Table of Reference
1 INTRODUCTION ... 1
2 RESOURCE CURSE, ECONOMIC CRISIS AND REGIME CHANGE ... 4
2.1 THE CONNECTION BETWEEN ECONOMIC CRISIS AND REGIME CHANGE ... 5
2.2 RESOURCE CURSE: AN ECONOMIC AND POLITICAL PERSPECTIVE ... 7
2.2.1 The economic resource curse ... 8
2.2.2 The political resource curse ... 10
2.3 OVERVIEW ... 12
3 METHODOLOGY AND METHODS ... 13
3.1 DATA SELECTION ... 14
4 RESOURCE CURSE AND REGIME CHANGE - VENEZUELA ... 15
4.1 ECONOMIC CRISIS AND THE RESOURCE CURSE IN VENEZUELA ... 16
4.1.1 Regime change in Venezuela from the Resource Curse Perspective: Political Institutions ... 18
4.1.2 Regime change in Venezuela from the Resource Curse Perspective: International influence ... 22
5 CONCLUSION ... 27
5.1 SHORTCOMINGS AND FURTHER RESEARCH ... 29
ABSTRACT. Venezuela is going through a political, economic and social crisis. Traditional regime change theory suggests that economic crisis and unstable political institutions lead towards regime change. However, this has not happened in Venezuela. Venezuela’s economy is built on oil wealth. In this thesis, I argue that the resource curse can provide an explanation for the lack of regime change in Venezuela. The wealth generated from oil stabilizes important institutions by generating the support of the military and police. International actors play an important role in this process, by supplying the current Venezuelan regime with revenue by importing oil which is a factor in keeping regime change from happening.
1 Introduction
For almost nine years Venezuela has experienced a large social, economic and political crisis. Once Venezuela was seen as one of the success stories in the South American continent (Nasa 2019). Because of its large proven oil reserves, Venezuela was one of the richest countries in the world. Furthermore, between the 1960s and the 1990s, it was one of the most democratic countries in the region, praised by many western governments (Margolis 2019). However, times have changed. Venezuela's democratic institutions and the country's economy have been declining rapidly for almost a decade (IMF 2019). As of 2019, the country experiences the highest inflation rate in the world. The International Monetary Fund (IMF 2019) predicts that by the end of 2019 the inflation rate and the average consumer prices will be up by ten million per cent. This will most likely result in a rapid decline of the Gross Domestic Product (GDP), further fueling the countries downward economic trend. The IMF (2019) predicts that the GDP in Venezuela will decline with 25 per cent in 2019 making it difficult for a big part of the Venezuelan population to get access to basic needs (IMF 2019, Amnesty International 2019). This economic crisis caused mass demonstrations resulting in a violent response from the Venezuelan government (Nasa 2019). After the death of president Hugo
intensified. Even though the crisis seems to be getting worse over the years, substantial regime change has not happened.
How can this lack of regime change in the light of the Venezuelan economic and political crisis be explained? Several authors highlight the importance of economics in regime change (Lipset 1959, Rueschemeyer et al. 1992; Burkhart and Lewis-Beck 1994; Gasiorowski 1995). Socio-economic conditions, social-structural conditions, the character of political institutions and the international political and economic conditions play a crucial role in making regime change happen. To investigate the lack of regime change from an economic perspective I chose to focus on oil wealth, on which a large part of the Venezuelan economy depends (IMF 2019; World Bank 2019). This led me to the literature regarding the resource curse. The resource curse highlights the negative economic and political impact of natural resource dependency (Ross 2004). Proponents of this theory argue that countries that largely depend on the extraction and trade of natural resources tend to experience less economic growth and are less democratic than countries with fewer of these natural resources (Ross 2004). Even though the theory highlights the occurrence of authoritarian regimes in these countries and the possibility for regime stability, underlying reasons for this stability are not sufficiently examined and explained. This leads me to the following research question: “What is the influence of the resource curse on the lack of regime change in authoritarian Venezuela?”
This thesis consists of three parts. The first section establishes a theoretical framework based on an extensive literature review. I start by highlighting the conditions which are necessary to establish a relationship between regime change and economic crisis. In this thesis, I focus on the quality of the political institutions in Venezuela in relation to natural resources. Furthermore, I highlight the importance of international political and economic relations that influence regime change. These conditions will subsequently be used to analyze both the internal economic as the internal political crisis in Venezuela which are influenced by international powers.
Thereafter I will give an overview of the literature that discusses the resource curse. This will highlight the negative economic and political impact on countries that highly depend on the extraction and trade of natural resources, such as slow economic growth and higher probabilities for authoritarian governments. Because this thesis explores the question of regime change, the main research focus lies on the political effects of the resource curse. However, the economic implications will be discussed as well because they are fundamental for understanding the Venezuelan conflict in regard to the recourse curse.
In the second section, I will explain my methodological choices in researching and analyzing the absence of regime change in Venezuela from a resource curse perspective. I will use document analysis to analyze news articles and rapports by governments and think thanks about Venezuelan case. I will discuss the pros and cons of these information sources and the used analysis techniques.
In the third part, I will analyze the data and present the results of my findings. I argue that oil wealth plays an important role in preventing regime change in Venezuela. Both the national political institutions and geopolitical factors have an impact on the lack of regime change in Venezuela. Because oil is the main driver of the Venezuelan economy, the control over this resource is crucial in establishing power over government institutions. Because current president Maduro still controls the oil fields and the national oil company, he uses rent-seeking to gain the support of the military which plays a role in preventing regime change from happening. However, this internal power struggle over oil is also influenced by geopolitical factors. Russia and the United States of America (U.S.) are both involved in the conflict. Russia is one of the last outspoken supporters of current president Maduro (Council on Foreign Relations 2019a). Russia has lent Venezuela billions of dollars to compensate it lacking oil revenues. Furthermore, Russia also has interests in the Venezuelan national oil company (Tamkin 2018). This suggests that Russia has an economic interest to keep the Maduro regime in place and therefor providing political legitimacy in favor of the current regime. The U.S. also plays a major role in the conflict because the country has long been the
mainly in the past, the U.S. provided Maduro with the money and resources to obtain the support and the power over the military.
