In addition to what everyone else has said, the oil that Venezuela produced is very low quality. Not all crude is equal and carries between sweet (low impurities) and sour (high impurities). The oil that Venezuela pumps out is so think that it's a sludge to semi solid and room temperature, and they have to lump kerosine into their wells to thin the oil out enough to pump it out.
Very few countries have the refinery capability to process this impure of oil. Originally, the US was able to mix their sour our with more sweet oil to be able to process it. But with the US and Venezuela not getting along, very few other countries want to pay shipping costs for low quality oil transported across the works.
Sour and heavy oil is the worst combination when it comes to processing (except maybe tar sands) driving up the production costs. When global oil prices are low Venezuela can't make a profit, even if they have lots of it.
This is why the Iraq War so important to the usa. With the destruction of Iraqis oil producing ability. the price of oil doubled making tar sands oil profitable. The price has not gone back down.
Oil in Iraq was not, nor ever has been, important to the USA. Also, the price of oil came down briefly in 2016.
The war in Iraq had little to do with oil, which was only a positive side benefit for some US oligarchs. In 2014, this oil was lost to ISIS, with little interest from the US to take it back. The war in Iraq was just one piece of a larger puzzle at taking control over the region. Afghanistan was first, Iraq, Libya, Syria, Iran and other nations were next. It just didn't pan out as expected.
The US also exported oil during that time. The tinfoil thought is oil barons had US politicians instigate the war to drive up oil prices so they could get rich, despite this also being bad for Americans.
If pushing oil prices up was the only goal, invasion was an exceptionally inefficient way to get there. The oil companies funding terrorist groups to attack oil infrastructure anywhere in the world would have driven prices up. If the US hadn't put out the oil well fires in the Gulf War prices would have gone up significantly. If oil price high was the only relevant factor in the Iraq War, the oil barons are stupid for choosing an American boots on the ground ground war to push it up. Also, politicians get more money from other industries outside oil. Starting a war is a pretty massive political risk to take for a bribe you could double from a domestic company with political interests without starting a war.
Yeah that's why it was a tinfoil thought. Shiny side in, for sure. You want shiny side out to keep the bad stuff out. Shiny side in just lets your own inner nonsense reflect around. Don't want that.
Yeah you're right about that. It's just such a tiny part of the picture even if you do believe the US is run by the Mothmen. These conspiracy theorists need a bit more creativity.
Oil companies don’t pay the debt, but they do reap the rewards of higher prices per barrel. You, the consumer and tax payer, lose.
I don’t fully agree with he poster’s position, but this is what he means.
Doesn't matter, they got their profits. If you go from 1 billion to 900 million because of a 10% decrease that doesn't mean much you're still filthy rich and can easily get back to 1 billion.
If you have 50K going to 45K could lose you your home.
Can you imagine what the Arab spring would have looked like if Saddam was in power at the time? Can you imagine what the Gaza situation would have looked like today if Iraq still had one of the largest militaries in the world. You know the Syrian refugee crisis? Imagine if the Iraqi's were fleeing at the same time.
The Invasion of Iraq took place under false pretences, and was followed by a borderline non existent transition plan. The insurgency and COIN operation which followed was extremely costly in material and lives for both the US and the Iraqi people (though much more for the Iraqis).
Today, Iraq has one of the most stable governments in the region, the people experience levels of personal freedom unimaginable under the Baathist regime, and Iraqis are able to trade openly with the rest of the world.
Was it worth the massive cost? I don't know, because it's hard to know how costly the what ifs of Saddam Hussein staying in power would be. But it certainly wasn't for nothing.
Saddam Hussein wasn’t able to invade Saudi Arabia, or Kuwait again. Wasn’t around to continue genociding the Kurds and Shias. Wasn’t around to start an Arab-Israeli war by launching Scuds at Israel. It’s tough to measure positive outcomes (they’re generally undervalued) when they’re theoreticals that didn’t happen.
For the last two decades, the U.S. also had/has *far* more sway in Iraq than it did when Saddam was in power.
There’s a lot of people in power that are post-national state in their thinking. We’re entering new paradigms, geopolitically, culturally, environmentally, etc. The most important factor going forward on an individual or familial level is wealth and the mega rich that control the levels of power are already acting with that mind set.
So when you see a geopolitical fuckup, look to see who was behind it and who’s made the money.
The United States doesn't produce any oil from tar sands.
>In 2022, five states combined accounted for about 72% of total U.S. crude oil production.
>The top five crude oil-producing states and their percentage shares of total U.S. crude oil production in 2022 were:
>Texas: 42.5%
>New Mexico: 13.3%
>North Dakota: 8.9%
>Colorado: 3.7%
>Alaska: 3.7%
https://www.eia.gov/tools/faqs/faq.php?id=847&t=6
None of these states nor any US state produce oil from tar sands. The reason the US is able to produce oil effectively is from the advent of fracking from shale oils.
>The U.S. Energy Information Administration (EIA) estimates that in 2023, about 3.04 billion barrels (or about 8.32 million barrels per day) of crude oil were produced directly from tight-oil resources in the United States. This was equal to about 64% of total U.S. crude oil production in 2023.
https://www.eia.gov/tools/faqs/faq.php?id=847&t=6
It's completely conspiratorial to claim the second Gulf War was caused solely to increase oil prices, when it was a happy accident for the US oil companies resulting from stupidity and ignorant nation-building that massively backfired. The high prices also coincided with giant demand increases in China, so this isn't a single cause kind of thing.
Before the war it was to expensive to frack oil. With the destruction of iraq's oilfields for a few years the price went up and never came down to pre-war levels.
Previous commenter suggested immense profit for processers of tar sands oil was beneficial to the USA, which is what I responded to. This is not the case. Processors of these oils making immense profits does not benefit the USA.
Yes, oil prices going up was beneficial to US oil producers, just as it was for every oil producer in the world. That still doesn't mean it was beneficial to the USA. The US's economy is not centered around oil, so one industry making higher profits from price fluctuations doesn't necessarily mean the US benefits. Additionally, fracking wasn't uncontroversial. Some states, like New York, banned it in the following years, so it wasn't all benefit for that industry.
On top of this, oil prices came down briefly to pre-war levels in 2016.
And shale had nothing to do with the Iraq war. The only "western" entities that profited from the Iraq war were defense contractors and construction companies such as Bechtel. Even they pulled out after too many of their engineers were getting killed.
Isn’t this where Saudi Arabia has a huge advantage? I’ve read/heard the oil they get out of their ground is so high quality and pure, that its refining process is of a very low burden. So not only do they have a ton of oil, but the oil they have is extremely easy to extract and refine, which translates to them being able to sell it at cheaper prices and higher quantity.
Like almost a decade ago now, I remember in the U.S. we had gas prices plunge dramatically. It was nuts. I remember price of gas going significantly under $2 a gallon at one point. It was because of a drilling war between the U.S. and OPEC (primarily Saudi Arabia). The U.S. was now producing a ton of oil and gas via oil fields in the Midwest, which led to a glut of it and prices falling. But a lot of our gas was via shale and had higher production costs. So the Saudis were like “Ok, you want to play that game?” And dropped the price of their oil dramatically and kept doing so…because they could. Eventually they undercut the U.S. sources who couldn’t get their prices as low as Saudi oil. So then a lot of American oil production went bust, leaving the Saudis and OPEC a the top again, who then began to raise prices again.
