"Un estado dentro del estado" : Venezuela and the PDVSA

“Un estado dentro del estado”

: Venezuela and the PDVSA

Word Count: 8182

Continuity and Change in Global Capitalism Final version

Submitted June 25th_{, 2018}

In December of 1998, Hugo Chávez was elected President of Venezuela. Criticizing the old elite for its corruption, its clientelism, and its relentless neoliberal course, the former military officer struck a chord with the country’s working poor. Another prime target of his campaign was the country’s oil company, the Petróleos de Venezuela, S.A. (PDVSA). While the managers of the company, like the old political elite, were living lavishly, regular Venezuelans were experiencing unprecedented levels of poverty. Furthermore, for Chávez, the company appeared as “un estado dentro del estado”, a state within the state, that had the ability to leverage power regardless of the state’s authority. The unaccountable decisions that they made, held Chávez, were fundamentally opposed to the interests of the Venezuelan population.

The relationship between the PDVSA and the Venezuelan state is the topic of the present paper. In what follows, I will discuss the history of this relationship from the year of nationalization onwards. For a thorough understanding of this unstable and contradictory relationship, I hold, the context of imperialism (or neo-colonialism) is of paramount importance. Only in this context can the PDVSA as “a state within a state” be unraveled. The reason for centrality of the PDVSA in this paper is clear: it is by far the largest productive firm in Venezuela; it has played an important international role in the pre-Chávez era; and, finally, it became the engine on which Venezuela’s “Bolivarian Revolution” still runs.

To start off, I will provide the theoretical context in which the entirety of my analysis is couched. Using concepts and theories developed by Frantz Fanon and Kwame Nkrumah, the economic situation of a country like Venezuela will be explained, to which I will refer back many times throughout the paper.

Then, an outline of the process of the nationalization of Venezuela’s oil industry will follow, including a brief explanation of the country’s political situation at the time. The contradictions that propel the relationship forward in the years after nationalization are here, I hold, already clearly visible, as the state and the PDVSA managers had irreconcilable ideas about the company’s way forward.

Thirdly, we move into the neoliberal era, where, because of the PDVSA managers’ ties to Western capital, the IMF and the World Bank play an important role in elevating the PDVSA already significant power. It is in this time that the contradiction between the PDVSA and the state, but also, importantly, between the PDVSA and the Venezuelan population at large, reaches its height.

Fourth, the years directly following Chávez’s election are discussed, and the rising tensions between his government and the oil company, as well as the world’s oil market at large. At this point, in their fierce opposition to each other, both the PDVSA and the Chávez government radicalized.

Finally, I refer back to the first section with several theoretical reflections on the historical relationship between PDVSA and the Venezuelan state. Many problems that Venezuela now faces with regards to its oil production, I hold, can be found in its own history.

Theoretical framework of analysis

At the beginning of the 20th century, Lenin (1914/1975: 12-31) analyzed the early period of unequal capitalist development. Fast concentration and centralization of capital allowed latecomers like Germany and the United States to reach a high stage of capitalism. With the rise of finance capital, which funds almost every industry, then, the capitalist network of different industries became even more closely interlinked through their financiers. This phase of development in the concentration of capital led to ‘monopoly capitalism’. While it may seem that this further socialization of capitalism can lead to fraternization between different capitalist classes, as Kautsky mistakenly theorized, the competitive character of capitalism leads the huge financial monopolies to a higher level of competition than ever (idem: 31). Lenin’s theory of imperialism, which has been the starting point of inquiry into this phenomenon for marxists and non-marxists alike, was written in the time of the First World War, when the competition between European countries and their financial-industrial trusts exploded into a war that was to settle the redivision of the globe’s colonial sector (Nkrumah 1965: 37-38).

Now, the official colonies of European countries have been mostly abolished. The ubiquity of Western capital in the former colonies, however, has not been reversed, and neither has the struggle over their resources. ‘War is the continuation of policy by other means,’ Clausewitz has told us, but the reverse is also true: the fierce conflict over the globe’s resources continued diplomatically and economically after the chaos of the World War. European and American capital is still dominant in much of the formerly colonized world. States and international organizations such as the International Monetary Fund (IMF), often in exchange for loans, push the peripheral countries to adjust their economies according to the wishes of Western capital (e.g. see Toussaint & Millet 2010; Euchner 1995). The sustained dominance of Western capital in the Global South in combination with Western states’ effort in assisting that capital is what Nkrumah (1965) called “neo-colonialism”: a continuation of the colonial policy but by different means. For Immanuel Wallerstein (2004), who had similar insights, the capitalist world-system is one of core-periphery relations, in which quasi-monopolized and highly profitable production in the core exploits cheaper and highly competitive lower grade industry in the periphery (idem: 28).

This exploitative relationship, which we can call ‘neo-colonial’ or imperialist, was also the basis for Frantz Fanon’s inquiry into the class societies of formerly colonized, currently neo-colonized countries. In his seminal Wretched of the Earth (1963/2004), Fanon discusses the process

of anticolonialist struggle. Like Nkrumah, Fanon had no illusions about the formal abolition of colonialism and further developed the theory on neo-colonialism and imperialism. While Nkrumah focussed more on imperialism on a grand, global scale, Fanon zooms in on individual imperialized countries and, specifically, on the nature of their capitalist classes. In the neo-colonized countries, the “national bourgeoisie discovers its historical mission as intermediary” (Fanon 1963/2004: 100) between its own working class and Western capital. This class is also often termed the ‘comprador class’, with ‘comprador’ referring back to the word used for native servants in European households in the colonies. The comprador class’ task is not to establish its own industries and develop the nation but, simply for a lack of choice, to “serve as a conveyor belt for capitalism” (ibid.). The orientation of the comprador class in the imperialized state is, in other words, largely in harmony with the interests of Western capital, since the economy it runs depends to a substantial extent on the investments that those foreign capitalists provide. Therefore, while a state may be independent, its subservient position in global capitalism undermines this independence, as it cannot develop its own industries and cannot, at least within the confines of capitalism, simply reject foreign capital.