In the fourth and last part of this thesis, I will answer my research question based on my research results. In the discussion, I will highlight how these results can be interpreted differently which explain the shortcomings of my research. Finally, I will suggest additional directions for further research on this subject.
2 Resource Curse, Economic Crisis and Regime Change
The economic crisis in Venezuela started in 2013 resulting in an economic and political crisis. This crisis intensified due to the rapid and sudden decline in oil prices in 2015 (Faiola and Zuniga 2017; Larmer 2018; Labrador 2019; Monaldi 2015; Congressional Research Service 2019; Council on Foreign Relations 2019a). In this theoretical framework, I will first give an overview of the literature that highlights the relationship between socioeconomic crises and regime change. This will highlight several economic conditions that can are necessary or can spark regime change. These conditions will help us to gain insights on the connection between the economy and the lack of regime change in Venezuela. The discussed conditions show the importance of national political institutions and international actors on the relationship between economic crisis and regime change.
As highlighted earlier, one of the main components of the economic crisis in Venezuela is caused by the sudden decrease in oil prices. This leads me to the second part of this theoretical framework where the resource curse theory will be discussed. Here the negative impact of natural resource dependency on the economic and democratic political governance is examined. I demonstrate that the lack of regime change can be another consequence of natural resource dependency. I argue that the quality of national political institutions impacts regime change. This has both an effect on the relationship between economic crisis and regime change and the role institutions play in the resource curse theory.
2.1 The connection between economic crisis and regime change
According to Gasiorowski (1995: 882), the notion that economic conditions or crisis can trigger regime change is widely accepted. However, the direction in which this regime change occurs is contested. O’Donnell (1973), Kaufman (1979) and Crowther (1986) argue that economic crises can be a trigger in breaking down democracy and transitioning to a more authoritarian government. However, Gasiorowski (1995: 882) states also: “others [scholars] argue that economic crises can also trigger regime change in the opposite direction, transitioning from an authoritarian regime to democracy”. In his article Gasiorowski (1995: 882) gives an overview of several findings within economic regime change literature. He identifies four main factors that can trigger regime change. These are the (1) socioeconomic conditions, (2) social-structural conditions, (3) the character of political institutions and (4) international political and economic conditions (Gasiorowski 1995: 882).
In this part I will explain these different conditions and show which are mostly relevant to answering the research question. The first condition is related to socioeconomic factor. According to Gasiorowski (1995) proponents of the importance of socio-economic conditions in regime change focus mainly on economic development. He states that low levels of income per capita, literacy, education, urbanization and the extent of media communication increases the possibility that a country becomes authoritarian. On the other hand, if a country scores high on these levels, the probability that this country becomes a democracy increases. According to indicators provided by the World Bank (2014), the income per capita in Venezuela increases over time, however still remains relatively low. According to Lipset (1959), Moore (1966) and Rueschemeyer et al. (1992), the development of a capitalist system promotes economic development and modernization and creates pressure towards democratization. These developments are made possible by the increase of the wealth of the working- and middle class. These groups seek and demand influence on the legislative power of the state (Moore 1966). However, the arguments made by Lipset, Moore and
Rueschemeyer are highly debated within the literature, with several studies finding no relationship between modernization and democracy (Wucherpfennig and Deutsch 2009: 2).
The second type of conditions Gasiorowski (1995) identifies are socio-structurally in nature. These conditions are also important in creating an environment for regime change. Some of these social-structural conditions are low inequality, an even distribution of power among social groups, tolerance and compromises (Dahl 1971; Lijphart 1977; Muller 1988; Gasiorowski 1995). If one or several of these conditions are met, the possibility towards democratic regime change increases. According to scholars such as Dahl (1971), Lijphart (1977) and Muller (1988), these conditions are preconditions for a democracy to exist. However, because this thesis focuses on the natural resources in relation to regime change, socioeconomic factors such as power among social groups, literacy and education are less relevant in answering the research question.
The third condition identified by Gasiorowski (1995) in the economic regime change literature is more relevant to the research question of this thesis because it overlaps with the resource curse literature. Later on, in the theoretical framework I will discuss this overlap more thoroughly when I present the importance of political institutions within resource curse theory. In democratic societies institutional structures provide stability. In order to obtain democracy, political institutions need to be willing to co-operate and make compromises regarding national policy (Gasiorowski 1995: 883). These factors are represented in constitutional arrangements, coherent party- and parliamentary systems. However, these institutional arrangements are not exclusively present within democratic systems. Huntington (1968) states that some of these institutional arrangements are also valid in authoritarian regimes. The most notable is the institutionalization of the military and the police. This focus on political institutions occurs in the literature about the resource curse as well and will therefore be discussed more thoroughly later on in this theoretical framework (Mehlum et al. 2005; Mehlum et al. 2016).
The last and fourth condition highlights the effect of international political- and economic conditions on regime change. These conditions are based on dependency theory in which resources flow from relatively poor and peripheral states to the core and rich states.
Dependency theory goes against the arguments made by Lipset (1959) that a capitalist economic system promotes democracy. According to the dependency theory, the economic dependency on other states can have an effect on the stability of a political regime in a relatively poor state (Bollen 1983; Gasiorowski 1988). According to Bollen (1983: 468), economic development has a significant and positive effect on political democracy. These findings, however, do not solely apply to rich states in the center, but also to countries in the periphery (idem: 477). Furthermore, Gasiorowski (1991) also highlights the importance of international superpowers on influencing economic conditions and therefore the political regime within a country. When countries are largely economically dependent on these other superpowers, it is easier to be economically and politically influenced.
This overview demonstrated the importance of economics in triggering a political regime change. However, there is no consensus on the direction of this mechanism. Because this thesis looks at the lack of regime change from the resource curse perspective, my main focus lies on the character, structure and quality of the political institutes within Venezuela. Furthermore, I look at the influence of international political- and economic conditions on regime change in the country. As will be demonstrated later in this thesis the impact of natural resources, whether positive or negative, heavily depends on the behavior, structure and the quality of political institutions (Snyder 2006: 943). The next theoretical part will examine the indirect connection between the resource curse and political regime change in relation to political institutions and international influences. This connection will be further demonstrated in light of the Venezuelan case study.
