Venezuela Scrapes the Bottom of Oil Barrel Diplomacy

(Bloomberg View) -- Hand it to Venezuelan President Nicolas Maduro. His country's streets are choked in tear gas. Scenes of his guard beating heads and shooting protesters are lighting up social media. The nation boasting the world's biggest oil reserves is importing crude, skirting default and bleeding regime loyalists. And yet Maduro is reveling in a self-proclaimed "diplomatic victory."

He has a point. On June 22, at the Organization of American States 47th general assembly in Cancun, Venezuela's envoys walked out and still managed to turn back an initiative by regional critics to admonish Maduro for trashing what remains of Venezuelan democracy. Not even the anodyne motion urging the region's ranking authoritarian to "reconsider" installing a regime-friendly constituent assembly to write a Castro-styled constitution passed. And so Latin America's most important diplomatic consort adjourned in a silence that only an autocrat could love. "Venezuela is still taking advantage of the fact that countries in the region lack the conditions to launch coordinated actions," said José Botafogo Gonçalves, a former Brazilian diplomat.

What's less clear is whether the silence can last. After all, the allegiance of the bloc of small countries standing between Maduro and censure is anything but sentimental. Though a few bloc members, like Bolivia and Nicaragua, are ideologically aligned with the Bolivarian Republic, most are small Caribbean island and coastal states in Central America, which have been driven by a single-minded objective: cheap oil. 

Through its Petrocaribe initiative, Venezuela has sold discounted oil to energy-deficient clients, practically giving it away in some cases. Lately, however, that generosity has diminished with Venezuela's economic misfortunes, hastened by tumbling global prices for oil -- the country's only viable source of export revenues. Even Brazil, with a fraction of Venezuela's reserves, now pumps 25 percent more oil.

Plunging oil prices are a double boon to the Caribbean, reducing energy bills and the region's once considerable debt load. Jamaica and the Dominican Republic, the Caribbean's biggest oil importers, managed to retire most of their Petrocaribe debts, heavily discounted by the cash-strapped Venezuelan treasury.

In that sense, Petrocaribe's decline ought to be an opportunity for hemispheric diplomacy. Put bluntly, why couldn't leaders in the Americas simply buy out Venezuela's position and turn reluctant client states with competing aid and comfort? "Latin America conceivably could change at least half the votes in the OAS with offers of help and diplomatic pressure," said Jaime Aparicio Otero, Bolivia's former ambassador to Washington. "It's not a lot of money, but you'd need to line up other more powerful countries in the region."

Here's where the diplomatic game board gets tricky. Wooing Venezuela's clients was part of the logic behind the Obama administration's 2015 clean-energy initiative. But even that help came with a caveat. "We're not going to be able to substitute American oil for Venezuelan oil," then deputy National Security Adviser Ben Rhodes advised. Given Washington's current Latin America attention deficit -- after calling out Venezuela's excesses, U.S. Secretary of State Rex Tillerson didn't show up in Cancun -- that prognosis is unlikely to change soon. "We shouldn't expect reasonable, pondered much less pacifying measures from the current U.S. government," said Brazil's Botafogo Gonçalves. "And it's unlikely we'll see courageous moves or financial assistance from Brazil, Mexico and Argentina, which are facing complicated political and economic crises of their own."

The U.S. absence could actually be a blessing in disguise for regional leaders, who have always flinched at gringo intromission below the Florida Straits. As Washington has hung back, OAS general secretary Luis Almagro has become more outspoken, even pledging to resign if Venezuela scrapped the constituent assembly, freed political prisoners and held free elections.

Almagro is not alone. Twenty nations backed the motion urging Maduro to scrap the constituent assembly, or just three votes short of the two-thirds majority required. "This was the largest number of countries ever to align against Venezuela, and it included nations that until now were quite favorable to the regime or unwilling to confront it, like Mexico and Brazil," said Javier Corrales, a political scientist at Amherst College. "The trend against Venezuela is favorable.

Consider Belize, a Petrocaribe client that nonetheless voted in favor of outside mediation of the Venezuela crisis and, tellingly, abstained on the motion for Maduro to drop attempts to rewrite the constitution. "We in Belize need to consider our position very carefully so that we don't at the first sign of trouble turn our back on our friends, but also that nobody takes us for granted in feeling that no matter what, Belize will support any and all actions of the Venezuela government, no," Prime Minister Dean Barrow told the local press last month.

Venezuela's opposition may be less impressed. The glacial shifts in regional statecraft still seem sorely out of step with the turmoil in the Venezuelan street, where some 75 people have died in protests. But the days of Venezuela's oil diplomacy buying it friendship and protection are numbered.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”

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