Samuel Furfari Ph.D.

Authored by Samuel Furfari.

Samuel Furfari is a lecturer at the ULB – Universite libre de Bruxelles – in geopolitics of energy.

The author speaks in his personal capacity; the following are his own opinions.

A French version of this post can be found here.


2017 protests in Caracas, Venezuela

Demonstrators clash with the Bolivarian National Police during a protest in Caracas, Venezuela, April 10, 2017. Credit: VOA News

Venezuela is at the crossroads. Is it moving towards modernism or is it going to continue its Bolivarian revolution towards the socialism that led to the debacle that we are witnessing today?

The country possesses all that is necessary for prosperity and peace. Its abundant hydrocarbon resources could have made it the Norway of Latin America, but it has become the model not to follow. How has a democratic country, not governed by religious laws of another time, come to the point of having to ration the most elementary goods and watch its inhabitants flee by thousands? In its pastoral letter to the free churches of Venezuela and Venezuelan society, the Association of Free Evangelical Churches, faced with the widespread violence in the country, has asked its faithful to think twice before leaving in order to safeguard the future of the country.

Curiously, it is oil that is at the root of this disastrous situation. With about 300 billion barrels, or 17.7% of the world total, Venezuela has the world’s largest proven reserves of crude, ahead of Saudi Arabia, which has 268. Its daily output in 2015 was only 2.6 Million barrels (Mb) per day, or 3.1% of world production. It even produced less crude oil than in 1970, when 3.7 Mb / d was extracted! The fall in the price of crude has worsened the economic situation compounded by the USA, which has cut back its purchase of oil. From an import of 600 Mb / year between 1994 and 2004 – that is 2/3 of the Venezuelan production – thanks to tapping their vast shale oil reserves, the Americans now import only 150 Mb. These few figures clearly show something is wrong in this country of Venezuela.

World Proven Crude Oil Reserves 2017

World Proven Crude Oil Reserves 2015. Source: EIA

The ideology of Hugo Chavez could only lead to a lamentable failure. For Chavez and Nicolas Maduro, who succeeded him after his death, Venezuela’s oil wealth was to be the instrument for launching the Bolivarian revolution and to establish socialism, not only in the country but throughout Latin America and later in the world. Chavez bought $528 million of Argentina’s debt, built houses in Cuba, helped the new Ecuadorian government, and proposed the creation of ALBA – a free trade area for the Americas. He befriended Iranian Ahmadinejad to challenge the US. On 20 September 2006, at the United Nations, he insulted George Bush by calling him a devil trailing the smell of sulfur. At the summit of Latin America and Spain, on 10 November 2007, he exasperated King Juan Carlos, who said: “¿Por que no te callas?” (Why do you not shut up?).

After the strike in 2002, 18,000 executives from the Venezuelan national oil company Petróleos de Venezuela (PDVSA) were dismissed, as were 85% of the engineers and 90% of the personnel working in the extractive sector. Those who possessed the know-how were replaced by acolytes of the regime. Oil revenues are not reinvested in the sector but in social programs. The consequences were not long in coming as the price of crude returned to a normal level.

Chavez’s predecessors also used oil as a retaliatory weapon. During the 1950s, President Marcos Pérez Jiménez promised to modernize the country overnight, but his government became corrupt and wasteful. In response to a first crisis with the US following President Eisenhower’s decisions, Venezuela proposed the creation of OPEC in 1960. In the 1970s, President Carlos Andrés Perez also promised to quickly transform Venezuela into a developed nation. But the country ended up collapsing and in debt when oil prices fell a decade later. Chavez, thanks to his country’s gigantic reserves, believed himself the master of the world. He urged OPEC to establish the famous “price band” which led to years of overpriced oil. Raul Gallegos, a Venezuelan analyst, explained that in the period 1999–2014, the Venezuelan government earned more than $1.3 trillion from oil—equivalent to more than 13 times the Marshall Plan expenditures (adjusted for inflation) that allowed Europe to recover from World War II. Although his spending briefly helped the poor, when oil prices fell in 2014 the country was ruined again. The failure of Bolivarian socialism allowed the opposition to win a big victory in December 2015. World oil tankers realized that instability would continue. In 2015, the annual Venezuela Oil Roadshow in Maracaibo ran as a fiasco; instead of the 40,000 participants expected, only 3,000 were present.

Juan Pablo Pérez Alonzo, Venezuelan Minister of Energy and founder of OPEC, described oil as “excrement of the devil.” In his book “Hundiéndonos en el excremento del diablo” published in 1976 he states that “oil brings waste, corruption, unnecessary expenditure and debt … We will suffer for years and years.” He was not mistaken, given the corruption that has become endemic in his country and in so many other oil-producing countries. Some have grown rich while their populations have remained very poor. Apart from a handful of OECD countries, oil-producing countries are not genuine democracies, are not economically stable, and face recurring problems. In the world of energy, this sad reality is called “the curse of oil”.

Norway, however, escapes this curse. It is a prosperous country and its income is well-managed. Its rigorous Protestant ethics undoubtedly limits corruption and promotes intergenerational solidarity. The day when its oil may dry up, its future generations are assured of still benefiting from this wealth thanks to the Fund created by the Norwegian government, whose value is estimated at 785 billion euros. What a contrast with the Bolivarian revolution!

Let us hope that the Venezuelan crisis does not end in civil war but that it helps the State to recognize that it is not so much the wealth of the subsoil that brings prosperity and peace, but good governance; not ideology, but good management.

If oil is the excrement of the devil, when properly spread to customers and supplied to citizens for industrial needs, like manure in a garden, things grow, becoming rich blossoms with a heavenly scent. When abandoned, misused, not properly applied, like excrement, potential oil wealth attracts the flies of corruption, stinks to high heaven and makes society itself sick beyond measure, as we witness the ongoing tragedy of poverty and despair in oil-rich Venezuela.

Samuel Furfari Ph.D. is the author of several books on energy, geopolitics and the environment. His most recent book is entitled “The Changing World of Energy and the Geopolitical Challenges.” It is a major two-volume work of over 1250 pages, with 437 figures and maps, in which Furfari tries to summarize everything he has learned in his 39 years working in the energy field. Each volume has 12 chapters. It is a book that he uses for his “Politics and Geopolitics of Energy” students at university. As the title indicates, the world of energy has changed substantially in recent years and this has triggered geopolitical challenges. Since both volumes are up-to-date on these recent and fundamental trends, they address all the important geopolitical issues arising from these “shifting sands.” For more information and to order, visit https://furfari.wordpress.com/.

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