2.2 Resource Curse: an economic and political perspective
Before highlighting the connection between regime change, economy and the resource curse, I will give an overview of the literature about the resource curse. The resource curse has been defined as the effect of a natural resource dependency on a country’s economic, social and/or political well-being (Sachs and Warner 1995; Ross 2004; Collier and Hoeffler 2004). Within
the resource curse literature, it is argued that nations with a high economic dependency on natural resources tend to experience less economic growth and development than nations that get most of their wealth from non-natural resources (Sachs and Warner 1995; Ross 2001; Ross 2004; Collier and Hoeffler 2004).
However, the impact of natural resource dependency is not only related to economy. States that depend highly on natural resources tend to be less democratic and experience more inter-state and intra-state violence (Sachs and Warner 1995; Ross 2001; Collier and Hoeffler 2004). At first glance, Venezuela seems to experience the effects of the resource curse when looking at the economic growth over time (IMF 2019; World Bank 2019) and the declining level of democracy (Freedom House 2019). The resource curse literature displays two different ways to approach the impact of a nation’s dependency on natural resources. These approaches are divided between the economic resource curse on the one hand and the political resource curse on the other hand.
2.2.1 The economic resource curse
The literature that focuses on the economic part of the resource curse tends to highlight the fact that countries with a lot of natural resources tend to grow and develop less on the economic level than countries that do not have natural resources at their disposal (Sachs and Warner 1995). According to Vahabi (2017: 2), there are several economic causes to explain this phenomenon. These include the Dutch disease model (Torvik 2001; Ross 2001), the corruption and a combination of the rent-seeking-model (Lane and Tornell 1996; Tornell and Lane 1999), and the institutional explanation (Auty 2004; Boschini et al. 2007).
2.2.1.1 Dutch disease
The first model to explain the economic effects of the resource curse is the Dutch disease model. Within literature regarding The Dutch model it is argued that natural resources almost always lead to a decline in income through market mechanisms (Brollo et al. 2010). When
recently discovered natural resources are exported the value of the national currency increases drastically. Because of the increasing value of the national currency, the economic position of the country becomes less competitive, which hurts its export power. This reduces the economic production and increases unemployment (Corden and Neary 1982). When discussing the Dutch disease model Corden and Neary (1982) differentiate between the non-tradable commodity sector and the tradeable commodity sector. The tradeable commodity sector consists of a thriving sector and a lacking sector.
In the Dutch disease model, most of the time the thriving tradable commodities consist of natural resources like oil, gas, gold, copper and diamonds. The lacking tradable sector mostly consists of agriculture or the production sector. When new natural resources are found the economy of a nation is impacted in two ways (Corden and Neary 1982). Firstly, the demand for labour will shift in the direction of this new sector, which leads to more pressure on the lacking sector, and eventually causes an increase in the price of these traded goods (Corden and Neary 1982). Secondly, the extra earnings generated by the natural resources will expand the non-tradable sectors. These increased revenues lead to excess demand for non-traded goods and increased price for non-traded goods. Non-traded commodities are used in manufacturing, and because they are relatively expensive, they lower the profits margins in this field, resulting in less economic growth (Corden and Neary 1982).
2.2.1.2 Institutional explanation
The institutional approach tends to combine institutional factors and rent-seeking factors when analyzing the effect of natural resources on economic growth. This explanation is not in line with the Dutch disease literature, which argues that states with a dependency on natural resources, will always experience a negative economic effect. Mehlum et al.’s (2016) influential work demonstrates that natural resource-rich countries can both experience economic growth as well as economic decline. They claim that the main reason for these conflicting findings are created by the differences in the quality of political institutions.
According to Mehlum et al. (2016), dependency on natural resources can have a positive economic impact when national political institutions are strong and producer friendly. Opposite to these producer friendly institutions are so-called “grabber friendly” institutions (Mehlum et al. 2005). These institutions tend to have a more negative effect on the economy due to a focus on direct wealth such as rent-seeking. Mehlum et al state: “when institutions are grabber friendly, there is a disadvantage from being a producer in the competition for natural resource rents. Hence, production and rent-seeking are competing activities” (ibid.)
According to these findings, countries with a high amount of natural resources can both be impacted positively and negatively. If national political institutions are fragile, natural resources tend to have a negative effect on the economy, when institutions are strong, they have the ability to positively affect the economy. This shows that the impact of the resource curse is influenced by the quality of national political institutions. This focus on political institutions will be one of the factors used in the analysis of the Venezuelan economic crisis and the lack of regime change in relation to the resource curse. The quality of institutions plays an important role in both regime change theory (Huntington 1968; Gasiorowski 1995) and in the resource curse literature (Mehlum et al. 2005; Ross 2015).
2.2.2 The political resource curse
The political resource curse focusses on the idea that political regimes that gain their wealth from natural resources tend to be more authoritarian than democracies. Furthermore, these countries also tend to experience more civil wars than countries that dependent less on natural resources. (Collier and Bannon 2003; Ross 2004). As shown by Ross (2004: 343) there exists a clear quantitative correlation between natural resources and democratic transition. He suggests that the higher a country’s economic dependency on oil, the less likely this country will undergo the transition to democracy. There are two main conditions why these countries do not transition into a democracy.
The first condition focusses on the impact of natural resources on the strengthening of an authoritarian regime. According to Ross (2015), most studies find that natural resources if such as oil strengthens authoritarian governments and prevents them from transitioning into a democracy. He argues that oil prolongs the survival of authoritarian leaders. Natural resource rents helps authoritarian leaders to avoid revolutionary uprisings and to survive them when they occur (Ross 2015: 245). According to Ross (2015: 243), higher levels of oil wealth make autocratic governments more stable and less likely to transition into a democracy. However, these findings are not conclusive. In contradiction with the above findings, Ross (2015: 244) states that even though most studies find that oil wealth prevents governments from the transition to democracy, there is also evidence that oil wealth can push democratic governments towards authoritarianism. Smith (2004) argues that wealth generated from oil does not necessarily lead to anti-democratic governments or democratic governments. He states that oil wealth foremost leads towards regime stability in general, it helps both democratic regimes as well as autocratic regimes to survive. However, these findings are contested. Several authors argue that the essential predictor of regime stability lies in the quality of political institutions, regardless of the political regime (Jensen and Wantchekon 2004; Ross 2012). These ideas overlap with the earlier discussed arguments in regard to the institutional explanation of the economic resource curse.
