Why did President Chavez last week order that Venezuela‘s gold reserves held abroad be repatriated and that international reserve funds held in banks in the U.S., Switzerland, Britain–the global north–be moved to banks in Brazil, Russia and China–to BRIC countries? The move is being hailed by Chavistas; but, the generalized anti-imperialist and nationalist rationals being cited are not useful as far as a specific geopolitical analysis. That is , they do not explain why this takes place right now as opposed to having been done at any given time during the last 12 years of his presidency.
So, why is this being done now? The idea is obviously to keep these funds in places where they cannot be seized or frozen. But, WHAT might trigger seizures or freezing of these funds NOW as they lay in U.S., British or Swiss banks?
First. The weaker explanation is that the arbitration cases from the nationalization of Exxon-Mobil and ConocoPhillips in 2006-07 are expected to be announced soon. There has been some talk of possible negotiated settlements and even of Venezuela paying off Exxon by granting it access to a Faja heavy-oil block (which appears rather strange, no? … given that it is compensation for a Faja-region oil expropriation!). In any case, if the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) suddenly rules in favor of U.S. oil major Exxon and/or Conoco, there might be attempts by these firms to seize assets of the Venezuelan national oil company PDVSA, or perhaps of the Venezuelan state itself. However, last October 2010, Exxon did agree to lower its demands from $12 to $7 billion, and there is some indication a settlement could be for as little as #2.5billion each to Exxon and Conoco. Nevertheless, the possibility that a decision as opposed to a negotiated agreement could spark an attempt to seize funds is a real worry for Bolivarian Caracas, and it seems to me should be considered as one motive for the present transfer of reserves out of the reach of US and EU courts.
Second. However, I expect that something else occurring right now is of much more concern. With the fall of Tripoli to the Libyan revolutionary forces this week, the specter of the fate of Gaddafi in Libya, whom President Chavez considers a close ally, is clearly haunting him. Here it should be noted that a significant lever of the popular uprising against Gaddafi’s rule was that his assets abroad were frozen in several countries with UN Security Council authorization. So, fear of assets being frozen for political reasons could be a major factor for President Chavez taking measures to protect state assets at this particular moment in time. Let’s examine this second factor. What are possible scenarios in which freezing of Venezuelan assets abroad might be imposed? These would seem to be:
- Due to Venezuelan violation of sanctions imposed on Iran as has already occurred. In its May 2011 action “The State Department said PDVSA delivered at least two cargoes of reformate, a gasoline blending component, to Iran between December 2010 and March 2011 worth about $50 million.” (Reuters, 24 May 2011). However, these sanctions on PDVSA were at the very lowest level possible under existing US laws; essentially they were a “shot across the bow.” However, the US and the EU, as authorized by the UN Security Council, are seriously working to enforce the present sanctions on Iran and any further violations by PDVSA or the Bolivarian state would clearly result in more stringent sanctions on Venezuelan entities.
- Due to an illegal rejection of results of the Presidential elections now scheduled for 2012 (i.e., if the Bolivarian government makes an egregious attempt to negate an electoral loss for Chavez) and especially if this is then accompanied by any aggravated suppression of internal dissent following the elections.
Let me take these one at a time.
On the first point: Till now, there have not been strong factors driving Caracas to violate UN/US/EU sanctions on Iran. Too much is at stake. About 45% of Venezuelan oil is presently exported to the US, and any infringement of the ability to carry out that trade would be ruinous for the Bolivarian state.