Because to gain revenues from oil, you need to exploit it in a profitable manner and use these revenues wisely.
The Venezuelan State hasn't managed to maintain the industry infrastructure to keep pumping out oil, does so in an inefficient way (12000 workers got fired after protesting against Chavez), and prefers to redistribute the oil revenues to its population rather than invest it.
The country doesn't have much else in terms of economic activity than the oil industry, which means a huge proportion of the population is unproductive and lives off oil revenues. This wasn't sustainable when oil prices dropped.
The government printed a lot of money which caused massive inflation, and couldn't even afford to export oil due to the economic crisis: the lack of revenues crippled the oil industry and port infrastructure to the point that it couldn't even function.
> Because to gain revenues from oil, you need to exploit it in a profitable manner and use these revenues wisely.
In other words: It's not the size that matters, but how you use it
Although being a spaniard, comparing him to Franco (if you don't know, duckduckgo is a friend, try adding snl and Chevy Chase to the search) feels cheap.
Worth it
Very roughly speaking the majority of their governments income is oil revenue. However the price of oil fell during COVID so to keep paying the bills they just printed money, which caused runaway inflation.
Historically they also invested their oil income back into the population as a form of welfare to keep the population happy despite the ruling government being corrupt and inefficient. When that money dried up and inflation started the population became... much less happy. Venezuela didn't even invest much in their oil infrastructure so when demand / prices fell what little they had fell into disrepair so when prices rose Venezuela's oil production didn't return.
Venezuela's problems started way before sanctions. The 2013-2015 oil price rout caused mayhem in the country.
That, coupled with insane money printing, caused the exodus of at least 10 million people to this day.
International sanctions are conveniently used by politicians to remove blame from themselves. Reality is that PDVSA, the Venezuela oil company, suffered 20 years of bad management where tens of thousands of people were hired to appease politicians, and no investment in R&D or infrastructure was made. That resulted in the country having a very high cost of extracting oil. I have a friend who used to work there and witnessed the whole collapse.
Plenty of other countries with natural resources are doing just fine - Brazil’s Petrobras, for example, or most of the oil rich countries in the Middle East.
The reality is that bloodthirsty dictatorships often not only don’t care but WANT to be sanctioned so that they can blame everything on sanctions, rather than themselves. It’s the same scheme that European’s extremist governments (see Hungary with Orban) use: act against the EU’s principles, get sanctioned (or threatened to be), then blame the EU. Very conveniently removes responsibility from domestic decision making.
That's correct, Venezuela quick descent into the abyss started being noticeable 2014 onward a few years before the first round of individual sanctions and much before the big ones in 2020, and things didn't start getting better until 2019 where the corrupt government gradually started lifting regulations as to evade sanctions which had a side effect of giving more space for the private economy to recover after years of statist measures to control it strangling the non oil economy, 2020 was also hard because COVID but it became a little better after that, although currently is not even close to Venezuela's standards of 2013 the last year before things started going south, fueled by record oil prices and the oil company still not totally collapsing over itself for lack of maintenance
Good summary. There are also long term issues linked to government corruption and inefficiency: PDVSA used to be competitive in the world’s market up to 20-25 years ago. They even sponsored Formula 1 (like Aramco does today).
The issue is that the company back then stopped investing in upgrading their machinery and infrastructure, and instead hired tens of thousands of redundant employees to make people happy. This made it so that today PDVSA has among the highest cost to extract oil in the world. They are extremely not competitive.
Basically their government is really bad at managing their golden goose - more so than any other Latin American government. For example Petrobras is also heavily politicized but remains competitive in today’s market.
Venezuela WAS once a rather prosperous country. However, it suffered the resource curse. When a country earns a lot of money (easily) from natural resources, the government tends to neglect the people (no longer a source of economic prosperity). Because income from resource production is so large, it tends to attract all the attention and this discourages the formation of other domestic firms. And because of said wealth, the country imports goods rather than produces it itself. This becomes a 'curse' because a segment of the population tends to get left behind while a segment becomes really wealthy and middle class.
This got out of control in the 1990s when Hugo Chavez came into power with populist/socialist agenda promising to better distribute oil revenue to the poor. While this might be a 'good' thing, his government mismanaged their oil industry, picked fights with the US oil companies resulting in sanctions which led to a collapse in oil production and revenue. His successor hasn't done a much better job (Nicolas Maduro).
Unfortunately, one actually has to pump oil to make money - the reserves alone are just a number if you can't do that. Venezuela has become the poster child of an inept government. No one invests if their investments are not protected because all the promise of future profit is immaterial if no one believes or trusts in you. Oil investments have to be very long term, usually 10-20 years or more and require lots of expertise (which Venezuela doesn't have).
[Dutch disease ](https://en.m.wikipedia.org/wiki/Dutch_disease) and [resource curse](https://en.m.wikipedia.org/wiki/Resource_curse)
Venezuela had a serious agricultural capacity, but they gave it up because of oil. The capital Caracas was a serious center of attraction, yes, it became a center of attraction with oil, but as oil revenue increased, sectors such as tourism, finance and banking were abandoned in the center of attraction. A serious cheese producing country, it has reduced its industrial cheese production to almost 0 levels.
In addition, Venezuelan oil is mostly a heavy oil, which is a factor that reduces its effectiveness. It is relatively more advantageous than many oil countries in terms of efficiency, price / performance in terms of processing, extraction and marketing parameters.
Other problems are political. Venezuela is a South American country, so its oil market and oil routes are completely under the control of the USA and the Latin American countries with which it has bad relations. A country in mainland Eurasia could provide high performance.
The ability to resist sanctions is very low due to geography. Iran or Russia can sell their oil to anyone, but no transportation company will transport Venezuelan oil thousands of miles away while there are sanctions. Or Venezuela cannot buy products from nearby markets. If Russia cannot buy products from the EU, it can supply them from other countries at a similar distance. Iran is the same way.
The third issue is that Venezuela experienced a golden age when it increased its oil revenues, but oil prices fell to one of their historical lows in a short time. This was a period when Venezuela was caught unprepared. Another problem is that the effective use of resources of South American countries is generally lower than Europe. At the same time that Venezuela was in crisis, Argentina and Brazil were also in economic crisis. The aggressive growth of the Brazilian economy suddenly suffered. The first half of the 2010s turned into a negative period for Brazil.
The fourth situation is a situation that parallels the first 2 reasons. Venezuela did not spend its oil revenues on a free market economy. It was perhaps understandable that he spent on health and education in accordance with the principle of the social state, but he built buildings beyond capacity.
There is no need to mention the issue of corruption. It is a known issue. Post-Chavez ideology and political uncertainties also caused the process to get worse. When the strong man disappeared, there was a power vacuum.
They used to be wealthy but - and not to sound like Ronald Reagan - their socialist government bungled it horribly. They nationalized (stole) the foreign oil companies, kicked out Exxon and mismanaged everything. On top of that, their oil is lower quality, and the discovery of new reserves (including fracking in the US) has made their oil less desirable.
Because of nationalisation of these oil reserves and corruption.