The second condition that prevents countries with a high amount of natural resources from transitioning into a democracy focusses on the impact of looting natural resources (Snyder 2006: 943). Within this framework the political resource curse literature focuses on how “lootable” certain natural resources are and how access to these natural resources is distributed. How easily can the natural resource be extracted? (Vahabi 2017). According to Snyder (2006: 943): “if rulers are able to forge institutions of extraction that give them control of revenues generated by lootable resources, then these resources can contribute to political order by providing the income with which to govern. Conversely, the breakdown or absence of such institutions increases the risk of the civil war by making it easier for rebels to organize”.
can vary between countries. This explains the variance in political outcomes in different countries that all economically depend on natural resources. According to Ross (2015: 246), the overall mechanism that links resource wealth to less democratic governments is the ”rentier effect”. Within this mechanism it is stated that wealth generated by oil revenue makes it possible to reduce taxes and increase the quality and availability of public goods. This makes it possible to buy off potential government challengers and prevent regime change from happening (Ross 2015: 246).
2.3 Overview
This theoretical framework gave an overview of the literature that can contribute to better understand the current crisis in Venezuela from a theoretical perspective. The Venezuelan socio-political conflict is mainly caused by an economic crisis. This led me to examine the role of economy in relation to regime change, which has not happened yet in Venezuela. From the theoretical framework it became clear that several economic conditions impact the probability of regime change. In regard to the case of Venezuela I focused on the institutional and the international conditions. Because the economic crisis in Venezuela is caused by oil wealth, the natural resource curse theory has been examined. The resource curse demonstrates the negative economic and political impact of natural resources on regime change. Within this thesis the focus has mainly been on the political impact due to the research question regarding regime change. Within the political recourse curse I examined the role of quality within national political institutions and international structures in regard to regime change. From this overview a sufficient theoretical framework has been provided to analyze the role of the resource curse in relation to the lack of regime change in Venezuela.
3 Methodology and methods
The theoretical overview has shown which concepts and theories are relevant in order to answer the research question. This thesis maintains the qualitative research approach, with an emphasis on generating theory (Bryman 2012: 35). To explore the relationship between regime change and the resource curse, I will make use of a case study. In this case study I will analyze the economic and political conflict in Venezuela to illustrate the influence of the resource curse on the lack of regime change in this country. As demonstrated in the introduction Venezuela seems to be an atypical case. In the past, the country was regarded as a success story, democratically and economically thriving, going against the arguments of the resource curse. However, since 2013 the country has faced a major economic and politic crisis. In contradiction to the resource curse substantial regime change has not happened. Therefor it is highly relevant to study this specific case in relation to the recourse curse.
Through this method an intensive examination takes place in order to understand the studied phenomenon. However, this research method has also some disadvantages. The selection of the case and its measurements are highly interpretive. I try to counter this as much as possible by using various sources, which will be highlighted further down this section. Another disadvantage of the case study is overdetermination. This occurs when a single-observed effect is caused by multiple variables, which makes it difficult to define the causal relationship. I counter this by first analyzing the relationship between regime change and the resource curse in Venezuela on a national level, looking at national political institutions. Subsequently, I connect this to the international level by focusing on the international political structures that influence regime change.
The use of a single case has a negative effect on the external validity due to its focus on one specific case. However, the goal of this method is to provide detailed insights into the specific case, which helps to understand the mechanisms and underlying processes that are relevant to understand the lack of regime change in Venezuela. The internal validity will be
high, due to the use of a qualitative analysis of documents and statements of the involved actors that demonstrate the causal link between oil wealth and regime change.
To analyze the conflict in Venezuela from a resource curse and regime change theory perspective, I will use the method of document analysis. As stated by Bowen (2009), document analysis is an interpretative exercise by the researcher to create meaning around the research topic. A hermeneutic methodology is used as a general strategy to analyze the data and interpret the findings. This means that the analysis is subject to subjective interpretations of the researcher. To avoid interpretation through personal values and opinions I analyze the empirical facts from a perspective of the research curse theory. However, I am aware that my own personal values influence the analysis and therefor acknowledge the reflexive character of social research (Hammersley and Atkinson 2007: 14).
3.1 Data selection and analysis
To analyze the relationship between oil and regime change in Venezuela, I have used the document analysis where primary sources written by or collected by actors involved in the development of the economic and political crisis are analyzed. This includes documents, rapports and newspaper articles from respected news outlets. The Venezuelan government does not produce many policy documents regarding the production and trade of oil which makes it difficult to illustrate the influence of national political institutions. The lack of these primary sources will be supplemented by news articles and academic papers regarding the crisis. Furthermore, I will analyze policy documents and statements produced by the U.S. and Russia regarding oil wealth to determine the relationship between international politics and regime change in Venezuela. Both actors were selected because of their economic involvement in the current Venezuelan crisis (Council on Foreign Relations 2019a). Russia for its economic stakes in the Venezuelan national oil company and the U.S. due to their substantial imports of Venezuelan oil (Balmforth and Rodionov 2019).
To gather information about the Venezuelan conflict, I analyzed news articles about the national state-owned oil company in relation to the current regime. However, this will not be a discourse analysis. These news articles are solely used to extract information about the Venezuelan conflict and to establish a chain of events. These news articles are mainly published in well-established and quality news outlets, most of which originate from the United Kingdom or the U.S. These news outlets concern: The Guardian, Reuters, the New York Times, The Washington Post and the Public Broadcasting Service. These news outlets can have a biased ‘Western’ viewpoint, which is why I solely use them to extract factual information. In addition to these newspaper articles, I also used academic articles to establish the influence of the resource curse in Venezuela. Furthermore, the quality of the Venezuelan political institutions will be assessed by The Worldwide Governance Indicators used by the World Bank. The problematic nature of these indicators will be addressed in the analysis.
