March 26, 2019

Oil & Energy

As new blackout hits, Venezuelans brace for more hardship

Much of Venezuela remained without electricity Tuesday as a new power outage spread across the country in what many feared will be a repeat of the chaos during the nation's largest-ever blackout earlier this month. The Maduro regime canceled work and school again as the second major blackout this month left streets mostly empty in Caracas and residents of the capital wondering how long power would be out amid a deepening economic and political crisis. The outage began around midday Monday and appeared to have affected most of Venezuela's 23 states. While the lights flickered back on in many parts after officials declared service would be restored within hours, the grid collapsed again in the late evening, knocking out communications and leaving much of the country bracing for the worst. As with the previous outage, Nicolas Maduro's regime blamed U.S.-backed opponents, accusing them of sabotaging the Guri dam, which supplies the bulk of Venezuela's electricity. Officials said the "attack" had been controlled, but their assurances, similar to ones the last time around, did little to calm the anger of residents in Caracas who filled traffic-clogged streets as they walked home after subway service in the capital was suspended on Monday. Their patience grew increasingly thin when a second outage struck late into the night, with residents in some neighborhoods banging on pots and pans in pitch black to express their growing frustration. On Tuesday morning, banks, shops and other businesses in Caracas were closed. Lights were out in the Maiquetia airport near Caracas, a Reuters witness said, though flights were not canceled. A worker checked passengers’ passports with a hand lamp, while the belt carrying checked luggage was running with power from a backup generator. NETBLOCKS, a non-government group based in Europe that monitors internet censorship, said the late evening outage had knocked offline nearly 90% of Venezuela's telecommunications infrastructure. Even the powerful state TV apparatus was down. The Trump administration, which is campaigning to remove Maduro, has denied any role in the outages. Meanwhile, electricity experts and opposition leader Juan Guaidó fault years of state graft and incompetence.  Guaidó, who the U.S. and dozens of other countries recognize as Venezuela's rightful leader, said he was meeting with aides to determine actions "to express the indignation of the entire population." The government seeks to discredit Guaidó, presenting what it claims to be evidence purporting to show opposition plans to hire mercenaries from Central America to carry out targeted killings and acts of sabotage. During a news conference in the middle of the blackout Monday, Communications Minister Jorge Rodriguez showed screenshots of what are purportedly private text messages between Guaidó, his mentor Leopoldo Lopez and other opposition insiders discussing payment details to the hired guns through banks in Europe and Panama. Late Monday, Lilian Tintori, the wife of Lopez, said a group of government loyalists on motorcycles besieged her home in eastern Caracas, shouting epithets against her husband and warning he would soon be thrown back in jail. Lopez has been under house arrest following his conviction for stirring anti-government unrest in 2014 in a case marred by irregularities. (The Miami Herald: https://www.miamiherald.com/news/business/article228416374.html; Reuters: https://www.reuters.com/article/us-venezuela-politics/venezuela-blackout-leaves-streets-empty-school-and-work-canceled-idUSKCN1R71SU; https://www.reuters.com/article/us-venezuela-politics-blackout/venezuela-blames-attack-as-another-crippling-blackout-hits-idUSKCN1R62A7; Fox News: https://www.foxnews.com/world/new-power-outage-leaves-much-of-venezuela-in-the-dark; Bloomberg: https://www.bloomberg.com/news/articles/2019-03-25/venezuela-can-t-keep-the-lights-on)

 

Oil rebounds as growth angst eases and Venezuela tensions mount

Oil rebounded along with global markets as pessimism over the global growth outlook eased a little, while rising tension in Venezuela revived fears of supply losses. Futures rose as much as 1.4% in New York after falling about 2% over the previous two sessions. Crude futures have rallied about 30% in New York and London this year as the Organization of Petroleum Exporting Countries and its allies implement production cuts to stave off a global surplus. American sanctions on Iran and Venezuela have further squeezed supplies, but the demand outlook remains clouded by a slowing world economy and uncertainty over whether the U.S.-China trade war will be resolved. West Texas Intermediate for May delivery rose 717cents, or 1.3%, to US$ 59.59 a barrel on the New York Mercantile Exchange as of 11:12 a.m. in London. It closed 0.4% lower on Monday after swinging between a 1.5% loss and an 0.5% gain earlier in the day. Brent for May settlement advanced 0.9% to US$ 67.79 a barrel on the London-based ICE Futures Europe exchange, rising for a second day. The global benchmark crude was at a premium of U$ 8.18 to WTI. (The Houston Chronicle: https://www.chron.com/business/energy/article/Oil-Rebounds-as-Growth-Angst-Eases-and-Venezuela-13716649.php)