Such was also the case in Venezuela. Like many oil-rich countries in the economic periphery, Venezuela’s role in the world capitalist system has mainly been one of export. Consequently, Venezuela’s oil industry, which produces its main export product, has long been subjected to foreign interests. In some underdeveloped countries, foreign investment led to the establishment of new industries. Mainly, however, the interests of foreign capital actually confined certain industries to their early stages. As the further development of a country’s industry to secondary and tertiary stages was not in the interest of those who held the finances necessary to advance industrial development, many countries that have opened their borders for foreign investments have seen their industry stagnating in its primary phases (Nkrumah 1965: 84).

Despite the fact that Venezuela had the largest proven oil reserves and that oil was the country’s main export product, Venezuelans did not see much of the high rates of profits that its comprador bourgeoisie was making. Because a primary industry in an imperialized country has the tendency to stagnate, as noted above, some internal pressure exists to, at the least, maximize the benefits for the state of its subsoil exploitation by foreign firms (Moran 1992). For neo-colonized resource-rich countries, therefore, the fundamental lack of control over resources constitutes a problem in need of a remedy. Resource nationalism, to an extent, provides such a remedy. It is rationalized by the idea that laissez-faire policies are not in the interest of the host state, and “governments should instead ‘set the terms’ for resource exploitation in ways that advance specific national goals” (Wilson 2015; Mares 2010; Stevens et al. 2013). Hellinger (2017) correctly identified this contradiction as a fundamental struggle between landed property—the state—and capital—the “international tenants” of the subsoil. As is central to resource nationalism, a state like

Venezuela appears as a “national landlord” (Mommer 1990: 418), as it leverages, much like a regular landlord, the principle of territorial sovereignty to assert the right to appropriate profits and demand compensation from the international tenants for access to its subsoil (Hellinger 2017: 59).

This landlord status was elevated to an internationally coordinated mission with the foundation of the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela was a founding member. Its 1968 Policy Declaration echoes the resource nationalist sentiment explained in the previous paragraph, stating that “the inalienable right of all countries to exercise permanent sovereignty over their natural resources, in the interest of national development, is a universally recognized principle of public law” (OPEC 1968). Foreign capital, however “can play an important role … provided that there is government supervision of the activities of foreign capital” (ibid.). Aside from charging a membership fee, in 1982, OPEC also started to impose production quota in an attempt to maintain high prices (Mommer 2003: 135). This way, the oil nationalist states sought to create a system of bargaining that tilted overwhelmingly in their favor.

Puntofijismo and the conditions of nationalization

Venezuelan democracy was founded by means of the 1958 Pact of Punto Fijo, signed by the three major political parties at that time: Accion Democrátia (AD), Unión Republicana Democrática, (URD), and COPEI, the christian-democrat party. The Pact was a written guarantee to respect the electoral results of that year and to jointly combat dictatorship (Corrales 2001: 90). Despite the Pact’s democratic aspirations, the Venezuelan Communist Party, then a considerable force in the country, was excluded from taking part in the country’s democratic processes.

Aside from its ideological premises, puntofijismo also rested on a material basis: “the distribution of international oil rents through a system of clientelism” (Hellinger 2003: 27). The Punto Fijo agreement was crafted by three parties who, already since the 1930s, had championed this type of electoral democracy as the best means of gaining supposedly sovereign control over the country’s oil reserves (ibid.). Accion Democrátia had already made clear its criticism of the oil policies that were implemented by the Medina government (1941-1945). AD’s influential founder, Romulo Betancourt, made clear that he saw Medina’s oil reforms as a sellout of national interests. Betancourt juxtaposed these reforms against AD’s prospective policies of “no more concessions” and “fifty/fifty”, referring to equal shares of oil profits between the state and oil firms (Hellinger 2003: 28). This sentiment, which was shared broader beyond just adeco’s, constituted the beginning of Venezuelan resource nationalism.

The puntofijista union of liberal democracy and resource nationalism culminated with the nationalization of the country’s oil industry in 1976. It is no coincidence that the pinnacle of the project occurred at this specific time. In 1973, the Organization of Arab Petroleum Exporting

Countries (OAPEC, consisting of Arab OPEC members plus Egypt and Syria) proclaimed a retaliatory embargo against countries that financially and militarily supported Israel during the Yom Kippur War. After all, some states realized, the oil exporting countries should have a final say over their resources. This had a significant impact on the international oil market. As major oil multinationals saw a general decline of their bargaining power on the international market, the power balance increasingly started to lean in favor of the oil exporting countries (Baena 1999: 33).