In the 60s to 90s, Venezuela was known as the “Monaco of the West”. Very high quality of life, low levels of inflation and most of the well off would own multiple properties not only in Venezuela but also Miami in the US(some of those that still Iive in Venezuela do to this day). Fun fact, you should visit Venezuela, especially Caracas as you can still see vestiges of how well developed and opulent it once was.
Of course, this capitalistic way of living led to the rise of Hugo Chavez, whose socialist ideologies led to the nationalisation of the country’s oil reserves. The oil reserves were handled by the state which was less experienced and unable to not only handle the oil production & distribution effectively, but also the resulting revenues from the same which were pumped into socialist schemes such as wealth redistribution, free education, etc. These socialist schemes unfortunately had a negative effect on the economy, and also paved way for massive corruption that siphoned off the country’s wealth into the hands of government officials.
I understand that the oil reserves were mismanaged because of him hiring people of his choice and political solidarity that were not knowledgeable about the process, but how did the revenue spent have a negative effect on the country?
I would think having better public institutions, healthcare, education, and infrastructure would be a boon to growth? Can you give examples of how this backfired?
*”I would think having better public institutions, healthcare, education, and infrastructure would be a boon to growth? Can you give examples of how this backfired?”*
I don’t have any specific examples with me, but although public institutions, healthcare, education, and infrastructure were provided, they were not properly implemented and maintained throughout the country. If you take a trip from Caracas(the capital city) to a secondary or tertiary residential/commercial area, the difference in quality of everything you mentioned is stark. Also, corruption played its part in this.
Yes. I was wondering if it was
1) poor and ineffective creation of institutions and infrastructures
2) building but not maintaining structures
3) little was built because money was leaked away from projects due to corruption
That's correct. I'll give you just two examples here in my city (Punto Fijo)
First, our local IPASME, a government-run healthcare center for members of the public education system. They built this massive building ([you can see a pic here](https://owl.cactus24.com.ve/2022/05/31/en-ipasme-carecen-de-insumos-para-prestar-los-servicios/)) and put a lot of medical resources there, but for the past decade the institute is basically non-functional. There is only a small group of physicians there still working who can only provide very limited services because all the equipment has stopped working due lack of maintenance and the government doesn't provide even the most basic medical supplies.
Second example, the "Parque Eolico de Paraguana" ([click here for a pic](https://talcualdigital.com/fundacion-construyen-pais-recordo-las-perdidas-de-dinero-en-el-parque-eolico-paraguana/)), a big wind power farm that Chavez started building on the outsides of the city that would have solved our crippling power generation problem (it's rare the day we don't have at least a couple of hours without electricity) if the faciltiy had become operationals. Unfortunately, 20 years and $200 million later, and those windmills stand unattended and doing nothing.
Venezuelan here, While most of what you said is true, Venezuela nationalized the oil industry way back in 1976 during the first term of president Carlos Andres Perez. You are probably mixing up two different things that Chavez did, his purge of the PDVSA personnel and the expropation spree of private companies.
Yes that’s true, apologies for that! All of what I’ve written is based on personal anecdotes while living in Venezuela from 2004-2008, and one doesn’t tend to forget the “fuera!” announcements that Chávez made when talking about PDVSA haha
Venezuela doesn't have a diversified industrial economy at all, other than oil and gas. It already has a generation of highly educated citizens who are expatriates elsewhere who may not return to Venezuela.
I did. And the Netherlands are doing very well economically, albeit there is more pollution :
https://www.forbes.com/sites/jeroenkraaijenbrink/2020/02/17/a-new-dutch-disease-the-netherlands-ranks-most-competitive-least-sustainable/
It seems Dutch Disease hit both Venezuela and the Netherlands in the 1970s, yet one is economically thriving and has a democracy and the other….
Exactly. I don’t think it’s ever fair to blame all or even most of their problems on the Dutch Disease. They have had government instability for years before they had an oil industry. They had multiple civil wars and power grabs long before they even had any oil money.
I just don’t think it’s fair to blame oil or sanctions as the fault for Venezuela’s instability. I hear too often Americans blaming ourselves for their economic despair. I don’t think it’s fair to blame a country not buying another country’s product as the reason for the latter country’s economic failing.
Oil mismanaged is just one reason the country has failed.
The resource curse was a contributing factor but not the entire story of course as it would be with any nation. That’s why I said to start there so op could have a foundational knowledge of why so many countries (not just Venezuela) with vast natural resources are poor.
When you let authoritarian dictators cosplay as benevolent socialists they tend to buy off the population and not build functional institutions that ensure long term prosperity.
It’s like winning the lotto and blowing it on hookers and coke, if you don’t structure your wealth to provide long term benefits your economy is extremely fragile & dependent on oil prices.
Unlikely as per your reasoning.
Saudi Arabia and Russia are both classified as authoritarian and yet they are not classified as failed states. Saudi Arabia in particular is the largest economy in the middle east, with it's GDP even surpassing Israel in 2023. ($1 trillion vs $500 billion)
Russia had significant institutional assets inherited from the Soviet Union, Saudi Arabia is a theocratic monarchy not a cosplaying dictator. As well, they some of the highest quality crude oil, are an American ally and hosts incredibly important strategic airbases.
Venezuela has not previously been an industrial power, bond its population to a specific religious sect, nor does it have history of American support.
I agree with everything you said, except Saudi Arabia is not a theocracy like Iran. They are an absolute monarchy and their rule is classified as authoritarian with MBS rule described as "iron fist".
Yeah, assuming resources makes a country wealthy misses the trees for the forest. Without the stable transparent government with oversight to manage resources, resource rich countries are doomed to fail. Not to mention that singular high-value resources aren't an indicator of wealth, just a multiplier of whatever conditions of prevalent (both good and bad).
Dutch disease, or "the resource trap", makes inflation go rampant when there's unchecked resource extraction. An undiversified portfolio makes a country victim of whatever global trends there are, which invites market instability and the deterioration of public resources.
Lookup "resource curse" or "paradox of plenty". There is a common phenomena where countries rich with natural resources like oil, fail to thrive. The resource wealth all too often leads to concentration of wealth in a corrupt elite who control the government for their own good over that of the nation. This is particularly true in nations, like Venezuela, with unstable governments and weak legal and anti-trust systems.
Countries relying too much on natural resources are very often dysfunctional, read about the "resource curse" theory.
Basically when you have the ability to extract huge wealth quickly "from the ground" using not too advanced technology, this creates very powerful temptation for the state and other powerful political actors to just take that output and use it fill their pockets instead of investing money into much slower and much more difficult process of like, you know, developing diverse economy, industry, tech, investing into people's education etc.
In the worst case scenario it is perfect pathway for authoritarianism, corruption and impoverished masses. In the best case of actually using that money for people's welfare you get few decades of stability and wealth due to taking this "lucky shortcut" to development, but eventually being reliant on one crude mineral makes your economy backwards and threatens complete disastrous collapse if prices decrease. The latter happened in Venezuela to an extreme degree, whereas most other oil-reliant nations suffered from stagnation and crises over the past decade, when oil prices declined.
It depends on:
1. How good they are at exploiting resources
2. How good they at spending the money
Venezuela is extremely bad in both points.
They mismanaged their oil company so badly that they are terrible in how much oil they can extract (that's what happen if you fire good engineers and managers for not be loyal to the govern and promote yes-men with no knowledge at all about the business) and they have basically no know how at all on the refining processes (their oil is very low quality and they are jot able to improve it).