The influence of U.S. and Russia on the lack of regime change in Venezuela are analyzed through public reports. The U.S. government has published documents concerning its oil imports from Venezuela, which I have analyzed. Furthermore, I also analyzed documents published by think thanks regarding the U.S. economic and oil relations with Venezuela. These think tanks are only used if they operate independently from political parties or the U.S. government. In contrast to the publications and statements made by the U.S., the Russian government does not publish rapports about its economic and oil relations with Venezuela. Therefore, the analysis regarding Russia’s influence is based on information published in respectable newspapers and supplemented by documents published by research organizations and academic papers.
4 Resource Curse and Regime Change - Venezuela
This analysis examines the role of natural resource dependency on the lack of regime change in Venezuela. To demonstrate the importance of natural resources empirically, I will study the
and political conflict in Venezuela where I establish the existence of the resource curse. This part however does not address regime change. The second part of the analysis will highlight this aspect, by examining the relationship between regime change theory, and resource cruse theory in Venezuela. After this connection is clarified, I will elaborate on the importance of the quality of political institutions in regard to the lack of regime change in Venezuela. The last part of the analysis highlights the importance of international factors in regime change from a resource cruse perspective, where I focus on the influence of Russia and the U.S. This will highlight the importance of geopolitics and oil in providing regime stability in Venezuela, and therefor contribution to the lack of regime change.
4.1 Economic crisis and the resource curse in Venezuela
In this part I will present an overview of the economic and political crisis in Venezuela in the period between 2013 and early-2019. In March 2013, longtime and greatly admired president of Venezuela Hugo Chavez died of cancer (Nasa 2019). According to research by Hammond (2011: 348), his popularity was partly explained by the implementation of social welfare programs. He states that since Chavez took office, oil revenues have been used to finance these programs. These social welfare arrangements consisted of food subsidies, education and health care programs (Karl 2007). The wealth generated by oil revenue makes it possible to reduce taxes and increase the quality and the availability of public goods in Venezuela (Karl 2007). However, these investments did not lead to better living conditions in Venezuela. According to the World Bank (2019), Venezuelan unemployment and poverty figures doubled this period. Furthermore, the income per capita more than halved during this period (World Bank 2019; IMF 2019). These large and long lasting unrestrained expences created a large deficit in the Venezuelan economy and is one of the main factors in causing the downward economic trend that resulted in an economic, political and social crisis (Hammond 2011; Monaldi 2015).
These empirical findings seem to be in line with the arguments made in the resource curse literature that addresses economic growth (Sachs and Warner 1995; Ross 2001; Collier and Hoeffler 2004). First of all, a large part of the Venezuelan economy is built on oil revenues. Since the 1970s oil rents contributed towards twenty per cent of the Venezuelan GDP (World Bank 2019; IMF 2019). Since the 1990s we see high fluctuations and a downward trend in GDP growth (World Bank 2019; Trading Economics 2019). As stated earlier in the theoretical framework, countries that depend on natural resources tend to grow less economically than countries that do not heavily depend on these natural resources. This seems to be the case when looking at GDP growth in Venezuela. This argument is strengthened by the fact that according to the IMF (2017) and Trading Economics (2017), the non-oil sector in Venezuela is decreasing over time. This corresponds to the theoretical arguments of the Dutch disease model in resource curse theory. If the Dutch disease model is applied to Venezuela, several similarities occur. First, Venezuela is highly economically dependent on the oil industry. Secondly, we see large inflation of the Venezuelan currency since 2013 (IMF 2019), which weakens the national currency and thus the economy. Thirdly, there is a decline in non-traded, non-oil and production sectors (Trading Economics 2017). This indicates that Venezuela experiences the effects of the resources curse from the perspective of the Dutch disease model. These arguments are supported by Mikesell (1997). He states: “Venezuela might be regarded as a classic resource curse case in the sense that a surge in resource-based exports was accompanied by reductions in the rate of growth and in per capita income. However, the poor performance of the non- oil sectors of the economy, including agriculture and manufacturing, was due more to faulty governmental”. This last sentence demonstrates the importance of political institutions which will be addressed later in this analysis.
Following Chaves’ death, Maduro becomes the next president of Venezuela. Maduro continued extensive spending in social programs (Nasa 2019). This led to a steep downward economic spiral resulting in the shortage of basic needs within the Venezuelan population (Amnesty International 2018). In February 2014 thousands of civilians started protesting on
resulted in clashes between demonstrators on the one hand and the military and police forces on the other hand resulting in 43 deaths in a three-month period (Nasa 2019). In December 2014, the Venezuelan Central Bank stated that the country had officially entered an economic recession. Even though the Central Bank did not state the cause of this recession it is attributed to the decline of oil prices (Monarldi 2015; Congressional Research Service 2019). The funding of the Venezuelan social welfare programs can be linked to the resource curse and the “rentier effect”. These programs are largely funded by profits gained from the sale of oil (Hammond 2011; Monaldi 2015; Nasa 2019). When the oil revenue decreased, these programs could not be funded anymore. This resulted in the mass demonstrations (Monaldi 2015; Amnesty International 2018; Nasa 2019).
In December 2015 the Venezuelan opposition gained two-third of the majority in the National Assembly, strengthening their legislative power. President Maduro responded by personally appointing Supreme Court judges loyal to his regime (Nasa 2019). In 2017 the Venezuelan Supreme Court banned an opposition leader from participating in the elections, resulting in new mass demonstrations which lasted for months and left 66 protesters dead (Nasa 2019). In the presidential elections on 20 May 2018, Maduro was reelected as president of Venezuela. The U.S. and many other countries qualified the elections as unfair and anti-democratic (Nasa 2019).
4.1.1 Regime change in Venezuela from the Resource Curse Perspective:
Political Institutions
After this summary of events that establish the presence of the economic resource curse in Venezuela, the focus of this next part will be on the political effects of the resource curse. By highlighting important factors and conditions of the political resource curse, I will demonstrate the relationship between the lack of regime change in Venezuela from the political resource curse perspective. This will demonstrate the importance of oil revenue in regard to the stabilization of the presidential power of Maduro. This power stabilization is facilitated by
rent-seeking of oil revenues. These revenues provide support of the military power that partly controls the oil industry. Because this part of the analysis focusses on the internal power relations in Venezuela in regard to the lack of regime change, I will focus on the political institutional conditions of regime change in relation to the institutional explanation of the resource curse. The institutional explination highlights the importance of rent-seeking and the quality of political institutions when analyzing the effect of natural resource dependency on regime change (Mehlum et al. 2016). The quality of political institutions can have a large impact on whether or not regime change occurs.