The process of the oil industry’s nationalization in Venezuela was a relatively consensual one. Up to the 1976 creation of PDVSA, “for every dollar of oil exports, the government collected eighty cents in rents, royalties, and taxes” (Mommer 2003: 132). When nationalization was announced, the government had already encroached enough on the industry for the oil executives to have no choice but to accept. As we shall see, the position of the oil capitalists within the PDVSA proved to be a better option for leveraging their power in the long run. As a concession on the part of the government, “foreign companies received indemnity from the expropriation of wells whose concession was due to expire in 1984” (Baena 1999: 34). Rather than a radical expropriation of the foreign oilmen by the Venezuelan government, the creation of the PDVSA was therefore a product of concessions on each side. Since the Venezuelan government was set to secure the oil industry’s profits as two-thirds of its entire income, government policy-makers made sure that the nationalization would not stand in the way of the foreign capital that was operating in Venezuela at that time (idem: 32). As the Minister of Energy put it at the time: “It is much better for the country not to have [nationalized] heroically because that would not have allowed the oil industry to continue bringing in the income which the country requires for its development (quoted in Baena 1999:32).

There was a clear motivation for the Venezuelan government to abstain from “heroic” nationalization. Due to favorable circumstances in the international oil market, the Venezuelan state was able to declare its “landlord status”, but, as Fanon had theorized, could not simply reject foreign capital because Venezuela did not have sufficient technological and financial means to operate autonomously. Prior to nationalization, there were three major foreign oil companies operating in Venezuela: Shell, Gulf, and Standard Oil (later Exxon), who were replaced with PDVSA subsidiaries still operating for the same firms. Nationalization therefore changed ownership but not management. Due to nationalist political pressure, the three companies’ executives were replaced with Venezuelan nationals (Mommer 2003: 132). This symbolic replacement, however, changed nothing for the oil company’s general economic orientation and loyalty to Western capital.

The choice of AD to refrain from “heroic” nationalization, for which there was considerable support among the country’s small left wing, had a significant and lasting impact on the position of the oil industry vis-à-vis the Venezuelan state. Initially, the PDVSA oil capitalists were wary of

political interference, a sentiment that the Ministry, at least to a certain extent, shared with them. For PDVSA’s executives, politics was an external and negative element. The type of “politics” that was shunned within the PDVSA here refers specifically to political parties; “ideological politics” on economics and globalization, on the other hand, were very much alive within the company (Livan 2006, personal interview, quoted in Wiseman & Béland 2010: 149). As a measure showing support for this desire for corporate freedom, the Venezuelan state appointed two non-politicians as PDVSA’s first president and Minister of Energy and Mines respectively (Baena 1999: 58).

As we shall see, however, these measures were not enough. PDVSA managers and Ministry officials had different and, more poignantly, irreconcilable conceptions on the way forward for the country’s oil industry. Beana (1999: 66) put it aptly: “For the former actors, oil is a business, a tradable commodity subject to the rationales imposed by international markets. For the latter, oil is the natural resource whose management determines the country’s economic performance and most of the government’s margin for action”. In other words, the comprador class, which is tasked with running its economy mostly on Western capital, has its interests aligned with foreign capital, and is therefore naturally and rationally an adherent of globalization. On the other hand, resource nationalism, as has been discussed, is a force of the singular state that chooses to restrict foreign capital. This is the fundamental contradiction that determined the tug of war that ensued after the ’76 nationalization.

The internationalization policy

From the very onset of the nationalization, the oil executives were acutely aware of the contradiction between their orientation and the state’s. The managers, who were, as noted, kept on from Exxon, Shell, and Gulf, “resolutely pursued a policy of insulating the company from government interference” (Parker 2005: 41). The PDVSA managed to keep, at least at first, the direction of the oil industry at the margins of public debate. Its stated goal was to develop into a modern corporation, free from state bureaucracy (ibid.). In this case, that bureaucracy was represented in the PDVSA’s affairs by the Ministry of Energy and Mines. The primary objective after nationalization, as Mommer (2003: 132) notes, was the displacement of this Ministry.

The PDVSA could circumvent government interference, it found out, through a strategy of internationalization. Although the internationalization strategy was mainly meant to insulate the Venezuelan government from the oil company in making tax-exempt overseas profits, the development of channels for crude found a natural continuation in PDVSA’s commercial policy as well (Baena 1999: 81). The strategy thus killed two birds with one stone: on the one hand, the PDVSA could more effectively grow as a globalized multinational, while on the other, internationalization allowed for closer ties with Western capital, and less landlord state interference.

One of the early examples of this two-sided strategy, which also holds relevance to the topic at hand, is the case of the Veba Oel contract established in April 1983. Veba Oel, a German company, was the first company with which PDVSA established a ‘joint venture’, a shared business entity that was specialized in refining Venezuelan crude. For this controversial decision, the oil managers at first sought both legislative and executive legitimacy. The latter, which was in the hands of the (pro-corporate) Ministry, was soon acquired. Getting legislative legitimacy from the more politically diffuse Congress, however, proved to be more difficult (Baena 1999: 81). Many Congress members who disagreed considered that a step in this international direction was of the utmost importance to the national interest that the oil industry was supposed to represent. Yet, the oil managers treated fierce criticism from these politicians with silence and aloofness. They appeared to lack a feeling of responsibility towards their national landlord—more so towards the international tenants. Reflecting this, one researcher notes that “[i]ndustry managers had very little experience of dialogue with other sectors of Venezuelan life, of assessing the depth and direction of criticism, of responding in different ways. These skills fairly common to the world of the public administration, still had not been learned by the oil people” (Johnson de Vogeler 1987, quoted in Baena 1999: 115).