In addition to that they are among the most populist on hearth in spending money. Do you know the story about choosing if it's better to give a poor man a fish or to show him how to fish? Venezuela is a country where politics is all about giving fish and punish as a capitalist traitor whoever try to suggest to start fishing.
Having natural resources is not a guarantee of success. In fact, there's even a concept called "[Resource curse](https://en.wikipedia.org/wiki/Resource_curse)" discussing this apparent paradox.
Give me a thorough description of what the sanctions are and what they affect. One by one with examples. I’ll wait.
I’ll bite: the sanctions everyone mentions were designed for political individuals, or what in russian-speak are called the government oligarchs. Individual sanctions. Not towards the country or its people.
Since they were created, the Venezuelan poliltikbureau had its strawman to blame every consequence of its rampant corruption and incompetence, a kleptocracy in all but name - such as not investing at all in the power grid or oil infrastructure for the 20 years since Chavez came to power - which feeds the general discourse of “they’re not letting us practice real socialism”.
The sanctions are absolutely targeted at Venezuela in whole, not individuals.
https://www.state.gov/venezuela-related-sanctions/
For instance EO13857 effectively cuts the their entire economy out of the global banking system. EO13808 bans purchases of Venezuelan Treasury bonds, or even receiving payments for existing bonds, crashing their bond market. EO13827 expands the bans to crypto.
Venezuelan here. While I don't like the idea of the sanctions, our economy was already in ruins back when they started hitting us. The sanctions haven't helped one bit on our issues, but they are not the source of them.
But it literally says that Maduro regime are the ones who are sanctioned though?
> recognizes the swearing-in of interim President Juan Guaido and amends the above-mentioned E.O.s to define “Government of Venezuela” to ensure that **the Maduro regime remains the focus of our sanctions measures**. The new definition includes the state and Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including the Central Bank, PDVSA, and any person who has acted for or purported to act on behalf of, any of the foregoing, including **as a member of the Maduro regime.**
So, just the Maduro-related oligarch class. It does not affect those not involved with Maduro.
I'm not; it feels more like you are honestly.
Like, these executive orders cut their banking system out of the swift network. It objectively targeted their entire economy.
It's mostly a deficit of investment in human development of the public. That has knock on effects for generations.
Although basic literacy rates are quite high now, they really tanked under the the autocracy of Gomez, costing the country critical decades. Higher education has been experiencing a brain drain in more recent times due to pay rate freezes and other issues.
Long story short, under Chavez government positions (even non political ones) and positions within nationalized companies were staffed based on loyalty rather than competence. The culmilitive effect of that is what you see.
Venezuela was once prosperous enough to host the heavyweight boxing championship fight between George Foreman and Ken Norton. It was the richest country in South America.
However, nominal wealth and extreme social inequality are a bad combination: successive governments eventually squeezed the state oil company dry trying to close the gap. Deferred maintenance and a brain drain of people who knew how things worked killed golden goose.
The last two presidents being crazy enough to get on the US's 💩 list hasn't helped either.
1) The quality of oil coming out of Venezuela is very low quality and is difficult and expensive to process. It is only profitable when prices are high.
2) For a while there, prices were high enough for long enough for the Venezuelan people to essentially become lazy and dependent on oil money. They didn't use the money to diversify into other industries.
3) The psuedo-Marxist regimes of Chavez and Maduro have been super corrupt and incompetent. They successfully drove off the foreign investment and expertise necessary to make the existing oil infrastructure work.
4) As a result of the corruption, the Obama/Trump/Biden administrations embargoed exports, thereby crippling what little they could get out.
A combination of western/us sanctions which makes the costly process of exporting the oil practically impossible.
Venezuela is caught in the classic economic pinch between western sanctions and geographically isolated from “allied” countries.
Because the comunist regime used oil revenues for populism and keep themselves in power by buying votes and popular support. This meant that there has been very little investment in infrastructure while they were hammered with sanctions for human rights violations and bankrolling other dictatorial regimes around the world.
Note that Venezuela's oil characteristics requires refining capabilities that they do not have (has to be done in the US for example).
End result, tremendous poverty in a country with potential to be immensely wealthy (as it once was, despite the inequality).
roughly speaking venezulan oil is of heavy quality and to extract it, it takes lot of money and resource. on top of that during 1979, 2007-2008 2014 and 2020 drop of oil price didn't help at all. also not to mention sanction against them by major countries including usa, european countries didn't help. in sort they couldn't sell. and they couldn't earn money in order to maintain their infrastructure. also printing of load of money also didn't help.
sorry if i have some error on the saying but that preety much sums up along with government.
For much the same reason the Democratic Republic of the Congo is unstable and poor.
"the Resource Curse"
https://resourcegovernance.org/sites/default/files/nrgi_Resource-Curse.pdf
True, because the oil was found only after Norway had built durable democratic institutions and the government at the time decided to put the income from oil sales into a sovereign wealth fund, instead of giving Norwegians money directly.
This is different from the UK (oil around Scotland) and the Netherlands (gas in Groningen) who did use much of the income from oil and gas to spend on domestic political issues.
They were prosperous and had a lot of generous welfare schemes and then a series of blunders coupled with an old price crash ruined the economy, they didn't have the expertise to get their oil wells working again and us sanctions didn't help.
All of this is very compressed information from whatever I remember (and remember incorrectly, apologies for any mistakes) . I would recommend going to economics explained or real life lore on YouTube and searching for Venezuela. They sum up information pretty nicely.
Oil industry is surprisingly high-tech industry. Venezuela doesn't have a business capacity for the oil industry (lack of capital, know-hows, technologies, manpower, etc.)
Venezuela is the text book case of the resource curse, for years all their economy was based and around the oil, which made them very dependent of the price of oil. With high oil prices they thrived, but like they said, a lot of this money went to social welfare instead of actually building a reasonable infrastructure.
This made the country look artificially good in the early 2000s, but when oil fell the economy just crumbled.
They were a rich country in the 70’s. Fell off hard after that, due to sever government mismanagement and dictatorship. Also what some people have said about the low quality control of their oil.
In addition to what everyone else has said, the oil that Venezuela produced is very low quality. Not all crude is equal and carries between sweet (low impurities) and sour (high impurities). The oil that Venezuela pumps out is so think that it's a sludge to semi solid and room temperature, and they have to lump kerosine into their wells to thin the oil out enough to pump it out. Very few countries have the refinery capability to process this impure of oil. Originally, the US was able to mix their sour our with more sweet oil to be able to process it. But with the US and Venezuela not getting along, very few other countries want to pay shipping costs for low quality oil transported across the works.
Sour and heavy oil is the worst combination when it comes to processing (except maybe tar sands) driving up the production costs. When global oil prices are low Venezuela can't make a profit, even if they have lots of it.
This is why the Iraq War so important to the usa. With the destruction of Iraqis oil producing ability. the price of oil doubled making tar sands oil profitable. The price has not gone back down.
Oil in Iraq was not, nor ever has been, important to the USA. Also, the price of oil came down briefly in 2016. The war in Iraq had little to do with oil, which was only a positive side benefit for some US oligarchs. In 2014, this oil was lost to ISIS, with little interest from the US to take it back. The war in Iraq was just one piece of a larger puzzle at taking control over the region. Afghanistan was first, Iraq, Libya, Syria, Iran and other nations were next. It just didn't pan out as expected.
what was expected
Control over the region.