 

America imported no oil from Venezuela last week. Here's why that's a big deal

America's once-robust imports of crude oil from Venezuela have ground to a halt because of Trump administration sanctions and chaos gripping this nation. The United States imported exactly zero barrels of crude from Venezuela last week, according to government statistics. That's never happened since the US Energy Information Administration began tracking this weekly metric in 2010.It marks a sharp decline from the prior week, when the United States imported 112,000 barrels per day from Venezuela. The plunge in oil shipments from Venezuela helped lift US oil prices above US$60 a barrel this week for the first time since November. The United States has never gone a full month without importing oil from Venezuela since the EIA started measuring this monthly data in 1973.Getting cut off from the United States adds to the misery for Venezuela. Before the sanctions, the United States was Venezuela's No. 1 oil customer. And the Venezuelan government relied on oil exports for 90% of its revenue. The good news for the United States is that it's pumping tons of oil at home. Powered by the shale revolution, US output has soared to record highs. In fact, the United States is now the world's leading oil producer. The bad news is that US refineries can't rely on American shale oil alone. That's because not every barrel of crude is created equally. While US shale oil is a high-quality light grade, the decades-old Gulf Coast refinery system is configured to run on a healthy dose of lower quality heavy crude, the likes of which is abundant in Venezuela. The situation has caused a strange phenomenon, where heavy crude is trading on par or even at a premium to light crude.(CNN: https://edition.cnn.com/2019/03/21/business/venezuela-oil-imports-united-states/index.html)

 

 

Economy & Finance

IADB cancels China meeting after Beijing bars Venezuela representative

The Inter-American Development Bank on Friday called off next week’s meeting of its 48 member countries in China after Beijing refused to allow a representative of Venezuelan opposition leader Juan Guaidó to attend, two sources with knowledge of the decision said. The sources said the decision was made in Washington on Friday at a meeting of the executive board of the IADB, Latin America’s largest development lender, after China refused to change its position. The sources said the board would vote within 30 days to reschedule the annual meeting for another date and location. On Thursday, the United States threatened to derail the March 26-31 meeting unless Beijing granted a visa to Guaidó’s representative, Harvard economist Ricardo Hausmann.The meeting, slated to bring together finance and development ministers from the lender’s members, was meant to mark the bank’s 60th anniversary. One source, speaking on condition of anonymity, told Reuters on Thursday that China had proposed that no representative from either Maduro’s or Guaidó’s camps attend the meeting to “depoliticize” the gathering. In a statement posted later on its website, the IADB confirmed that the meeting would not take place on March 28-30 in the city of Chengdu as planned, but it did not give a reason. China’s foreign ministry said in its own statement it regretted the decision but bore no responsibility. Spokesman Geng Shuang said China “had difficulty allowing” Guaidó’s representative to attend because Guaidó himself lacked legal standing.“ Changing Venezuela’s representative at the IADB won’t help solve Venezuela’s problems and (the proposal) damaged the atmosphere of the IADB annual meeting and disturbed preparations for the meeting,” he said. The Washington-based IADB was the first multilateral lender to replace a Maduro-selected representative with one backed by Guaidó. The move would eventually open lines of credit to Venezuela should Maduro step down. The International Monetary Fund and World Bank have so far not made a decision on whether to recognize Guaidó officially as head of state. (Reuters: https://www.reuters.com/article/us-venezuela-politics-china-iadb-exclusi/exclusive-iadb-cancels-china-meeting-after-beijing-bars-venezuela-representative-idUSKCN1R32NU)

 