Despite fierce criticism of the Veba Oel contract by the opposition parties in Congress, the PDVSA went ahead with the joint venture. Baena (1999: 145) refers to this strategy as the “fait-accompli approach”: the PDVSA decided that seeking legislative legitimacy—something that was agreed upon beforehand—was not worth the trouble. One might see the confidence with which the PDVSA constructed the German joint venture without political legitimacy as a symptom of the industry’s unparalleled structural power in the country. Structural power, as conceptualized by Culpepper (2015: 404), refers to the dependence of capitalist states on entrepreneurs. States need capital accumulation and investments to keep the economy alive. In the case of Venezuela, which at that point relied on the oil industry for three-thirds of its treasury, this necessity was even more pressing. Venezuela—not to mention the clientelist practices of the puntofijista’s—was structurally dependent on PDVSA’s fiscal contributions and, as such, had no real means of repercussions if the PDVSA implemented policy that was politically illegitimate. Joaquin Tredenik, a PDVSA director at the time, sheds light on the industry’s thoughts on political legitimacy: “[The fait-accompli approach] is a way of always behaving without waiting for the government … After the decision has been taken, and often even implemented, PDVSA drags the government behind its decisions.” Tredenik more bluntly states that “the PDVSA is a few years ahead of the state. The industry is the tail that wags the dog, and it should be careful that the dog does not bite its tail” (Baena 1999: 146). After a short period in which president Lusinchi managed to bring further international purchases to a halt, PDVSA swiftly continued its internationalization policy. With the 1980s debt crisis lingering

on and Lusinchi losing legitimacy due to scandals, PDVSA saw its chance to buy a controlling interest in the North American refining and distribution company Citgo (Hellinger 2017: 60). The PDVSA had become fully conscious of its structural power after the Veba Oel controversy had simmered down, and it was to leverage this power even more in the following years.

The neoliberal era

Throughout the 80s and 90s, Latin America’s economies underwent massive changes that were concurrent with neoliberal restructuring in much of the rest of the world. During this period, Latin American states opened up their markets to foreign capital, embracing a free-market model that was unthinkable in the state-interventionist time of the previous decades (Flores-Maciás 2009). The US-backed Chilean coup in the 1970s paved the way for a series of economic experiments. These policies, formulated by a group of U.S. economists known as the “Chicago Boys”, favored conservative fiscal policies, trade liberalization towards the West, and opening up natural resources to private exploitation (Harvey 2007: 26). Following crises in the 1980s, the International Monetary Fund offered loans to underdeveloped countries that desperately needed it, but only on the condition of compliance with economic “structural adjustments”, meaning compliance with exactly the type of policies that were implemented in Chile. It was in this era that the IMF—together with its twin institution, the World Bank—stepped onto the world stage as an instrument of imperialism, that is, as an instrument of coercing imperialized states into providing further access for Western capital. During his election campaign Carlos Andrés Pérez stated that the IMF was “a neutron bomb that killed people but left buildings standing” (Fastenberg 2011). After his election in ‘89, however, Pérez caved in to pressure from Venezuela’s comprador class and the world economy at large. Venezuela was left without foreign reserves, and Pérez quickly accepted the IMF structural adjustments as part of one “paquete”.

Class politics had long been absent from Venezuelan politics because, for one, the Communist Party had been excluded from the democratic process in the Punto Fijo regime, but also because the three main centrist parties had drawn support from heterogenous constituencies that crossed across class lines (Baloyra & Martz 1979: 184). The Punto Fijo project was based on clientelism and the alternation of power between AD and COPEI. The IMF paquete, however, provoked class conflict which had been seemingly absent from Venezuelan politics for decades, shaking the already puntofijismo to its core. (Roberts 2003: 55-6; Buxton 2003: 123). Per capita gross domestic product (GDP) peaked shortly after the oil windfall in the late 1970s, but in the 80s it had declined by nearly 20 percent (Crisp 2000: 175). The state implemented a relentless regime of austerity, including real cuts of greater than 40 percent in education programs, 70 percent in housing and urban development, and 37 percent in health care (República de Venezuela 1995: 40;

Roberts 2003: 59). The portion of the country’s population living below the poverty line increased sharply between 1984 and 1995 from an already high 36 to devastating 66 percent, while the portion living in extreme poverty more than tripled from 11 to 36 percent (ibid.). The neoliberal course, escalated by the 1989 paquete, provoked the caracazo riots all over Venezuela by the country’s poor working class, which was in turn answered with severe military repression. The caracazo constituted a newly realized contradiction between Venezuela’s elite and its poor, ushering in an enormous resurgence of the country’s left wing—up to and including Chávez’s election ten years later.

The caracazo had severely impacted president Pérez’s ability to confront the PDVSA. What is more, figureheads from the puntofjiismo parties were desperately looking to the oil company’s plan as the only way to put the country back on track (Hellinger 2017: 60). As part of the broader neoliberalization of the economy, PDVSA itself was thus placed in charge of the petroleum apertura to foreign capital. Congress, at first a major obstacle in the oil compradors’ course of action, was cast aside. The Ministry of Energy and Mines’ role was reduced to “rubber-stamp status” (Mommer 2003: 137).