However, a new development which might push PDVSA and/or the Venezuelan state to commit further violations of sanction on Iran, even if they have little more than symbolic impact, is the fact that Iran is facing potentially the most serious setback to its position in the Middle East region since its loss of the Iran-Iraq War of 1980-88. There is now a possibility that Assad of Syria could fall from power, just as Gaddafi has fallen and before him Ben Ali of Tunisia and Mubarak of Egypt. But, Syria is the main prop, the main and only state ally of a predominantly Shia and ethnically Persian Iran within the primarily Sunni-Arab Middle East region (Assad’s rule is based on an alawite minority, not the country’s Sunni majority population). Via Syria, Iran has also been able to maintain close support for Hezbollah’s activities in Lebanon. These connections of course directly impact Israel, not to mention Egypt and especially Iranian-rival Saudi Arabia. Furthermore, in the confrontation of the US with Iran for regional predominant influence, the US is presently in a difficult position due to its commitment to leave Iraq soon, which would open up especially the south of Iraq to Iranian dominant influence. The potential loss of Iran’s one and only ally Syria, whether it be through the effective isolation of Syria by the US and foreign powers in the course of the popular democracy uprisings there, or a complete fall of Assad’s regime, would very seriously set back Iran in the region. In addition, very recently Iran has begun to feel the heat of Turkish opposition to Iran’s active support for Assad’s suppression of the Syrian democracy movement. And, Turkey decisively supported the overthrow of Gaddafi by the Libyan revolution as well.
Now, my only central point here is that while normally Chavismo can do little to impact the fate of its ally, Iran, and normally it has not been worth taking the heat from the US and EU for violating sanctions on Iran, nonetheless, in this new situation, of a possible sharp change in Iran’s fate, and on the heals of Gaddafi’s fall, Chavez might be moved to make efforts to support Iran, even if only with basically symbolic violations of sanctions possible. (Note too, President Chavez’ decision to repatriate gold and protect reserve funds overseas was taken shortly after a well publicized telephone conversation between Presidents Chavez and Ahmadinejad where they “blasted aggression in Libya and Syria” by the U.S. et al.)
More generally, there can be no doubt that the fall of Gaddafi is a great psychological blow to President Chavez and Chavismo. Qaddafi is seen as a very kindred spirit, in that President Chavez sees his government as one that, like that of Assad and Ahmadinejad represented a third, “independent” way, against the global north whose ways of market-centered, global business and of pluralistic democratic politics conflict with sharply his movement’s antiquated manner of maintaining its “anti-imperialist” rule in his country.
On the second point: As I observed in my time there this summer, Venezuela is suffering a plethora of crises, and a constant, slow degradation of support for Chavismo that extends back over several years. I will dedicate other posts to assessments of the current political climate in Venezuela, and the strengths and weaknesses of both the opposition and Chavismo movements, both internally to each movement and as far as their positions with the electorate. For the present, suffice it to say that it appears to me that there is a certain slow coming together of two different streams of opposition to Chavismo at present in Venezuela.
Economic-infrastructural: The country has long suffered a plethora of single-issue economic and infrastructural/managerial failures (from constant failures of the electrical grid, to crime and citizen insecurity, lack of housing, protests of workers and retirees for not receiving pay or benefits owed them, lack of medical care, inflation, high food prices, lack of professional-level employment, rampant corruption, managerial failures of the national oil company and all other major nationalized firms, etc.).
Political: The country has a growing anti-Chavista political movements which are mainly electoral but increasingly also non-electoral, such as the protests and hunger strikes of students, but also increasingly one finds protests by other sections of society on issues of human rights, a free press and political prisoners. It seems that these various, disparate, often single issue movements, are coming slowly together into a generalized opposition movement.
Add to this the fact that President Chavez is suffering from cancer, that he is not being transparent about his condition, and so his future is even more uncertain. And, he has not succeeded in presenting any other individual as an alternative electoral face of the revolution to the masses.
So, to bring together this second point: If Chavismo losses the upcoming presidential elections and does not accept this loss, and if protests over this issue spark a bringing together all the heretofore rather desperate streams of frustration over infrastructure, management and economics, with the political protest and electoral opposition, then, violent suppression of a movement around the issue of elections (i.e. succession) could lead to external sanctions imposed on Venezuela and problems with access to reserves.
This might seem like a stretch, … but, right now, there goes Qadaffi, Assad and Ahmadinejad, allies and admired leaders of Chavez, whose assets abroad have indeed been restricted in just this very manner. Hence, here again, the example of the Middle East’s “Arab Spring” is undoubtedly very fresh on President Chavez’ mind in his decision to repatriate Venezuelan gold.
The Global Barrel 