U.S. blacklists Venezuelan state banks after arrest of Guaidó aide

The United States imposed sanctions on Friday on Venezuela’s development bank, BANDES, a day after the Trump administration warned there would be consequences for the arrest by Venezuelan authorities of opposition leader Juan Guaidó’s top aide. The U.S. Treasury said it was slapping the sanctions on Banco de Desarrollo Economico y Social de Venezuela, including its subsidiaries in Uruguay and Bolivia. It also imposed sanctions on state-owned Venezuelan commercial banks, including Banco de Venezuela and Banco Bicentenario. “The United States will not tolerate the arrest of peaceful democratic actors, including members of the democratically-elected Venezuelan National Assembly and those Venezuelans working with interim President Juan Guaidó,” the White House said in a statement. The U.S. Treasury said Maduro tried to move US$1 billion out of Venezuela through Banco BANDES Uruguay in early 2019 as he came under increasing pressure from the United States and other countries in the region to step down. BANDES has received billions of dollars over the past decade from the China Development Bank, in exchange for oil, which the Venezuelan government used to fund infrastructure projects. Uruguay has stayed neutral on Venezuela’s political crisis and has called for dialogue, while China, Russia and regional ally Cuba have backed Maduro. But the sanctions on BANDES could test Beijing’s ties with Caracas, since it would impede Venezuela from restructuring its US$20 billion debt with China, opposition lawmaker Angel Alvarado said on Friday. The sanctions freeze assets belonging to the banks and subsidiaries, and prevent U.S. citizens from any dealings with them. They follow a raft of other sanctions imposed by the administration of U.S. President Donald Trump in recent months against Maduro, top government officials, and state oil firm PDVSA. Trump’s national security adviser John Bolton tweeted earlier on Friday: “BANDES bank is to Venezuela’s financial sector what PDVSA is to its oil sector. This action will severely affect any attempted currency movements by Maduro and his cronies moving forward. Do not test the resolve of this Administration.” (https://www.reuters.com/article/us-venezuela-politics-usa-sanctions/u-s-blacklists-venezuelan-state-banks-after-arrest-of-Guaidó-aide-idUSKCN1R32FQ)

 

 

Politics and International Affairs

2 Russian military planes land in Venezuela, exacerbating political tension

A visit to Venezuela by two military airplanes from Russia, which landed in broad daylight at the international airport in Caracas, has set off alarms that the Kremlin might be acting more brazenly to protect President Nicolás Maduro from the uprising against him. Russian and Venezuelan officials have not disputed the arrival of the airplanes, which were first seen at the airport on Saturday. Such flights ordinarily would be sent to a protected military air base beyond the sight of the public. The planes brought supplies and technical advisers to Caracas, Venezuela’s capital, according to a Russian state news agency and a Russian diplomat. The visit was related to military cooperation contracts signed years ago between Russia and Venezuela, said the news agency, Ria Novosti, suggesting it was routine. A Russian diplomat in Caracas, who spoke on condition of anonymity because the diplomat was not authorized to speak to the media, confirmed the Ria Novosti account and said there was nothing unusual. But opposition members said the visibility of the military planes was unusual and had been meant to send a message. The timing showed that both Russian and Venezuelan officials wanted to convert a routine technical stop into a show of strength, said Rocio San Miguel, a Venezuelan security analyst. Russia has maintenance contracts for weapons sold to Venezuela under late President Hugo Chávez, including air defense systems, fighter jets and tanks, that are worth billions of dollars. Flight tracking websites showed an Ilyushin IL-62 jet and an Antonov AN-124 cargo plane flew from Moscow’s military airport to Caracas’s international airport via Syria. The cargo plane flew back to Syria on Monday, according to flight tracking website bosphorusobserver.com. The arrival of the advisers came as Venezuela activated Russian-made S300 air defense systems last week, according to satellite imagery analysis firm IMAGESAT Intl. Russia has also recently deployed the S300 in Syria. US Secretary of State Mike Pompeo spoke with Russian Foreign Minister Sergey Lavrov on Monday and called on Russia "to cease its unconstructive behavior" in Venezuela, State Department spokesman Robert Palladino said in a statement. The United States "will not stand idly by as Russia exacerbates tensions in Venezuela," the statement said. "The continued insertion of Russian military personnel to support the illegitimate regime of Nicolas Maduro in Venezuela risks prolonging the suffering of the Venezuelan people who overwhelmingly support interim President Juan Guaidó," the statement said. The United States on Monday accused Russia of "reckless escalation" of the situation in Venezuela. (The New York Times: https://www.nytimes.com/2019/03/25/world/americas/russian-planes-caracas.html; Military Times: https://www.militarytimes.com/flashpoints/2019/03/25/pompeo-says-russian-troops-in-venezuela-increases-tensions/; Haaretz: https://www.haaretz.com/us-news/u-s-calls-russia-deployment-of-planes-to-venezuela-reckless-escalation-1.7059121; CNN: https://www.cnn.com/2019/03/25/americas/venezuela-news-roundup/index.html; The Wall Street Journal: https://www.wsj.com/articles/u-s-chides-russia-for-military-aid-to-venezuela-11553553299; McClatchy: https://www.mcclatchydc.com/news/politics-government/white-house/article228377779.html) 