With the rise of the Venezuelan working class in both politics and civil society, the regime of puntofijismo was flailing. The 1992 failed military uprising led by Hugo Chávez had left a major impact on Venezuelan society. Chávez’s uncompromising attacks on the corruption and clientelism of the puntofijista’s and his revolutionary politics struck a chord with the Venezuelan poor, who, as noted, regained a class consciousness that had been absent from Venezuelan politics for decades. The sharp decline of legitimacy for the puntofijismo parties was clear in 1994 with the first loss the puntofijista’s had suffered since they signed their pact in 1958. President Caldera, who assumed office in 1994, was elected with a marginal mandate of only 30.5 percent of the votes (Hellinger 2003: 34). Caldera had split from COPEI and ran with the “National Convergence” party, a coalition with the social-democratic Movimiento al Socialismo (MAS) and sixteen other small parties, nicknamed “chiripera” as an analogy to small insects that are able to produce quite a noise when chirping together.

Caldera, however, was unable to restore puntofijista legitimacy, although not for a lack of trying. A major banking crisis early in his tenure quickly exhausted the already small treasury and, again, the country was placed at the mercy of international financial forces (ibid.), with the PDVSA compradors as one of the only beneficiaries. Caldera soon announced his “Agenda Venezuela”, an IMF-instructed structural adjustment program virtually indistinguishable from the hated paquete, including the essential apertura of the oil industry.

As a part of this apertura, the PDVSA entered into multiple joint ventures, launching four integrated projects for the production of synthetic crude. This “syncrude” is subject to lower levels

of taxation compared to conventional crude oil. “If this oil were included in Venezuela’s OPEC quota,” as Mommer (2003: 136) explains, “it would displace more highly taxed conventional crude from PDVSA’s exports”. In other words, syncrude provided yet another way to make profits without high revenues for the government. Possibly more importantly, fidgeting with OPEC quota also forced a conflict between the PDVSA and the OPEC, possibly leading to Venezuela being forced out of the organization. The compradors’ strategy of forcing a conflict is consistent with their benefactors’ goals at the International Energy Agency, an organization that was founded by Western oil consuming countries in order to counteract OPEC (ibid.).

Luis Giusti dealt what seemed like the final blows to resource nationalism in his years as PDVSA president between 1994 and 1999. Still in charge of the apertura, Giusti successfully campaigned for legislation to be introduced in 1995, allowing foreign capital to operate in certain fields. The bidding mechanism for these operations was not based on state-sanctioned law, as was the case before, but on contracts drafted solely by the PDVSA. In these contracts, PDVSA was to compensate the investor in case of changing conditions by the state, thereby again circumventing the state and directly dealing with their Western partners (Rondón de Sansó 2012). Domestic capital was mostly excluded from the apertura. Alí Rodriguez, energy spokesman for the left-wing Causa R, identified this fact as the apertura having no real national interest, instead only serving to increase the profits of Western multinationals (ibid.). Moreover, Giusti placed emphasis on increasing export volumes “at the cost of noncompliance with OPEC production quotas” (Buxton 2003: 121) in order to make profits despite low oil prices. To maintain these production levels, the PDVSA incurred vast amounts of foreign debt to obtain the necessary resources (Mommer 1996: 18). Non-compliance with OPEC quota was not a new strategy for PDVSA, but, as noted, the PDVSA at this point took a more openly hostile approach to OPEC, explicitly campaigning to leave the organization in the second half of 1990s as a precursor to full privatization of the oil sector (Giusti 1999: 118; Arrioja 1998; Hellinger 2003).

The PDVSA was also well aware of the weakness of puntofijismo. While it had previously maintained a safe distance from the state and its politics, the weakness at this point constituted an opportunity to expand the company’s institutional influence. In the second half of the 1990s, the PDVSA had employees sitting at negotiating tables with the IMF as well as in the top branches of the Ministry, in order to, as a former PDVSA manager told Wiseman and Béland (2010: 148), “ensure that they were in line with our policies.”

In the years up to the 1998 elections, therefore, the struggle between capital and landed property had been almost definitively won by the former. The experiences of the tug-of-war showed that the nationalization of an oil industry that still cooperates with foreign capital is a contradiction that can shift one way or the other, depending on the fluctuations of international market forces.

Capital, however, has long been a stronger force than the states that seek to curb it. The “Washington Consensus,” of which the IMF, World Bank and their policies were direct products constituted a victory for global capital; the policies of liberalization that were constructed in order to give way to capital also necessarily reduced the role and power of the state (Fernández 2008: 406). The PDVSA, the state within a state, grew more powerful the more its host country became impoverished (Mommer 2003: 144). Venezuela’s comprador class, emboldened by—and cooperating with—the entire supporting force of Western imperialism through the IMF and the World Bank, seemed to have decisively won the struggle with Venezuelan landed property.

Statistics put in evidence the Venezuelan government’s losing streak in the neoliberal era. In 1981, the income from hydrocarbon production, including refining, peaked at $19.7 billion. It peaked again in 2000 with a gross income of $29.3 billion. Nevertheless, in 1981 the PDVSA paid $13.9 billion in fiscal revenues, but only $11.3 billion in 2000. In other words, for every dollar of gross income in 1981, the PDVSA paid seventy-one cents to the Venezuelan state, while the state only saw thirty-nine cents of that dollar in 2000 (Ministero de Energía y Minas 2001).

Early chavismo and the oil industry

In the running up to the 1998 presidential elections, it was clear to many Venezuelans that a new type of politics had to take over. The puntofijismo regime had definitively lost its legitimacy, signaled, aside from Chávez’s coup attempt, by the implosion of COPEI, the equally flailing AD, and the insurgence of the labor movement and its Causa R party. Polls conducted between 1995 and 1998 show that an increasingly large portion of Venezuelans became proponent of “radical changes” as opposed to “partial reforms” (see Table 1).