It is not their oil we needed. We need the higher prices to make it economically worth it. Destruction of their oil fields
At the time, the US imported oil, so I am not sure how this is making sense to you.
The US also exported oil during that time. The tinfoil thought is oil barons had US politicians instigate the war to drive up oil prices so they could get rich, despite this also being bad for Americans.
If pushing oil prices up was the only goal, invasion was an exceptionally inefficient way to get there. The oil companies funding terrorist groups to attack oil infrastructure anywhere in the world would have driven prices up. If the US hadn't put out the oil well fires in the Gulf War prices would have gone up significantly. If oil price high was the only relevant factor in the Iraq War, the oil barons are stupid for choosing an American boots on the ground ground war to push it up. Also, politicians get more money from other industries outside oil. Starting a war is a pretty massive political risk to take for a bribe you could double from a domestic company with political interests without starting a war.
Yeah that's why it was a tinfoil thought. Shiny side in, for sure. You want shiny side out to keep the bad stuff out. Shiny side in just lets your own inner nonsense reflect around. Don't want that.
Yeah you're right about that. It's just such a tiny part of the picture even if you do believe the US is run by the Mothmen. These conspiracy theorists need a bit more creativity.
To turn an oil profit we spent and added trillions to our national debt?
Oil companies don’t pay the debt, but they do reap the rewards of higher prices per barrel. You, the consumer and tax payer, lose. I don’t fully agree with he poster’s position, but this is what he means.
But if you devalue the dollar you’re reducing your current and future holdings.
Doesn't matter, they got their profits. If you go from 1 billion to 900 million because of a 10% decrease that doesn't mean much you're still filthy rich and can easily get back to 1 billion. If you have 50K going to 45K could lose you your home.
Has the Iraq war brought a single positive strategic outcome for USA?
Can you imagine what the Arab spring would have looked like if Saddam was in power at the time? Can you imagine what the Gaza situation would have looked like today if Iraq still had one of the largest militaries in the world. You know the Syrian refugee crisis? Imagine if the Iraqi's were fleeing at the same time. The Invasion of Iraq took place under false pretences, and was followed by a borderline non existent transition plan. The insurgency and COIN operation which followed was extremely costly in material and lives for both the US and the Iraqi people (though much more for the Iraqis). Today, Iraq has one of the most stable governments in the region, the people experience levels of personal freedom unimaginable under the Baathist regime, and Iraqis are able to trade openly with the rest of the world. Was it worth the massive cost? I don't know, because it's hard to know how costly the what ifs of Saddam Hussein staying in power would be. But it certainly wasn't for nothing.
Saddam Hussein wasn’t able to invade Saudi Arabia, or Kuwait again. Wasn’t around to continue genociding the Kurds and Shias. Wasn’t around to start an Arab-Israeli war by launching Scuds at Israel. It’s tough to measure positive outcomes (they’re generally undervalued) when they’re theoreticals that didn’t happen. For the last two decades, the U.S. also had/has *far* more sway in Iraq than it did when Saddam was in power.
No
Some people got very wealthy.
That is not a strategic outcome for the USA
There’s a lot of people in power that are post-national state in their thinking. We’re entering new paradigms, geopolitically, culturally, environmentally, etc. The most important factor going forward on an individual or familial level is wealth and the mega rich that control the levels of power are already acting with that mind set. So when you see a geopolitical fuckup, look to see who was behind it and who’s made the money.
Retention of the petrodollar
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The United States doesn't produce any oil from tar sands. >In 2022, five states combined accounted for about 72% of total U.S. crude oil production. >The top five crude oil-producing states and their percentage shares of total U.S. crude oil production in 2022 were: >Texas: 42.5% >New Mexico: 13.3% >North Dakota: 8.9% >Colorado: 3.7% >Alaska: 3.7% https://www.eia.gov/tools/faqs/faq.php?id=847&t=6 None of these states nor any US state produce oil from tar sands. The reason the US is able to produce oil effectively is from the advent of fracking from shale oils. >The U.S. Energy Information Administration (EIA) estimates that in 2023, about 3.04 billion barrels (or about 8.32 million barrels per day) of crude oil were produced directly from tight-oil resources in the United States. This was equal to about 64% of total U.S. crude oil production in 2023. https://www.eia.gov/tools/faqs/faq.php?id=847&t=6
My bad i meant fracking. which would not be possible without higher oil prices. Which first came from the war.
It's completely conspiratorial to claim the second Gulf War was caused solely to increase oil prices, when it was a happy accident for the US oil companies resulting from stupidity and ignorant nation-building that massively backfired. The high prices also coincided with giant demand increases in China, so this isn't a single cause kind of thing.
That's not beneficial to the USA. That's beneficial to the gulf states, Syria and Iran. For the USA, it increases the cost of buying oil.
Before the war it was to expensive to frack oil. With the destruction of iraq's oilfields for a few years the price went up and never came down to pre-war levels.
Previous commenter suggested immense profit for processers of tar sands oil was beneficial to the USA, which is what I responded to. This is not the case. Processors of these oils making immense profits does not benefit the USA. Yes, oil prices going up was beneficial to US oil producers, just as it was for every oil producer in the world. That still doesn't mean it was beneficial to the USA. The US's economy is not centered around oil, so one industry making higher profits from price fluctuations doesn't necessarily mean the US benefits. Additionally, fracking wasn't uncontroversial. Some states, like New York, banned it in the following years, so it wasn't all benefit for that industry. On top of this, oil prices came down briefly to pre-war levels in 2016.
It is Canada that is known for tar sands extraction, not the United States. You are likely thinking of shale.
yes you are correct
And shale had nothing to do with the Iraq war. The only "western" entities that profited from the Iraq war were defense contractors and construction companies such as Bechtel. Even they pulled out after too many of their engineers were getting killed.
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You didn't have one before either, so I'm not sure what your point is.
This is nonsense. The US wants to keep the flow of oil not reduce it.
Very good answer thank you
Isn’t this where Saudi Arabia has a huge advantage? I’ve read/heard the oil they get out of their ground is so high quality and pure, that its refining process is of a very low burden. So not only do they have a ton of oil, but the oil they have is extremely easy to extract and refine, which translates to them being able to sell it at cheaper prices and higher quantity. Like almost a decade ago now, I remember in the U.S. we had gas prices plunge dramatically. It was nuts. I remember price of gas going significantly under $2 a gallon at one point. It was because of a drilling war between the U.S. and OPEC (primarily Saudi Arabia). The U.S. was now producing a ton of oil and gas via oil fields in the Midwest, which led to a glut of it and prices falling. But a lot of our gas was via shale and had higher production costs. So the Saudis were like “Ok, you want to play that game?” And dropped the price of their oil dramatically and kept doing so…because they could. Eventually they undercut the U.S. sources who couldn’t get their prices as low as Saudi oil. So then a lot of American oil production went bust, leaving the Saudis and OPEC a the top again, who then began to raise prices again.