To assess the quality of the political institutions in Venezuela I use The Worldwide Governance Indicators by the World Bank (2018). These indicators measure the quality of governments and political institutions. They measure the accountability of the government, the political stability, the governments' effectiveness, regulatory quality, the rule of law and the ability of the government to control corruption (Kaufman et al. 2010). These indicators estimate the quality of a government on a scale of -2.5 (weak) to 2.5 (strong). However, these indicators can be problematic. According to a rapport by the Bretton Woods Project (2019), an independent group of NGO’s, the World Bank is biased. They state that the World Bank shows political power imbalances in its governance structures. The distribution of voting power is severely imbalanced in the favour of the U.S., Europe and Japan. Furthermore, The Worldwide Governance Indicators are criticized for their lack of reproducibility, complexity and hidden biases (Arndt and Oman 2008; Thomas 2009; Langbein and Knack 2010). However, Hamilton (2017) finds that these indicators do measure corruption, government effectiveness and the overall quality of the government correctly. I acknowledge that the World Bank and their indicators are biased and overall promote capitalist economies. However, due to the lack of other sources “The Worldwide Governance Indicators” are the only measures to indicate the quality of Venezuelan government over time.
On the accountability indicator Venezuela scores below average with an -0.93 in 2011, which decreases to a -1.21 in 2017. The political instability shows the same trend, decreasing
-1.19 in 2011 to -1.40 in 2017. Furthermore, the indicator that measures the regulatory quality also drops from -1.48 in 2011 to -1.96 in 2017. All indicators show the same trend over time, highlighting the decline of the overall quality of institutions in Venezuela. When these indicators are used as input for the institutional conditions of regime change theory, we can argue the following.
First of all, these indicators show that the quality of the Venezuelan political institutions decreases over time. As shown in the theoretical framework strong institutional structures promote stability and facilitate the persistence of democracy. When constitutional arrangements, party systems and or parliamentary systems are weak within a country, these countries are prone to regime change. Over time Venezuela became less democratic and more authoritarian (Economist Intelligence Unit 2018). Based on the above-described indicators of weak political institutions and the earlier discussed overview of the crisis the argument can be made that Venezuela is perceptible to regime change. However, a regime change has not happened. This is in line with Ross’ (2015) findings that oil wealth can push democratic governments towards authoritarianism and prevents them from transitioning to a democracy. This is demonstrated by the fact that after the discovery of oil, Venezuela has become more authoritarian, especially during the Chavez and Maduro regime. However, this part of the theory does not explain why during the current crisis regime change in Venezuela has not happened. To explain this, we should take other important aspects of regime change theory into account.
In the relationship between regime change and economic crisis, Huntington (1968) highlights the importance of the institutionalization of the military and the police in regard to regime change in authoritarian regimes. This specific theory can provide insights into the lack of regime change in Venezuela from the resource cruse perspective.
According to a rapport by the Council on Foreign Relations (2019b), the Venezuelan military has taken over the operations of the oil industry in Venezuela. The military supports president Maduro (Council on Foreign Relations 2019b). The national oil company of Venezuela also employs several military organizations to protect the oil refineries. The Military
Corporation for Mining, Petroleum and Gas Industries (Camimpeg) created in 2016, intercepts the income from the oil sector. According to the Council on Foreign Relations (2019), this organization tries to suppress strikes by oil workers and unions. This American thinktank also reports that Venezuelan soldiers often engage in illegal smuggling of stolen oil. They argue that Maduro provides the military and the police with benefits that are generated from the oil industry.
Based on this information we can identify the two main conditions given by the resource curse theory in regard to the lack of regime change in Venezuela. The first (1) condition highlights that natural resources strengthen authoritarian regimes by giving them the means to avoid revolutionary uprisings. Furthermore, the resource curse theory also argues that the wealth provided by oil revenue gives president Maduro the means to suppress these uprising. Presidents Maduro invests the revenue generated by oil into the military and is therefore gaining their support. The military is then used to suppress demonstrations other threats to the current regime (Nasa 2019). Therefore, the argument can be made that the wealth generated by the oil industry stabilizes the current political regime. This seems to be in line with the arguments made by Smith (2004), that wealth generated from natural resources foremostly leads to regime stability and helps regimes to survive.
The second (2) condition demonstrates the lack of regime change based on looting natural resources. Here the access to and the extraction of natural resources plays an important role. As reported by several news sources the Venezuelan government led by president Maduro still controls the oil fields and the state oil company (Parraga 2019; Council on Foreign Relations 2019b; Nasa 2019). Snyder (2006: 943) states that control over the revenues generated by “lootable” resources can contribute to political order by providing the regime with income which they use to govern. This suggests that according to the resource curse theory the control over oil gives president Maduro the income and the means to govern and prevent regime change from occurring.
This section gave an overview of the economic and political crisis in Venezuela. In the first part, I established that Venezuela seems to experience the negative economic effects of the resource curse. The economy is slowing down, inflation is at an all-time high, the non-traded goods sector is shrinking and the unemployment rate is growing. All these factors indicate the presence of the resource curse. In the second part, I linked the resource curse to the lack of regime change in Venezuela. Here I focused on political institutions because of their importance in both regime change theory and resource curse theory. I found that political institutions in Venezuela are weak and declining, which suggests that the country is susceptible to regime change. However, this has not yet happened. I argue that the resource curse can explain this. To keep the support of the military and the police, oil revenues are invested in these political institutions. These organizations are used to keep revolutions from happing and suppress the opposition, therefor hindering the possibility of a regime change in Venezuela.