 

Guaidó accused of plotting 'terrorist acts'

Jorge Rodriguez, the nation's minister of communication, spoke on national television Saturday to accuse opposition leaders, including National Assembly President Juan Guaidó, of plotting "terrorist acts" in the country. Rodriguez said some of the evidence was collected from the personal phone of Roberto Marrero, Guaidó's chief of staff, who was detained in Caracas on Thursday and later accused of being involved in an alleged "terrorist cell" planning attacks against high-level political figures. According to Rodriguez, Marrero coordinated the arrival of "hitmen" from El Salvador, Guatemala and Honduras to "kill members of the Venezuelan government." He said that about 60 "hitmen groups" were prepared and "trained in Colombia," but that given the closure of the Colombian-Venezuelan border, only "30 groups entered Venezuela." Marrero's lawyers have denied the claims and accused Maduro's regime of planting evidence. Rodriguez did not present any evidence to support his claim. This is not the first time the Venezuelan government has presented strong accusations against the Venezuelan opposition based on text messages, emails or pictures. And, with frequency, the elements are not presented by the Attorney General's Office, but by Rodriguez himself. Surrounded by hundreds of people waving flags and flashing cameras, Guaidó asked his followers to stay on the streets demanding freedom and to not be afraid. "We have the support of important countries ... we are not alone," he said. Guaidó closed the rally by singing the national anthem and once again spoke directly to Maduro: "You believe you are going to intimidate us. Well, here we are, moving forward, holding our heads high, taking it all for the freedom of Venezuela," he said. (CNN: https://www.cnn.com/2019/03/25/americas/venezuela-news-roundup/index.html)

 

House passes bills to expand humanitarian aid in Venezuela and hurt Maduro

The House of Representatives passed three bills on Monday to expand U.S. humanitarian assistance in Venezuela, examine Russia’s growing military presence in the country and prohibit U.S. exports of crime control materials that Nicolás Maduro can use against pro-democracy protesters. The bills, led by South Florida Democrats Donna Shalala, Debbie Mucarsel-Powell and Debbie Wasserman Schultz, are the first legislative responses to Venezuela’s ongoing humanitarian crisis since the U.S. recognized Juan Guaidó as the country’s legitimate leader in January. The bills were sent to the U.S. Senate without opposition.“ The world has witnessed the violent actions of Maduro’s security forces and their use of arms, rubber bullets, tear gas, and other dangerous weapons to violently disperse crowds during peaceful protests,” Shalala said. “With the passage of the Venezuela Arms Restriction Act, we will move one step closer to ensuring that no weapons originating in the United States are used to silence dissent through intimidation, repression, or execution.” Republicans allowed the bills to pass by a voice vote, meaning there was no significant opposition to any of the proposals. Though some Democrats have questioned the U.S. decision to recognize Guaidó, there was no formal opposition to the bills on the House floor. Mucarsel-Powell’s bill compels the Trump administration to outline a long-term humanitarian aid strategy in Venezuela and allocate at least US$ 150 million in federal funding for humanitarian aid in 2020 and 2021. Wasserman Schultz’s bill would compel the State Department to monitor and provide Congress with steps to limit Russian military influence in Venezuela. The three South Florida Democrats are in lockstep with Florida Republicans in support of Guaidó’s nascent government and Wasserman Schultz and Shalala recently visited the Colombia-Venezuela border. But their efforts have been overshadowed by Democrats who argue that recognizing Guaidó is a prelude to a U.S.-backed coup and Republicans like Sen. Marco Rubio who communicate directly with the president on the importance of maintaining a hard line against Maduro. Another piece of legislation that would expand Temporary Protected Status for Venezuelans has the support of Democrats and Republicans from South Florida, though some of Trump’s advisers are wary of expanding immigration protections after they sought to cut TPS for countries like Haiti, Nicaragua and El Salvador. Rubio is also planning to reintroduce a bill that expands humanitarian assistance in Venezuela and provide funds for pro-democracy groups. (The Miami Herald: https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article228383199.html; AP: https://www.apnews.com/3affa036dbea48b794ef33c19fd5e0a4)

