigger, much more widespread. And I am sure you have noticed that the people have darker skin.”

I hesitate to broach the topic of Chávez, and his contentious relationship with the oil industry, but it seems unavoidable.

“People make a big deal about Chávez, about control of the oil, and socialism. I think it is all for nothing. Look around you. Does this look like socialism? What people don’t understand is that the rich are too powerful. They will never go away, they will never give up what they have. Chávez understands this well, I think, and he will not disturb them too much. It is like it is with your president. Chávez and George Bush threaten each other, and say many bad things, but they need each other to do business. The rest is for show. The same thing is true with Chávez and the rich people in Venezuela. It does not matter that they hate each other. They need each other. Will Chávez nationalize all the oil? Maybe, but the rich will still make the money.”

She’s right. Despite the fact that oil nationalization has caught the attention of conservative critics of the Chávez regime, this aspect of the Bolivarian project is, in fact, the least revolutionary. At the very most, Chávez’s program of nationalizing Venezuelan oil makes efforts at establishing a fairer return on its deposits. Tim Padgett, a perceptive reporter for Time magazine and an observer of Venezuelan politics, notes that the Chávez regime aims for nothing higher than “catching up with the rest of the pack” of oil producing countries that retain control over their resources. And as he does so, the bank accounts of wealthy Venezuelans swell with cash.

The galaxy of rigs, refineries, and other oil-related activities in Venezuela revolves around the centralized authority of the state-owned oil company Petroleos de Venezuela, Sociedad Anonima (PDVSA). Originally conceived as part of the oil nationalization of 1975, PDVSA developed into the most powerful arm of the Venezuelan government. In his look at PDVSA, Christian Parenti notes that “the engineers, geologists and managers who traditionally ran the company…held a quiet veto power over key political matters. They kept this power because PDVSA was both a rich and well-run megafirm, considered a First World corporation in a Third World country.”

PDVSA generated massive revenue from its myriad operations, not least because from its inception, the company has followed a steady policy of attracting foreign investment. While the rest of the world’s oil-rich countries have largely frustrated foreign investment by multinational oil corporations, Venezuela under PDVSA prostituted its petroleum reserves at bargain basement prices. That is, until Hugo Chávez moved into the presidential palace. Since 1999, Chávez has battled to exert control over the company, which strenuously resisted his attempts.

Things reached a head in the turmoil of 2002, when PDVSA’s chief Ali Rodriguez, a Chávez appointee, cleaned house by firing 18,000 oil workers perceived to be members of the opposition. The move effectively cut the company in half, and significantly reduced PDSVA’s capacity for efficient production. Nevertheless, with greater leverage over the company, Chávez enabled himself to move quickly in reversing PDVSA’s tendency to mortgage its resources at cut rates to foreign corporations. He aggressively nationalized Venezuelan oil operations through successive stages of expropriation, placing control more firmly in the hands of the state company.

Hardliners cheered his nationalization of the last remaining privatized oil holdings in May 2007. The scene was dramatic: Robert Collier reports that “revolutionary flags flew over refinery stacks as newly bought, Russian-made fighter jets streaked through the sky, while Chávez shouted ‘Down with the U.S. empire!’ to thousands of red-clad oil workers. ‘The nationalization of Venezuela’s oil is now for real,’ added Chávez, who called the state takeover a historic victory for his socialist revolution after years of U.S.-backed corporate control.” Yet while Chávez used the occasion to showcase his taste for theatrics, reality paints a less radical picture.

As compared with the nationalist undertakings of Gamel Nasser in Egypt in the late 1950s, for example, Chávez’s actions have been far less audacious. The Bolivarian government has wrested control over their oil holdings with thickly-padded kid gloves. There’s no question that Chávez has forced companies to give a greater share of profits to his government, but “he’s at least allowing those private multinationals to continue taking part in the drilling,” says Padgett. “Not so, for example, in Mexico or the world’s largest oil producer, Saudi Arabia. Washington touts those two countries as model energy allies, despite the fact that for more than half a century their national oil companies have barred U.S. and other foreign oil businesses from production ventures.” At the same time, Venezuelan elites continue to enjoy increased profit margins. According to World Bank data, the richest fifth of the Venezuelan population, who collect their wealth almost entirely from oil money, enjoys more than half the country’s income. And the disparity between rich and poor is only growing worse.

Chávez’s refusal to dismantle the wealth of the rich, through direct confrontation or even simple tax policy, should give those who champion the revolutionary potential of Bolivarian politics pause. “We have no plan to eliminate the oligarchy, Venezuela’s bourgeoisie,” Chávez recently proclaimed. We have demonstrated this sufficiently in our eight years.” Obviously, revolution — socialist, or otherwise — demands more than what Chávez demonstrates willingness to engage with. The tension that exists between the hardline revolutionary change established through the parallel structures of missions must be reconciled with Bolivarian softline refusal to confront privately held capital. Otherwise, the former will eventually collapse under the pressure of the latter.

Bolivarian Missions will never achieve a complete break with state structures until the oligarchy is brought under government control. As it is, the missions are trapped in cycles of playing catch-up with the needs of the poor. While they welcome and depend on increased oil revenue, the influx of petro monies into the Venezuelan economy produces greater rates of inflation, which in turn exacerbates disadvantages faced by the impoverished majority. The first steps to escaping this rock-and-a-hard-place trap could lie in radically altering the country’s tax code with the view to equitable wealth distribution. Such a move, of course, would threaten the viability of Chávez’s government, and is thus not likely to be forthcoming. Yet until Chávez matches his hardline missions project with an equally hardline confrontation with the oligarchy, his Bolivarian Revolution is destined to struggle on the slippery slope between traditional populism, and fleeting opportunities for actual revolution by peaceful means.

For the time being, however, Chávez enjoys considerable leeway to pursue alternative avenues of meaningful change. With oil prices skyrocketing to worrisome heights, American attention distracted by the ongoing chaos in Iraq, and a stable base of popular support at home, Chávez has freedom to pump petro dollars into social welfare schemes, meddle in the political affairs of neighboring states, and thumb his nose at George W. Bush, all without seriously jeopardizing the stability of his power. Yet critics and supporters alike question the direction Venezuela will take when Chávez’s term in office comes to an end. Indeed, it remains far from clear if his successor will be capable of maintaining the furious pace of change established by the current Venezuelan leader.

On my final day in Caracas, I take a walk downtown to visit the National Gallery of Art. I pass through the plaza one last time, to Avenida Universidad, a hectic street with traffic zooming through in both directions. I run across the first lane to the median strip where I await an opening to cross the second. Parked on the strip, the legless drunk sits in a broken-down lawn chair yelling at the cars whizzing by. I catch his wild eye momentarily, and say hello. He nods back, then opens his mouth to unleash another round of vitriol. “You! You like Chávez, yes? You like his revolution, but it is all worthless.” There is a pause in traffic, and I step into the street to make my escape. As I run to the other side, the man yells after me: “Chávez can’t live forever, chamo. When he dies, then what?”

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