4.1.2 Regime change in Venezuela from the Resource Curse Perspective:
International influence
I this part I will discuss the crisis in Venezuela and the resource curse from an international perspective. Earlier in this analysis, we saw that oil revenues provide the current Venezuelan regime with the means to withstand regime change. This naturally leads to the question who are the importers of Venezuelan oil, and how do they influence the possibility of a regime change? Gasiorowski’s (1988) fourth condition for regime change highlights the importance of international political and economic influence. In this process superpowers play an important role. Geopolitically oil is a complex factor within the possibility for regime change in Venezuela because of the involvement of both Russia and the U.S. On the one hand, the U.S. needs oil to keep its national economy running, and therefore benefits from a stable regime in Venezuela (Council on Foreign Relations 2019b). On the other hand, the country opposes the current regime of Maduro due to the economic and humanitarian crisis, and has slowed down
the oil imports (UNHCR 2019). Russia’s influence on regime change can be explained by its economic involvement in Venezuelan state oil companies. The country supplied large loans to the Venezuelan government and president Maduro (Council on Foreign Relations 2019a, Nasa 2019). Russia, which has invested heavily in the Maduro regime, is likely to push back on efforts to topple the regime. Russia stated at the United Nations Security Council that more economic intervention and sanctions will interfere with Venezuela's sovereign internal affairs (Nasa 2019). It becomes clear that both countries are heavily embedded in the Venezuelan oil sector and therefor have an impact on the lack of regime change.
4.1.2.1 Russia
Before analyzing the geopolitical influence of the U.S., as the main importer of Venezuelan oil (U.S. Department of State 2016), I will analyze Russia’s influence on the Venezuelan regime in relation to the oil industry. Russia is considered to be one of the last remaining allies of Venezuelan president Maduro (Kassai and Zerpa 2018; Council on Foreign Relations 2019a, Nasa 2019; Congressional Research Service 2019). What are the reasons for their support? According to the American independent thinktank Council on Foreign Relations (2019a), Russia has been one of Venezuela’s closest allies. In 2006 former president Chaves signed an arms deal of almost three billion dollars in exchange for Russian military material (Kurmanaev 2019; Balmforth and Rodionov 2019). This deal is connected to Venezuelan oil (Faiola and DeYoung 2017). According to the Council on Foreign Relations (2019a), this deal allowed Russia to buy Venezuelan oil below market-price. This highlights the importance of oil between the relationship of Russia and the current regime of Maduro.
Another important observation in relation to the resource curse perspective is that Russia owns substantial parts of the Venezuelan oil fields. They acquired these in exchange for substantial loans and economic bailouts for the Venezuelan government over the past decade caused by declining oil prices (Tamkin 2018). When analyzing this relationship from the resource curse perspective we notice several theoretical conditions in the connection
between Russia and Venezuela. First of all, we can conclude that the Venezuelan government does not fully control the oil extraction and processing due to the fact that the oil industry is partly controlled by Russia. This is demonstrated by the fact Venezuela signed over almost half of Citgo (oil refinery), as collateral to the Russian state-owned oil company Rosneft (Tamkin 2018). According to Rosneft’s 2018 financial statements, Venezuela’s outstanding debt to the company was more than two and a half million dollars. Furthermore, Rosneft also has a 49 percent stake in Citgo. Citgo is part of national oil company Petróleos de Venezuela, which handles the refining of crude oil and supplies it to gasoline stations. According to the resource curse, when a government or regime loses control over its natural resources the probability of regime change increases. This would suggest that Russia’s involvement in the Venezuelan oil industry would make regime change more likely.
However, Russia is not interested in regime change. According to Demarais (2019) director at the Economist Intelligence Unit: “in reality, geopolitical implications of regime change in Venezuela are secondary for Russia, Venezuela has limited strategic significance.” Because Russia has several major stakes in the production and trade of Venezuelan oil they stand to lose economically when their allied president Maduro loses control over these the oil fields and companies. Therefore, they supply the current regime with financial means and revenue’s generated by the import of Venezuelan oil. According to the resource curse theory, the Russian interests in Venezuelan natural resources helps to stabilize the current government and prevents regime change from happening.
4.1.2.2 United States
After discussing Russia’s involvement in the Venezuelan oil industry and its impact on regime change, I will now discuss the influence of the U.S. The U.S. have been one of the main critics of the Maduro regime (Council on Foreign Relations 2019; Congressional Research Service 2019; Diamond and Malloy 2019). Furthermore, the U.S. is the largest oil consumer in the world and responsible for twenty percent of petroleum consumption (EA 2019a). According to
the Energy Information Administration, the U.S. have long been one of the main importers of Venezuelan oil (EIA 2019b). Between 2010 and mid-2017 the U.S. imported between 500 thousand till 1,4 million barrels of crude oil out of Venezuela per day. In the period after 2017, till the beginning of 2019, these imports dropped to between 200 thousand and 750 thousand barrels of oil per day. As discussed earlier in the theoretical framework the dependency theory also applies to the relation between the U.S. and Venezuela regarding oil. Resources from the relatively poor and peripheral Venezuela flow to the rich and core state of the U.S. According to Bollen (1983), the movement of these resources form relatively poor countries to core rich countries can have a negative effect on the political regime in the poor country.
Since the beginning of 2019, the crude oil imports of the U.S. have been declining rapidly (Eaton 2019; EIA 2019b). This was the result of opposed sanctions by the U.S. government against the Petróleos de Venezuela (PdVSA) (Eaton 2019). On the 29th of January, the U.S. Treasury Secretary Mnuchin stated: “The U.S. is holding accountable those responsible for Venezuela's tragic decline, PdVSA has long been a vehicle for embezzlement, for corruption for Venezuelan officials and businessmen. Today's designation of PdVSA will help prevent further diversion of Venezuela's assets by Maduro, and will preserve these assets for the people of Venezuela where they belong." (Diamond and Malloy 2019). This statement highlights that the U.S. is critical of the current government of Venezuela. Implying, even though subtle, support for the opposition, and therefore hinting they are proponents of regime change.
If we look at the measures taken against the Venezuelan oil companies by the U.S. from a resource curse perspective, we see the following. These actions weaken the authoritarian regime led by president Maduro. If we argue in line with Ross (2015), the decrease in oil revenue would shorten the survival of Maduro as an authoritarian leader. This suggests that the U.S. can influence regime change in Venezuela. Oil rents help authoritarian leaders to suppress revolutionary uprisings and survive them if they occur. The resource curse, therefore, suggests when these revenues drop, the ability to suppress demonstrations
Venezuela are influenced by U.S.’s own national interest (Laya 2018; Council on Foreign Relations 2019b). If the U.S. takes too drastic measures against the national oil company, national interest could be damaged. This highlights the international and geopolitical influence on regime change from the resource curse perspective.
