The Foreign Service Journal, June 2011

In any event, by Sunday, April 14, 2002, Chávez had been restored to office and the whole issue was moot. Reality Comes Crashing Down Apart from the oil and mining in- dustries, most businesspeople were slow to see what was coming, in part because they were blindsided by the record profits reg- istered during the 2004-2008 oil revenue–fueled boom. So long as the United States continued to be the main customer for Venezuela’s oil and the primary source of imports, they saw no problem. By 2009 and 2010, that illusion had evaporated as Chávez tightened his controls over the commercial and industrial sectors. His administration seized more than three million hectares of private farm land and expro- priated at least 600 companies in just five years. Mean- while, U.S. imports of Venezuelan oil fell from more than 1.6 million barrels a day to fewer than a million bar- rels a day, a nearly 40-percent drop. Today, Venezuelan businesspeople are running scared. U.S. policymakers also appear to have been slow to see what was coming. While Washington continued to emphasize the fact that America was the principal cus- tomer for Venezuelan oil, Chávez was aggressively de- veloping commercial ties with such non-traditional trading partners as Russia, Belarus and, most important of all, China. Today, Beijing is Venezuela’s largest cred- itor; the total owed, or committed to it, is on the order of $28 billion and is to be repaid with oil shipments — 250,000 b/d today, rising to 300,000 b/d in 2012. The People’s Republic of China, along with Brazil, is the beneficiary of huge construction contracts (primar- ily railways and housing) and reportedly is in line to as- sume responsibility for managing Venezuela’s aluminum smelters. In addition, the PRC and a baker’s dozen of other countries have signed formal agreements calling for joint development of Venezuela’s huge, extra-heavy oil reserves. However, China is the only one of these na- tions with the financial capacity to undertake its share of a project worth between five and seven billion dollars. More important, however, in terms of U.S. interests in the region, is the fact that Chávez has aggressively sup- ported radical groups in several countries, providing them with financing and tactical and strategic support. He has strongly backed the rise to power of Evo Morales in Bolivia, Rafael Correa in Ecuador and Manuel Zelaya in Honduras (elected, then deposed), as well as the re-emergence of Daniel Ortega in Nicaragua, and has prop- ped up Fidel Castro in Cuba. Chávez-backed candidates in sev- eral other countries came close to gaining power in 2006, as well, including Perú (Ollanta Humala) and Mexico (Andrés Manuel López Obrador). Chávez’s efforts to gain influence in Argentina in- cluded providing sufficient cash so that it could break re- lations with the International Monetary Fund (a particular bête noire for leftists). Even so, one gets the impression that the Argentines played him for a chump, accepting his cash and contracts but ignoring most of his ideological and anti-Yankee initiatives. Likewise, Chávez reportedly supported Brazilian President Lula da Silva’s Workers’ Party, but his influence there was not decisive. Like the Argentines, the Brazil- ians exploited the relationship with Chávez to sell goods and services (especially in the construction field) to Venezuela. But neither Lula nor his elected successor, Dilma Rousseff, has been beholden to Chávez. On the contrary, Rousseff seems to be putting distance between herself and Chávez thanks to improved U.S. diplomacy in the region, including visits by Presidents George W. Bush and Barack Obama. Still, there’s a lot more Washington could do to counter Chávez, such as lifting the burdensome tariff on ethanol imports and lob- bying for Brazil to be assigned a permanent seat on the U.N. Security Council. Another Chávez stratagem that appears to have been underestimated by U.S. policymakers was his campaign to position himself as a leader of the Third World. Dur- ing the past 13 years, Chávez has forged closer links to the likes of Iran, Syria, Russia, Belarus and Libya. He has purchased huge quantities of arms fromMoscow and, at one point, he offered the Russian Navy free access to Venezuelan ports — a measure clearly intended as an af- front to Washington. More worrisome still is Chávez’s continuing support for such terrorist groups as the Colombian FARC (which he lobbied to have declared “belligerents”) and Spain’s ETA, as well as such Middle Eastern extremist groups as Hezbollah and Hamas. It is difficult to imagine a worse mistake for the U.S. than to impose sanctions against Caracas. 36 F O R E I G N S E R V I C E J O U R N A L / J U N E 2 0 1 1 F O C U S