Table 1 Percentage of Venezuelan population favoring ‘radical changes,’ ‘partial reforms,’ or ‘no more changes,’ 1995-1998

1995

3rd quarter 1st quarter 1996 2nd quarter 1997 1st quarter 1998 3rd quarter 1998 Radical changes 51% 55% 55% 60% 63% Partial reforms 26% 27% 25% 20% 27% No more changes 17% 13% 13% 13% 7% Source: Consultores 21, 2000

Approaching the elections, the PDVSA had taken on a more prominent political role. Although Giusti himself has always denied interest, the PDVSA president was being discussed as potential presidential savior of the country by leaders of COPEI, AD, and even MAS. In July 1997, AD figureheads met with Giusti for a possible candidature. Significantly, the idea of the architect of the oil apertura running Venezuela—another reaffirmation that capital had definitively won over landed property—also attracted interest from financial groups and international investors (Hellinger 2003).

In order to seek presidency, Chávez in 1997 founded the Movimiento Quinta República, attracting many members and supporters, as well as militant sections of the “refugees from the sinking puntofijista ship” (Hellinger 2003: 42). MAS, many small parties, and the new Patria Para Todos formed the Polo Patriótico (Patriotic Pole) as an electoral and governmental alliance. In his election campaign, the long-eschewed PDVSA became a prime target of derision for Chávez. PDVSA could no longer be an uncontrollable “state within a state” that made policy decisions without regard for the Venezuelan people (Chavez 2005). Chávez relentlessly attacked the oil company, promising to reverse internationalization. A central MVR campaign promise was thus to “subordinate PDVSA to the Venezuelan state” (Rohter 1999).

When Chávez was elected president with a wide margin and massive support from the Venezuelan working poor, however, these promises appeared more complex to fulfill. The fact that Venezuela, nota bene a founding member of the oil nationalist OPEC, was on the brink of becoming the “model pupil of natural resource liberalism” (Mommer 2003: 139) in Latin America, was naturally a pressing issue. As president, Chávez did not directly have the opportunity to reverse those facets of the PDVSA that made it a “conveyor belt” of Western capital. One thing Chávez and his oil minister Alí Rodríguez Araque could enforce, however, was the restoration of OPEC’s authority in the country’s oil production, reversing the PDVSA policy of neglecting OPEC quotas. Venezuela promoted and hosted the September 2000 summit of OPEC heads of state, tellingly only the second in the entirety of its existence (Bellos 2000).

At the summit, Chávez brought back oil nationalist discipline to the fractured cartel that seemed to have forgotten its purpose. “We cannot allow that once again we be indicted as guilty for the imbalance of the world,” Chávez spoke in defense of ramping up oil prices. “We are victims of the imbalances of the world economy — we are not at fault” (Bellos 2000). At the summit, the Venezuelan president reaffirmed the principles of oil nationalism on a world scale, promoting OPEC as a bulwark against the imperialism that was damaging the Third World.

Domestically, Rodríguez Araque reinstated the authority of the Ministry in PDVSA. One way of doing this was to revivify the royalties, one of the constituent elements of fiscal revenues aside from rents and taxes. The virtue of royalties is that there are only two variables involved:

volumes and prices. Therefore, unlike income taxes, royalties are immune to fluctuations and manipulations of production costs (Mommer 2003: 141). For that very reason PDVSA wanted to get rid of the royalty, instead opting for a slightly higher income tax on profitable fields (Espinasa 1999). In 2001 a new Organic Law of Hydocarbons was enacted, which established a minimum royalty rate of 30 percent. Besides that, the law also guarantees the state to have a majority shareholding in any joint venture. As we shall see, however, this policy did not mean much of a reversal, as the Hydocarbons Law only applied to new licenses, concessions, and contracts (Mommer 2003: 141).

While the new law appears to reinforce sovereign ownership of the oil, the liberal agenda of the PDVSA still faired quite well. The apertura could not be easily reversed, and the PDVSA stuck to its old policy: whenever OPEC quotas discouraged investment in the Venezuelan oil industry, it was spent abroad. The company continued to expand into the refining and retail business in the United States, Europe, and all over Latin America (idem: 142). The only thing the chavista government could do at this point was demand PDVSA to present accounts clearly and properly, in this way keeping a check on the international network it had embedded itself in. Having incurred $10 billion in debt to maintain its internationalization policy, the PDVSA had “even lost control over itself” (idem: 143) because of its decade-long agenda of furthering ties with Western capital and deserting the Venezuelan government.

At this point, it is of importance to note the difference between the oil nationalism of the ‘Fourth Republic,’ as the period of puntofijismo was posthumously dubbed in Venezuela, and the Bolivarian oil nationalism of the Fifth Republic led by Chávez. The MVR grew out of the anti-neoliberal left wing that arose in Venezuela following the paquete and the caracazo. Chávez himself drew political inspiration out of many sources, including the many social-democratic parties that joined his movement, old Venezuelan patriots, but also the Marxism-Leninism of the Venezuelan Revolutionary Party (Chávez elder brother was a PRV cadre) and the superseding Communist Party (Cicciariello-Maher 2013: 49). His political thinking, that is to say, differed quite from that of a regular oil nationalist adeco or christian democrat.