 

US warns it will protect its 40,000 citizens in Venezuela

The US government took the unprecedented step of revealing the number of US citizens currently living in Venezuela. Spain’s ABC daily has published an interview with US State Department spokesman Robert Palladino where the Trump Administration warns Nicolás Maduro directly that it Will not tolerate abuses against US citizens on Venezuelan soil. “The US is seriously concerned for the wellbeing and safety of all Americans detained in Venezuela, and for deports that prison officials are blocking their families and lawyers from delivering food to them. We will make Maduro and his jailers responsible for their safety and wellbeing”. Previously, US National Security Advisor John Bolton had revealed that there are at least 40,000 US citizens living in Venezuela. More in Spanish: (Globovision, http://globovision.com/article/eeuu-advierte-que-protegera-a-sus-40-mil-nacionales-en-venezuela)

 

OP-ED: Russia is making the US look weak in Venezuela, by Erin Dunne

It’s no secret that President Trump wants illegitimate Venezuelan dictator Nicolas Maduro out. But as the Trump administration pressures Maduro’s regime and continues to back opposition leader Juan Guaidó, Russia has successfully positioned itself as a roadblock to Washington-backed regime change. And if existing shadowy ties between the Moscow and Caracas weren’t already a serious concern for Washington, the two Russian air force planes that touched down in Caracas over the weekend certainly are. Those planes carried 100 troops, a Russian defense official and almost 40 tons of cargo. They not only provide much-needed materiel assistance for Maduro, but they also send a clear message to Washington that the U.S. isn’t the only international player interested in Venezuela. That Russia would take stronger steps to back Maduro isn’t entirely unexpected. Indeed, at the end of January there were already Moscow-linked military contractors on the ground in Venezuela to support Maduro. Moreover, Russia has been a staunch backer of Maduro’s regime, investing billions of dollars in military contracts and other projects. That has left Moscow with a vested interest in keeping Maduro in power, both to cash in on their monetary investments and to reap the rewards of their influence. But the real motive for Russian President Vladimir Putin seems to be what Russian and before them Soviet leaders have always relished: challenging U.S. authority in what Washington views as its own backyard. Putin is complicating U.S. plans to end Maduro’s grip and restore stability to the region. Russia's investment in the government of a failed state is likely to yield few if any long-term direct returns on investment. That makes this challenge to the U.S. the most plausible reason behind Moscow’s continued support for Maduro. Likewise, the 100 Russian troops that Moscow has put on the ground, even backed by a generous shipment of equipment, is hardly enough to secure an embattled regime, although it could be enough to create a headache for Washington. Russia's actions not only make U.S. involvement more dangerous by introducing the potential to spark engagement with Russia, but they also undercut existing efforts against Maduro limiting the impact of sanction. They give Maduro new military power to rely on and lend him international backing even as the U.S. and other countries have increasingly isolated him. Secretary of State Mike Pompeo warned on Monday that the U.S. does not take these actions lightly. As he put it, U.S. and its allies “will not stand idly by as Russia exacerbates tensions in Venezuela.” Just what Pompeo has in mind is unclear. What is obvious, however, is that Russia has made Washington look weak. (The Washington Examiner: https://www.washingtonexaminer.com/opinion/russia-is-making-the-us-look-weak-in-venezuela)