Since the outbreak of the economic crisis in Venezuela in 2013, the oil imports by the U.S. have been relatively steady (EIA 2019b). Even though the U.S. already started to oppose the Venezuelan government in 2013 (Nasa 2019), until 2019 they were still one of the main importers of Venezuelan oil (U.S. Department of State 2016). This shows that for almost six years into the crisis the U.S. imported large quantities of oil out of Venezuela, and therefor indirectly supports president Maduro and his authoritarian regime.
The above made analysis highlights the effect of international political and economic influece on regime change in Venezuela. Both Russia and the U.S. influence the current Venezuelan regime based on their national oil interests. Russia influences the current regime by its interests in the Venezuelan oil fields and the national oil company. Therefore, providing the president Maduro with wealth and power to sustain his regime. Russia is not interested in regime change due to its dependence on agreements with Maduro regarding Venezuelan oil. The U.S. has long been a main importer of Venezuelan oil. According the resource curse theory they provided the current regime with oil revenues that helps it to stabilize its power. Even though the U.S. proclaims to be against president Maduro, till 2019 they imported large quantities of Venezuelan oil. In 2019 the U.S. took measurements to reduce oil imports in order to apply pressure on Maduro regime. According to the resource curse theory, these new measures should have a negative influence on the stability of the current regime. This analysis highlights that international political actors have influence on the current Venezuelan regime from the resource curse perspective. The wealth they provide by importing Venezuelan oil helps to stabilize the Maduro regime in a country that economically depends on oil. Due to the fact that both Russia and the U.S. are dependent on the Venezuelan oil, they contribute to the lack of regime change in the country.
5 Conclusion
Venezuela has experienced a large political and socio-economic crisis for several years, intensified by the declining oil prices in 2015. Venezuela largely depends on the wealth generated by the extraction and trade of oil for maintaining its economy and its social institutions. Based on the theoretical debate regarding the economic conditions that influence regime change, in this thesis the argument has been made that the political and economic conditions in Venezuela could increase the probability of a regime change. However, this has not happened. This led me to investigate the Venezuelan crisis from the resources curse perspective due to Venezuela’s high dependency on a natural resource. The literature on the resource curse explains that countries that economically depend on natural resources are less democratic and not economically sustainable. In my thesis, I examined the following research question: “What is the influence of the resource curse on the lack of regime change in authoritarian Venezuela?”.
To answer this research question, I went through several stages. In the first part of this thesis I gave an overview of the literature that highlights the connection between economic crisis and regime change. I focused on the influence of national political institutions and international influence on regime change. The second part of the theoretical framework focused on the impact of natural resource dependency on the economy of a country. This part highlighted that countries that economically depend on natural resources tend to be less democratic and more authoritarian.
Subsequently I presented the methodology that enabled me to use the theories and concepts from the theoretical framework to analyze the qualitatively gathered data for this atypical case study through document analysis. In my analysis, I argued that the dependency on oil can play an important role in establishing regime change from happening where the national political institutions and international influences play a big role. First, I gave an overview of the emergence of the economic crisis in Venezuela. Based on newspaper articles we can conclude that the Venezuelan economic crisis is heavily intensified by the decline of
oil prices. Based on the important role of the quality of political institutions in the resource curse, the following can be concluded. Even though the quality of political institutions in Venezuela is low, control over oil resources gives president Maduro the economic leverage to control and keep the support of the military. This support of the military can keep regime change from happing, by knocking down protests and the political opposition.
This economic leverage shows the connection between the national Venezuelan crisis and the international influence from other countries. I argue that this international influence plays an import role in preventing regime change in Venezuela that depends on natural resources. From the resource cruse perspective, I focused on the influence of the U.S. and Russia on regime change in Venezuela. On the hand the U.S. opposes the current government of president Maduro but on the other hand they long have been one of the main importers of Venezuelan oil and still benefit from this trade. Through this they supply Maduro with economic leverage and wealth to stop regime change from happening. Russia has strong economic ties with president Maduro. The country is part owner of the Venezuelan state oil company and therefor also benefits from regime stability.
From these findings I argue that the resource curse influences the lack of regime change in Venezuela. In contradiction to the resource curse theory in the specific case of Venezuela weak political institutions do not lead to substantial regime change. The wealth generated from oil trading is invested into the military, therefor giving the government the power and the means to suppress demonstrations and political opposition that keeps regime change from happening. Most of the oil wealth relates to exports and agreements with the U.S. and Russia. In addition to Venezuela therefore being dependent on its natural resource the US and Russia also depend on this natural resource regarding their own national interests. This ensures that these countries influence the absence of regime change in Venezuela. Creating a new within the resource curse in relation to regime change. In this specific case the international influence a major to the influence of the national political institutions which potentially creates resource curse were the current regime stays in place.
5.1 Shortcomings and further research
For this thesis I have made several methodological choices in order to answer my research question. First of all, I used the case study method where I focused on one specific case in a specific time frame. This methodological choice implicates that the findings of this study cannot be generalized, which makes the external validity low. However, this was never the goal of this thesis. Due the use of documents analysis I have been able to examine underlying structures of this phenomenon. The internal validity of this research thesis varies. Based on the available information from primary sources the connection between the national political institutions, international influence and regime change can be made. However, this study cannot explicitly state that other variables influence this relationship. Therefore, internal validity of this study is low. The ecological validity of this research varies. Through the use of primary sources obtained from governments ecological validity is expected to by high due to researched actors directly give meaning to the studied events (Bryman 2012: 399). However, the lack of more primary and therefore the use of news articles ecological validity is rather low. The reliability of this research is low due to the fact that this is a qualitative study. Because a researcher interprets qualitative data, it is possible that when the research is repeated by a different researcher the outcomes will vary due to another individual approach. Further research could focus another economic and political crisis where in natural resource depend countries. To further establish the arguments made in this thesis, a further investigation of the relation between international influences and regime change in countries that highly depend on natural resources would be highly relevant. This would highlight if the arguments of this thesis only apply the this specific or are maybe more generally present in similar cases.
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