For the first time in years, the Venezuelan working class became politically active on a massive scale in the 1990s. Many Venezuelans were, as noted in Table 1, ready for radical change. The project of puntofijismo was based on the clientelist distribution of international oil rents among the Venezuelan elite. The distribution enacted by the Fifth Republic’s government was something completely different, using the oil revenues for “Bolivarian Missions”, which included long-term anti-poverty campaigns, the construction of thousands of free medical clinics for the poor, combatting illiteracy, and more (Buxton 2003: 126-7; Ciccariello-Maher 2013: 122;). Combining these pro-working class policies with his hostile approach to the private sector, most notably

towards the “internationalized petroleum elite” and their “anti-Venezuelan agenda” (quoted in Wiseman & Béland 2010: 154), then, Chávez combined the age-old oil nationalism with the class struggle that had taken leaps into maturity in the decade preceding his election.

In my view, it is impossible to discuss this era of Venezuelan politics without mentioning this fact. Chávez’s coup, his imprisonment, and his subsequent legal election as president left a deep mark on Venezuela. At the start of the millennium, it had already become a radically different place, with old elites seeing their power wrested from them. Nevertheless, it is important to note that Chávez is a product of an awakening of the Venezuelan poor, and that his policies, in turn, answered back to the constituency and movement out of which he himself grew (Ciccariello-Maher 2013: 6-10).

The compradors strike back

“Any coup serves to draw back the veil of polite society to reveal the lines of force that traverse it.”1

Tensions between the Venezuelan government and PDVSA were rising rapidly in the years after Chávez’s election and subsequent overhaul of the country. Together with the 2001 Hydrocarbon Law, Chávez signed 49 other laws that increased state involvement in the country’s economy and society. This included the Ley de Tierras, part of Chávez food security program, which stipulated that underused private lands may be expropriated against a “fair market” compensation by the government (Wiseman & Béland 2010: 145; Ciccariello-Maher 2013: 207-8). Whereas the private sector besides the PDVSA was, both in rhetoric and in policies, largely unbothered by Chávez’s presidency, the 49 laws surely constituted a change in that stance, with the land reform being the most notorious amongst the middle and capitalist classes. Venezuela’s capitalists joined the oil compradors in their fierce opposition to the government of the Fifth Republic. This opposition, which was slowly solidifying towards the end of 2001, was led by Fedecámaras, the chamber of commerce representing most of Venezuela’s capitalists. With them joined the heads of the largest traditional labor union, CTV, and the old puntofijista political elite (Golinger 2006: 51).

The role of the United States in the crucial year of 2002 must be considered. It has already been noted that states play an important role in paving the way for capital. In fact, as Nkrumah (1965) notes, states play a decisive role in supporting overseas enterprise. This is clear again with the role of the IMF in its effort to restructure Latin America’s economies into liberalized, international capital-friendly havens. The overwhelming influence of Western states in the IMF is

significant. The IMF, like the World Bank, is organized in such a way that a country’s fiscal contribution determines its share of votes, thereby further institutionalizing global inequality and power relations (Toussaint & Millet 2010: 95-99). “Control of fuel resources is a prime motivator in the frantic competition between monopolies,” notes Nkrumah (1965: 42), and Venezuela’s vast oil reserves were certainly such a prime motivator for the U.S. to intervene in the country’s democracy. The United States played a significant part in solidifying the Venezuelan opposition, mainly through the National Endowment for Democracy (NED), an organization primarily funded by the U.S. Congress, but also through USAID, an organization directly under control of the U.S. Department of State. In the months between November 2001 and April 2002 alone, as evidenced by the U.S. State Department’s report “US Policy Toward Venezuela”, the combined funding for political and civil groups in Venezuela—“some of whom are understood to have been involved in the events of April 12-14”—totalled $3.3 million (Golinger 2006: 54, see also Table 2). All of these groups, from landowner and school associations to conservative parties like Primero Justicia, had one feature in common: publicly pronounced opposition to the Chávez government.

Table 2 US public funds for Venezuelan civil and political groups

Year NED in US$ USAID in US$

2000 232,831 -

2001 877,435 -

2002 1,698,799 2,197,066

2003 1,046,321 8,903,669

Source: Golinger (2005: 56)

In the beginning of 2002, while factions of the military were preparing the April coup, Venezuela’s opposition leaders had already agreed on a post-Chávez government. It was to be led by Pedro Carmona, the head of Fedecámaras. In a September 2001 meeting of the Council of Venezuelan-US Businessmen at the U.S. embassy, Carmona was already labeled “a highly regarded and influential business leader who has consistently played a critical role in advancing US commercial interests in Venezuela (Golinger 2006: 47). On April 11th, supported by a crowd of mostly middle-class Venezuelans that had been mobilized by private media in the weeks beforehand2_{, soldiers arrested}

2 _{When Carmona’s presidency was announced by opposition journalist Napoleón Bravo on his 24 Hours}

morning show, Bravo thanked “society, the armed forces” and “all the private media” for having made the coup possible (Ciccariello-Maher 2013: 168).

Chávez and his cabinet. In the short-lived Carmona government, Guaicaipuro Lameda, a former PDVSA president who was fired for opposing the Hydrocarbons Law, was reinstated (Rosales 2018: 17). Popular rebellion against the coup, however, was almost immediate: millions of poor Venezuelans streamed onto the streets in support of Hugo Chávez who, together with loyal sections of the military, reinstated the chavista government on April 13th (Ciccariello-Maher 2015: 169, 174).