 

OP-ED: Maduro faces mounting pressure to quit, yet he persists, by Philip Reeves

Two months have elapsed since the Trump administration threw its weight behind a multipronged campaign to oust Nicolás Maduro, after an economic collapse that has led more than 3 million Venezuelans to move abroad and created widespread hunger and shortages. Since then, Maduro — who is fond of comparing himself to a boxer in the ring — has been absorbing one body blow after another. Yet, somehow, Maduro remains in the ring — still on his feet, on TV in front of a crowd, cheerfully goading his enemies. Maduro's adversaries had hoped for success by now. They are beginning to ask what else they and their international supporters need to do to topple him. No one doubts that Maduro would fall if the men in charge of Venezuela's armed forces withdraw their support. Some heavy hitters on the world stage continue to back him — notably China, Iran, Turkey and Russia. Fractures have appeared in the lower ranks. Yet Venezuela's military high command has remained loyal, despite Guaidó's offer of amnesty to armed forces that abandon the government. Maduro's opponents explain the continued support by saying senior army commanders pocket millions from illicit black-market activities, including food and currency rackets and narcotics and gold smuggling. Venezuelans also frequently attribute their generals' dogged loyalty to the role played by Cuba, Maduro's closest foreign friend. Large numbers of Cuban agents operate within the Venezuelan military, monitoring the ranks for signs of betrayal. The National Assembly voted to block the government's long-running shipments of heavily discounted oil to Cuba, in the hope this will encourage the Cubans to withdraw their spies. But the state-run oil company is not expected to abide. As Guaidó's U.S.-backed campaign to assume power enters its third month, Maduro appears to be stepping up the use of force against his opponents. After Venezuela's huge power outage, Maduro called for the mobilization of colectivos, an armed pro-government motorcycle militia with a reputation for using extreme violence. Many Venezuelans feel the same about other security forces: Thirty-seven people were reported killed in Caracas during house raids in January by the national police's special force, according to United Nations High Commissioner for Human Rights Michelle Bachelet. Most of the victims were from poor neighborhoods and were suspected of participating in anti-government protests, she said. Many Venezuelans believe — and often hope — the U.S. will lead a military intervention that will finally drive out Maduro. That conviction is reinforced by the Trump administration and Guaidó: Both regularly emphasize that "all options are on the table." Yet the idea is widely opposed in the international arena, and there is little sign of enthusiasm for it in Washington. Maduro's hard-core support is small: just 14%, according to a February survey by the Caracas-based polling company DATANALISIS. Guaidó scored 61%. The same survey included another striking statistic: 47% still support Chávez, who died of cancer in 2013. Luis Vicente León, head of DATANALISIS, cites this as evidence that in the long term, the Chavistas could eventually make a comeback in Venezuela, "even with transparent and clear elections." Maduro now faces an even tougher test. Blows are raining down on him, as he dodges and weaves to somehow keep his broken economy running. The oil sanctions the U.S. imposed on Venezuela in late January are making an impact. With the world's largest proven oil reserves, Venezuela's production dropped by 142,000 barrels per day from January to February, according to OPEC. That is far below Venezuela's output from a few years ago. The industry's infrastructure is falling apart; many thousands of engineers have left; the state-run oil company finds it increasingly difficult to import diluents needed to raise Venezuelan crude to export grade. The Maduro government is scrambling to find fresh clients for crude oil that it is no longer exporting to the U.S. Despite this, it is far from certain Maduro will fall. That concerns rights groups, which fear U.S. sanctions are deepening the hardship of a long-suffering population and weakening their ability to organize against Maduro's government. Crashing an economy alone does not always bring a government down. Pollster León recalls: "Everyone thought the same with Cuba, Iran, Syria, Zimbabwe and North Korea." (NPR: https://www.npr.org/2019/03/25/706635580/venezuelas-maduro-faces-pressure-from-much-of-the-world-yet-he-persists)

 

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas& Asociados and The Selinger Group.