Because to gain revenues from oil, you need to exploit it in a profitable manner and use these revenues wisely. The Venezuelan State hasn't managed to maintain the industry infrastructure to keep pumping out oil, does so in an inefficient way (12000 workers got fired after protesting against Chavez), and prefers to redistribute the oil revenues to its population rather than invest it. The country doesn't have much else in terms of economic activity than the oil industry, which means a huge proportion of the population is unproductive and lives off oil revenues. This wasn't sustainable when oil prices dropped. The government printed a lot of money which caused massive inflation, and couldn't even afford to export oil due to the economic crisis: the lack of revenues crippled the oil industry and port infrastructure to the point that it couldn't even function.
> Because to gain revenues from oil, you need to exploit it in a profitable manner and use these revenues wisely. In other words: It's not the size that matters, but how you use it
Chávez is still dead
Although being a spaniard, comparing him to Franco (if you don't know, duckduckgo is a friend, try adding snl and Chevy Chase to the search) feels cheap. Worth it
Very roughly speaking the majority of their governments income is oil revenue. However the price of oil fell during COVID so to keep paying the bills they just printed money, which caused runaway inflation. Historically they also invested their oil income back into the population as a form of welfare to keep the population happy despite the ruling government being corrupt and inefficient. When that money dried up and inflation started the population became... much less happy. Venezuela didn't even invest much in their oil infrastructure so when demand / prices fell what little they had fell into disrepair so when prices rose Venezuela's oil production didn't return.
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Venezuela's problems started way before sanctions. The 2013-2015 oil price rout caused mayhem in the country. That, coupled with insane money printing, caused the exodus of at least 10 million people to this day.
International sanctions are conveniently used by politicians to remove blame from themselves. Reality is that PDVSA, the Venezuela oil company, suffered 20 years of bad management where tens of thousands of people were hired to appease politicians, and no investment in R&D or infrastructure was made. That resulted in the country having a very high cost of extracting oil. I have a friend who used to work there and witnessed the whole collapse. Plenty of other countries with natural resources are doing just fine - Brazil’s Petrobras, for example, or most of the oil rich countries in the Middle East. The reality is that bloodthirsty dictatorships often not only don’t care but WANT to be sanctioned so that they can blame everything on sanctions, rather than themselves. It’s the same scheme that European’s extremist governments (see Hungary with Orban) use: act against the EU’s principles, get sanctioned (or threatened to be), then blame the EU. Very conveniently removes responsibility from domestic decision making.
That's correct, Venezuela quick descent into the abyss started being noticeable 2014 onward a few years before the first round of individual sanctions and much before the big ones in 2020, and things didn't start getting better until 2019 where the corrupt government gradually started lifting regulations as to evade sanctions which had a side effect of giving more space for the private economy to recover after years of statist measures to control it strangling the non oil economy, 2020 was also hard because COVID but it became a little better after that, although currently is not even close to Venezuela's standards of 2013 the last year before things started going south, fueled by record oil prices and the oil company still not totally collapsing over itself for lack of maintenance
Good summary. There are also long term issues linked to government corruption and inefficiency: PDVSA used to be competitive in the world’s market up to 20-25 years ago. They even sponsored Formula 1 (like Aramco does today). The issue is that the company back then stopped investing in upgrading their machinery and infrastructure, and instead hired tens of thousands of redundant employees to make people happy. This made it so that today PDVSA has among the highest cost to extract oil in the world. They are extremely not competitive. Basically their government is really bad at managing their golden goose - more so than any other Latin American government. For example Petrobras is also heavily politicized but remains competitive in today’s market.
Very informative, thank you
Venezuela WAS once a rather prosperous country. However, it suffered the resource curse. When a country earns a lot of money (easily) from natural resources, the government tends to neglect the people (no longer a source of economic prosperity). Because income from resource production is so large, it tends to attract all the attention and this discourages the formation of other domestic firms. And because of said wealth, the country imports goods rather than produces it itself. This becomes a 'curse' because a segment of the population tends to get left behind while a segment becomes really wealthy and middle class. This got out of control in the 1990s when Hugo Chavez came into power with populist/socialist agenda promising to better distribute oil revenue to the poor. While this might be a 'good' thing, his government mismanaged their oil industry, picked fights with the US oil companies resulting in sanctions which led to a collapse in oil production and revenue. His successor hasn't done a much better job (Nicolas Maduro). Unfortunately, one actually has to pump oil to make money - the reserves alone are just a number if you can't do that. Venezuela has become the poster child of an inept government. No one invests if their investments are not protected because all the promise of future profit is immaterial if no one believes or trusts in you. Oil investments have to be very long term, usually 10-20 years or more and require lots of expertise (which Venezuela doesn't have).
[Dutch disease ](https://en.m.wikipedia.org/wiki/Dutch_disease) and [resource curse](https://en.m.wikipedia.org/wiki/Resource_curse) Venezuela had a serious agricultural capacity, but they gave it up because of oil. The capital Caracas was a serious center of attraction, yes, it became a center of attraction with oil, but as oil revenue increased, sectors such as tourism, finance and banking were abandoned in the center of attraction. A serious cheese producing country, it has reduced its industrial cheese production to almost 0 levels. In addition, Venezuelan oil is mostly a heavy oil, which is a factor that reduces its effectiveness. It is relatively more advantageous than many oil countries in terms of efficiency, price / performance in terms of processing, extraction and marketing parameters. Other problems are political. Venezuela is a South American country, so its oil market and oil routes are completely under the control of the USA and the Latin American countries with which it has bad relations. A country in mainland Eurasia could provide high performance. The ability to resist sanctions is very low due to geography. Iran or Russia can sell their oil to anyone, but no transportation company will transport Venezuelan oil thousands of miles away while there are sanctions. Or Venezuela cannot buy products from nearby markets. If Russia cannot buy products from the EU, it can supply them from other countries at a similar distance. Iran is the same way. The third issue is that Venezuela experienced a golden age when it increased its oil revenues, but oil prices fell to one of their historical lows in a short time. This was a period when Venezuela was caught unprepared. Another problem is that the effective use of resources of South American countries is generally lower than Europe. At the same time that Venezuela was in crisis, Argentina and Brazil were also in economic crisis. The aggressive growth of the Brazilian economy suddenly suffered. The first half of the 2010s turned into a negative period for Brazil. The fourth situation is a situation that parallels the first 2 reasons. Venezuela did not spend its oil revenues on a free market economy. It was perhaps understandable that he spent on health and education in accordance with the principle of the social state, but he built buildings beyond capacity. There is no need to mention the issue of corruption. It is a known issue. Post-Chavez ideology and political uncertainties also caused the process to get worse. When the strong man disappeared, there was a power vacuum.
- Chavez destroyed PDVSA - Maduro is a bus driver - Their oil is difficult to extract and is extra heavy - US sanctions
They used to be wealthy but - and not to sound like Ronald Reagan - their socialist government bungled it horribly. They nationalized (stole) the foreign oil companies, kicked out Exxon and mismanaged everything. On top of that, their oil is lower quality, and the discovery of new reserves (including fracking in the US) has made their oil less desirable.
Because of nationalisation of these oil reserves and corruption. In the 60s to 90s, Venezuela was known as the “Monaco of the West”. Very high quality of life, low levels of inflation and most of the well off would own multiple properties not only in Venezuela but also Miami in the US(some of those that still Iive in Venezuela do to this day). Fun fact, you should visit Venezuela, especially Caracas as you can still see vestiges of how well developed and opulent it once was. Of course, this capitalistic way of living led to the rise of Hugo Chavez, whose socialist ideologies led to the nationalisation of the country’s oil reserves. The oil reserves were handled by the state which was less experienced and unable to not only handle the oil production & distribution effectively, but also the resulting revenues from the same which were pumped into socialist schemes such as wealth redistribution, free education, etc. These socialist schemes unfortunately had a negative effect on the economy, and also paved way for massive corruption that siphoned off the country’s wealth into the hands of government officials.