At the end of that same year, when Venezuela had barely recovered from this political crisis, an economic crisis ensued. Together with the Fedecámaras, the PDVSA had announced a top-down “national strike”, effected by the oil management locking out workers from their facilities and shutting down shipping. Within days, the company was paralyzed, and the engine on which the Bolivarian experiment was running came to a grinding halt. With many other bosses joining in on the strike, Venezuela’s economy was in shambles. On December 9th, the opposition declared the strike to be indefinite, and said that only Hugo Chávez’s resignation could end it (Jones 2008: 376-7).

The radical attempt of the oil compradors and their U.S. backers to destabilize Chávez’s government only served to further radicalize chavismo. Eventually, after an estimated $20 billion dollars in losses (Hernandez 2012), the government took over the company through military action, firing workers who had joined the strike and finally bringing the PDVSA under full centralized control of the government (Rosales 2018: 19). The damage the PDVSA had done with the strike, as well as the loss of human capital in the government firing striking workers, meant that the sabotage had long-lasting effects on the Venezuelan economy.

Reflections

The nationalization of Venezuela’s oil industry, which more radically excluded domestic capital than Western capital (Mommer 1996: 14), was from its onset an unstable venture, with the Ministry and the oil management being two irreconcilable parts of a contradictory whole. This contradiction has determined the history of Venezuela’s oil industry. The openness to foreign capital in the exploitation of a product that is central to modern-day “frantic competition” meant continued efforts by the oil management to sidestep the Venezuelan landlord state and, simultaneously, to attempt to further ties with Western capital. This was first poignantly evidenced by the case of the Veba Oel contract, in which the Venezuelan oilmen chose to construct a joint venture with German capitalists while evading political procedures. The $10 billion in foreign debts that the PDVSA incurred to further its internationalization policy without support from the government is a burden still on the shoulders of the Venezuelan government (Mommer 2003: 135) .

In the neoliberal era, moreover, the IMF and the World Bank provided an even stronger coercive element to PDVSA’s agenda. The comprador class, tasked with running Venezuela’s primary industry mostly on Western capital, gained open support from the West’s most powerful institutions. As noted, the oil industry was one of the few beneficiaries of the structural adjustments that Venezuela was pressured to accept. Emboldened by this new team member, PDVSA’s next target was the oil nationalist OPEC, a campaign which, again, was in the interest of Western capital. Shortly before Chávez’s plans with the PDVSA were clear, Giusti (1999: 118) was exceedingly optimistic about privatization, which would have constituted the final victory of capital over landed property.

As already noted, the fact that Venezuela’s industry was subjected to foreign interests meant that the country had little chance of growing out of its primary phases and its export dependency. The capitalist class of such a country, as Fanon (1963/2004: 98) argues, is an “underdeveloped bourgeoisie” that is not connected to the country’s powerful industries and financial trusts. Rather, it is an elite—in the case of Venezuela, the puntofijista’s—that has no way of developing industries that surpass the already established metropolitan-controlled industries. As such, it has political power, but severely lacks economic power. The Bolivarian process of subordinating the PDVSA to the state, then, meant that, for the first time, the state also gained significant economic power. After being elected, Chávez only had to gain control over the PDVSA in order to replace and transcend the old political elite. In the attempt of replacing this old elite, however, the powers that traversed Venezuela made itself clear once more, with the United States backing the top-down strike and the coup in 2002.

As Rosales (2018: 22) notes, the chavista type of nationalization that occurred in the Fifth Republic between 2000 and 2010 seems less ambitious than the ideas that Venezuelan left-wing radicals held about nationalization in the 1970s. Venezuela, in contrast to what the radicals envisioned, still heavily relies on joint ventures and foreign investments. As is clear now, this is due to the fact that the country’s oil industry has long been subjected to foreign interests. Accumulated capital has not been invested in the development of a fully autonomous oil company, since this was not in the interests of the company’s benefactors, making the PDVSA more of a licensing company than an oil producer. With the puntofijista nationalization, it became clear that the PDVSA would have to keep ties with foreign companies due to its lack of technological and financial means. This lack is still felt by the company, precisely because it has relied on foreign capital to provide for it in the puntofijismo era.

Conclusion

The goal of this paper has been to analyze Venezuela’s oil history in the context of neo-colonialism or imperialism, using Fanon’s ideas about the national bourgeoisie in imperialized countries. As I have shown, the context of imperialism is of paramount importance in the analysis of Venezuela’s oil history.

The PDVSA sidestepped the government mainly because of its loyalty to Western capital. The ties between the industry and Western capital became even more clear in the neoliberal era, when Western capital’s institutions and the PDVSA worked together closely in restructuring the economy according to their shared interests.

Second, the experiences of the coup in 2002 and the support that the U.S. provided revealed once more that the PDVSA (and the other, smaller firms in the private sector) had coinciding interests with Western powers, and even worked together. Close cooperation among OPEC members, on the other hand, has shown itself to be an effective bulwark.

Furthermore, my analysis has shown that PDVSA’s loyalty to Western capital has a legacy that Venezuela is still dealing with. For one, the massive amounts of foreign debt that the PDVSA incurred in order to further its internationalization policy without support from the government are still not fully paid. Foreign assets and refineries, such as Citgo and Veba Oel, are now also part of the production chain. The Venezuelan state would have to come up with significant funds in other to reverse this and substitute it with autonomous firms. Moreover, the dominance of Western companies in the puntofijismo era meant that PDVSA saw no use in developing into an autonomously functioning company. That is why joint ventures and foreign investments are still prime necessities for Venezuelan oil production, both in contradiction to chavismo’s anti-imperialism.

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