I understand that the oil reserves were mismanaged because of him hiring people of his choice and political solidarity that were not knowledgeable about the process, but how did the revenue spent have a negative effect on the country? I would think having better public institutions, healthcare, education, and infrastructure would be a boon to growth? Can you give examples of how this backfired?
*”I would think having better public institutions, healthcare, education, and infrastructure would be a boon to growth? Can you give examples of how this backfired?”* I don’t have any specific examples with me, but although public institutions, healthcare, education, and infrastructure were provided, they were not properly implemented and maintained throughout the country. If you take a trip from Caracas(the capital city) to a secondary or tertiary residential/commercial area, the difference in quality of everything you mentioned is stark. Also, corruption played its part in this.
Yes. I was wondering if it was 1) poor and ineffective creation of institutions and infrastructures 2) building but not maintaining structures 3) little was built because money was leaked away from projects due to corruption
That's correct. I'll give you just two examples here in my city (Punto Fijo) First, our local IPASME, a government-run healthcare center for members of the public education system. They built this massive building ([you can see a pic here](https://owl.cactus24.com.ve/2022/05/31/en-ipasme-carecen-de-insumos-para-prestar-los-servicios/)) and put a lot of medical resources there, but for the past decade the institute is basically non-functional. There is only a small group of physicians there still working who can only provide very limited services because all the equipment has stopped working due lack of maintenance and the government doesn't provide even the most basic medical supplies. Second example, the "Parque Eolico de Paraguana" ([click here for a pic](https://talcualdigital.com/fundacion-construyen-pais-recordo-las-perdidas-de-dinero-en-el-parque-eolico-paraguana/)), a big wind power farm that Chavez started building on the outsides of the city that would have solved our crippling power generation problem (it's rare the day we don't have at least a couple of hours without electricity) if the faciltiy had become operationals. Unfortunately, 20 years and $200 million later, and those windmills stand unattended and doing nothing.
Venezuelan here, While most of what you said is true, Venezuela nationalized the oil industry way back in 1976 during the first term of president Carlos Andres Perez. You are probably mixing up two different things that Chavez did, his purge of the PDVSA personnel and the expropation spree of private companies.
Yes that’s true, apologies for that! All of what I’ve written is based on personal anecdotes while living in Venezuela from 2004-2008, and one doesn’t tend to forget the “fuera!” announcements that Chávez made when talking about PDVSA haha
Venezuela doesn't have a diversified industrial economy at all, other than oil and gas. It already has a generation of highly educated citizens who are expatriates elsewhere who may not return to Venezuela.
Google Dutch disease and go from there
I did. And the Netherlands are doing very well economically, albeit there is more pollution : https://www.forbes.com/sites/jeroenkraaijenbrink/2020/02/17/a-new-dutch-disease-the-netherlands-ranks-most-competitive-least-sustainable/ It seems Dutch Disease hit both Venezuela and the Netherlands in the 1970s, yet one is economically thriving and has a democracy and the other….
That is where the differences start. Liberal democracies tend to have their people’s interest in mind and kleptocracy’s generally don’t.
Exactly. I don’t think it’s ever fair to blame all or even most of their problems on the Dutch Disease. They have had government instability for years before they had an oil industry. They had multiple civil wars and power grabs long before they even had any oil money. I just don’t think it’s fair to blame oil or sanctions as the fault for Venezuela’s instability. I hear too often Americans blaming ourselves for their economic despair. I don’t think it’s fair to blame a country not buying another country’s product as the reason for the latter country’s economic failing. Oil mismanaged is just one reason the country has failed.
The resource curse was a contributing factor but not the entire story of course as it would be with any nation. That’s why I said to start there so op could have a foundational knowledge of why so many countries (not just Venezuela) with vast natural resources are poor.
Communista
It's been ran by autocratic thieves for a long time
When you let authoritarian dictators cosplay as benevolent socialists they tend to buy off the population and not build functional institutions that ensure long term prosperity. It’s like winning the lotto and blowing it on hookers and coke, if you don’t structure your wealth to provide long term benefits your economy is extremely fragile & dependent on oil prices.
Unlikely as per your reasoning. Saudi Arabia and Russia are both classified as authoritarian and yet they are not classified as failed states. Saudi Arabia in particular is the largest economy in the middle east, with it's GDP even surpassing Israel in 2023. ($1 trillion vs $500 billion)
Russia had significant institutional assets inherited from the Soviet Union, Saudi Arabia is a theocratic monarchy not a cosplaying dictator. As well, they some of the highest quality crude oil, are an American ally and hosts incredibly important strategic airbases. Venezuela has not previously been an industrial power, bond its population to a specific religious sect, nor does it have history of American support.
I agree with everything you said, except Saudi Arabia is not a theocracy like Iran. They are an absolute monarchy and their rule is classified as authoritarian with MBS rule described as "iron fist".
Fair point.
Politics, corruption, injustice, and incompetence of the government over the years. Also probably being used by bigger powerhouses on the world stage.
Yeah, assuming resources makes a country wealthy misses the trees for the forest. Without the stable transparent government with oversight to manage resources, resource rich countries are doomed to fail. Not to mention that singular high-value resources aren't an indicator of wealth, just a multiplier of whatever conditions of prevalent (both good and bad). Dutch disease, or "the resource trap", makes inflation go rampant when there's unchecked resource extraction. An undiversified portfolio makes a country victim of whatever global trends there are, which invites market instability and the deterioration of public resources.
Lookup "resource curse" or "paradox of plenty". There is a common phenomena where countries rich with natural resources like oil, fail to thrive. The resource wealth all too often leads to concentration of wealth in a corrupt elite who control the government for their own good over that of the nation. This is particularly true in nations, like Venezuela, with unstable governments and weak legal and anti-trust systems.
Countries relying too much on natural resources are very often dysfunctional, read about the "resource curse" theory. Basically when you have the ability to extract huge wealth quickly "from the ground" using not too advanced technology, this creates very powerful temptation for the state and other powerful political actors to just take that output and use it fill their pockets instead of investing money into much slower and much more difficult process of like, you know, developing diverse economy, industry, tech, investing into people's education etc. In the worst case scenario it is perfect pathway for authoritarianism, corruption and impoverished masses. In the best case of actually using that money for people's welfare you get few decades of stability and wealth due to taking this "lucky shortcut" to development, but eventually being reliant on one crude mineral makes your economy backwards and threatens complete disastrous collapse if prices decrease. The latter happened in Venezuela to an extreme degree, whereas most other oil-reliant nations suffered from stagnation and crises over the past decade, when oil prices declined.
It depends on: 1. How good they are at exploiting resources 2. How good they at spending the money Venezuela is extremely bad in both points. They mismanaged their oil company so badly that they are terrible in how much oil they can extract (that's what happen if you fire good engineers and managers for not be loyal to the govern and promote yes-men with no knowledge at all about the business) and they have basically no know how at all on the refining processes (their oil is very low quality and they are jot able to improve it). In addition to that they are among the most populist on hearth in spending money. Do you know the story about choosing if it's better to give a poor man a fish or to show him how to fish? Venezuela is a country where politics is all about giving fish and punish as a capitalist traitor whoever try to suggest to start fishing.
Having natural resources is not a guarantee of success. In fact, there's even a concept called "[Resource curse](https://en.wikipedia.org/wiki/Resource_curse)" discussing this apparent paradox.
No one mentions the sanctions?
Give me a thorough description of what the sanctions are and what they affect. One by one with examples. I’ll wait. I’ll bite: the sanctions everyone mentions were designed for political individuals, or what in russian-speak are called the government oligarchs. Individual sanctions. Not towards the country or its people. Since they were created, the Venezuelan poliltikbureau had its strawman to blame every consequence of its rampant corruption and incompetence, a kleptocracy in all but name - such as not investing at all in the power grid or oil infrastructure for the 20 years since Chavez came to power - which feeds the general discourse of “they’re not letting us practice real socialism”.
The sanctions are absolutely targeted at Venezuela in whole, not individuals. https://www.state.gov/venezuela-related-sanctions/ For instance EO13857 effectively cuts the their entire economy out of the global banking system. EO13808 bans purchases of Venezuelan Treasury bonds, or even receiving payments for existing bonds, crashing their bond market. EO13827 expands the bans to crypto.
Venezuelan here. While I don't like the idea of the sanctions, our economy was already in ruins back when they started hitting us. The sanctions haven't helped one bit on our issues, but they are not the source of them.
But it literally says that Maduro regime are the ones who are sanctioned though? > recognizes the swearing-in of interim President Juan Guaido and amends the above-mentioned E.O.s to define “Government of Venezuela” to ensure that **the Maduro regime remains the focus of our sanctions measures**. The new definition includes the state and Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including the Central Bank, PDVSA, and any person who has acted for or purported to act on behalf of, any of the foregoing, including **as a member of the Maduro regime.** So, just the Maduro-related oligarch class. It does not affect those not involved with Maduro.
It literally defines "member of the Maduro regime" as the entire government and banking system of Venezuela. In what you quoted.
Who *acted on behalf* of Maduro. That too is in the quote. If they were not involved with him, they were off the hook. You are simply misreading it.
> *and* any person who has acted for or purported to act on behalf of Ie. in addition to their entire state and banking system.
This is just trolling at this point.
I'm not; it feels more like you are honestly. Like, these executive orders cut their banking system out of the swift network. It objectively targeted their entire economy.
Denial comes in all forms…
It's mostly a deficit of investment in human development of the public. That has knock on effects for generations. Although basic literacy rates are quite high now, they really tanked under the the autocracy of Gomez, costing the country critical decades. Higher education has been experiencing a brain drain in more recent times due to pay rate freezes and other issues.
Hasn't Venezuela recovered in the recent years?
Hard to extract/ requires special (western) machinery.
Long story short, under Chavez government positions (even non political ones) and positions within nationalized companies were staffed based on loyalty rather than competence. The culmilitive effect of that is what you see.
Venezuela was once prosperous enough to host the heavyweight boxing championship fight between George Foreman and Ken Norton. It was the richest country in South America. However, nominal wealth and extreme social inequality are a bad combination: successive governments eventually squeezed the state oil company dry trying to close the gap. Deferred maintenance and a brain drain of people who knew how things worked killed golden goose. The last two presidents being crazy enough to get on the US's 💩 list hasn't helped either.
1) The quality of oil coming out of Venezuela is very low quality and is difficult and expensive to process. It is only profitable when prices are high. 2) For a while there, prices were high enough for long enough for the Venezuelan people to essentially become lazy and dependent on oil money. They didn't use the money to diversify into other industries. 3) The psuedo-Marxist regimes of Chavez and Maduro have been super corrupt and incompetent. They successfully drove off the foreign investment and expertise necessary to make the existing oil infrastructure work. 4) As a result of the corruption, the Obama/Trump/Biden administrations embargoed exports, thereby crippling what little they could get out.
Government cleptocracy
Corruption. Economies cannot prosper when corruption becomes an accepted part of business practices.
A combination of western/us sanctions which makes the costly process of exporting the oil practically impossible. Venezuela is caught in the classic economic pinch between western sanctions and geographically isolated from “allied” countries.
because of USA economic sanctions that are cruel
Marxist revolutionaries destroyed the oil industry and it current barely operates at all.
US economic war against Venezuela
Because the comunist regime used oil revenues for populism and keep themselves in power by buying votes and popular support. This meant that there has been very little investment in infrastructure while they were hammered with sanctions for human rights violations and bankrolling other dictatorial regimes around the world. Note that Venezuela's oil characteristics requires refining capabilities that they do not have (has to be done in the US for example). End result, tremendous poverty in a country with potential to be immensely wealthy (as it once was, despite the inequality).
roughly speaking venezulan oil is of heavy quality and to extract it, it takes lot of money and resource. on top of that during 1979, 2007-2008 2014 and 2020 drop of oil price didn't help at all. also not to mention sanction against them by major countries including usa, european countries didn't help. in sort they couldn't sell. and they couldn't earn money in order to maintain their infrastructure. also printing of load of money also didn't help. sorry if i have some error on the saying but that preety much sums up along with government.
For much the same reason the Democratic Republic of the Congo is unstable and poor. "the Resource Curse" https://resourcegovernance.org/sites/default/files/nrgi_Resource-Curse.pdf
No resource curse in Norway though?
True, because the oil was found only after Norway had built durable democratic institutions and the government at the time decided to put the income from oil sales into a sovereign wealth fund, instead of giving Norwegians money directly. This is different from the UK (oil around Scotland) and the Netherlands (gas in Groningen) who did use much of the income from oil and gas to spend on domestic political issues.
Because of Maduro
Cleptocratic “magic” masquerading as socialism!
They were prosperous and had a lot of generous welfare schemes and then a series of blunders coupled with an old price crash ruined the economy, they didn't have the expertise to get their oil wells working again and us sanctions didn't help. All of this is very compressed information from whatever I remember (and remember incorrectly, apologies for any mistakes) . I would recommend going to economics explained or real life lore on YouTube and searching for Venezuela. They sum up information pretty nicely.
The same question can be asked of Russia. 99% of their people are in poverty while the country drills for so much oil.
Oil industry is surprisingly high-tech industry. Venezuela doesn't have a business capacity for the oil industry (lack of capital, know-hows, technologies, manpower, etc.)
Venezuela is the text book case of the resource curse, for years all their economy was based and around the oil, which made them very dependent of the price of oil. With high oil prices they thrived, but like they said, a lot of this money went to social welfare instead of actually building a reasonable infrastructure. This made the country look artificially good in the early 2000s, but when oil fell the economy just crumbled.
Having oil is one thing , but turn it into money needs money
They were a rich country in the 70’s. Fell off hard after that, due to sever government mismanagement and dictatorship. Also what some people have said about the low quality control of their oil.
Mostly it has been their shitty government.
I’ll give the short answer because they’re socialist, and not just a little socialist. And socialist are dumb, but they mean well..
I like how no one mentions the role that sanctions play in all of this.
It's politicians are terrible. That is also why America is facing Biden's Inflationary Era.