Venezuelan Petro State Thesis Remi Lehmann
Post on 24-Oct-2014
173 Views
Preview:
Transcript
The Venezuelan Petro State and Foreign Policy Oil Rents and Soft Balancing Strategies
Master thesis Political Science: International Relations
Student: Remi Lehmann (s6190596)
Supervisor: Dr. Reinoud Leenders
Second reader: Dr. Antonio Carmona Baez
Date: July 31st, 2010
2
Table of Contents
Abstract ------------------------------------------------------------------------------------------------------------ 5
Introduction ------------------------------------------------------------------------------------------------------- 6
A balance of power ------------------------------------------------------------------------------------------- 6
The Natural Resource Curse -------------------------------------------------------------------------------- 8
Relevancy for theory and policy --------------------------------------------------------------------------- 9
Methodological considerations and case study -------------------------------------------------------- 9
Case selection: Venezuela --------------------------------------------------------------------------------- 10
Structure of the thesis ------------------------------------------------------------------------------------- 11
1 | Theoretical framework ----------------------------------------------------------------------------------- 12
1.1 The post-Cold War balance of power -------------------------------------------------------------- 12
1.1.1 The Absence of balancing behavior ----------------------------------------------------------- 13
1.1.2 The Soft Balancing Alternative ----------------------------------------------------------------- 15
1.1.3 Conceptualizing Soft Balancing ---------------------------------------------------------------- 16
1.1.4 Critics of soft balancing -------------------------------------------------------------------------- 18
1.1.5 Soft Balancing as an integral part of foreign policy --------------------------------------- 20
1.2 The Natural Resource Curse ------------------------------------------------------------------------- 21
1.2.1 The Rentier state ---------------------------------------------------------------------------------- 23
1.2.1.2 A Political-Economic dimension ---------------------------------------------------------- 24
1.3 The Petro State ----------------------------------------------------------------------------------------- 25
1.3.1 The Political Economy of the Petro State ---------------------------------------------------- 26
1.3.2 An International dimension? ------------------------------------------------------------------- 27
1.4 Methodological considerations --------------------------------------------------------------------- 30
1.4.1 Methods of research ----------------------------------------------------------------------------- 31
1.5 Case Selection: Venezuela ---------------------------------------------------------------------------- 33
1.6 Use of sources ------------------------------------------------------------------------------------------- 33
2 | The Venezuelan Petro State ----------------------------------------------------------------------------- 35
2.1 From Colonial Outpost to Independent Nation (1498 – 1900) ------------------------------ 35
2.2 The birth of the Petro State (1901 – 1942) ------------------------------------------------------- 36
2.3 The Developmental Petro State (1943 – 1988) -------------------------------------------------- 37
2.3.1 Experiments with democracy and PuntoFijismo ------------------------------------------- 38
2.3.2 Nationalization, boom and bust --------------------------------------------------------------- 40
2.4 The Oil Opening and Neoliberal reforms (1989 – 1999) --------------------------------------- 42
3
2.4.1 Pérez: The Shock Doctrine ---------------------------------------------------------------------- 42
2.4.2 Caldera: gradual reforms and PDVSA privatization --------------------------------------- 45
2.5 The Chavista Petro State (1998 – present day) -------------------------------------------------- 46
2.5.1 Reversing neoliberalism ------------------------------------------------------------------------- 47
2.5.2 Petro-boom and deepening the process ---------------------------------------------------- 52
2.5.3 Ten Years of Chávez ------------------------------------------------------------------------------ 54
3 | Venezuelan Foreign Policy ------------------------------------------------------------------------------- 56
3.1 The 4th Republic and the World ------------------------------------------------------------------ 56
3.1.2 Traditional balancing behavior -------------------------------------------------------------- 59
3.1.3 Carlos Andres Pérez --------------------------------------------------------------------------- 62
3.1.4 Rafael Caldera (feb ’94 – feb’99) ----------------------------------------------------------- 63
3.2 Bolivarian foreign policy --------------------------------------------------------------------------- 66
3.2.1 Signs of hard balancing? ---------------------------------------------------------------------- 68
3.2.2 Spreading the oil wealth: petro dollar diplomacy -------------------------------------- 70
3.2.3 UNASUR: Defending Latin-American sovereignty -------------------------------------- 74
3.2.4 ALBA and the Banco del Sur: Alternative models for economic integration ----- 77
3.2.5 The role of International Financial Institutions ------------------------------------------ 80
3.2.6 OPEC: Multilateral oil diplomacy ----------------------------------------------------------- 81
3.2.7 Eschewing cooperation and promoting sovereignty ----------------------------------- 86
3.2.8 The Obama administration and Chávez --------------------------------------------------- 87
4 | Analysis ------------------------------------------------------------------------------------------------------ 88
4.1 Near absence of traditional balancing ------------------------------------------------------------- 88
4.2 Soft balancing ------------------------------------------------------------------------------------------- 90
4.2.1 OPEC and the Oil Weapon revisited ---------------------------------------------------------- 91
4.2.2 Economic Integration Alternatives ------------------------------------------------------------ 93
4.3 The role of domestic institutions and petrodollars --------------------------------------------- 94
4.4 Soft Balancing a success? ----------------------------------------------------------------------------- 96
Conclusion ------------------------------------------------------------------------------------------------------- 98
Research Question ------------------------------------------------------------------------------------------ 98
The Venezuelan case --------------------------------------------------------------------------------------- 98
Main Findings ------------------------------------------------------------------------------------------------ 99
Theoretical implications --------------------------------------------------------------------------------- 100
4
Implications for policymakers -------------------------------------------------------------------------- 101
Methodological and theoretical remarks ------------------------------------------------------------ 103
Suggestions for further research ---------------------------------------------------------------------- 104
Cited Works ------------------------------------------------------------------------------------------------ 106
5
Abstract
Het onvermogen van het Neorealisme om het gedrag van staten te verklaren binnen de
context van een unipolair statensysteem heeft het debat over de verklaringskracht van het
neorealisme aangewakkerd. De theorie kan niet aannemelijk maken waarom staten zich niet
tegen de enige overgebleven supermacht – de VS – keren. Deze thesis richt zich op een
theorie die aangeeft dat staten wel degelijk balancen, maar in kiezen voor minder risicovolle
en minder kostbaardere non-militaire middelen, ook wel ‘soft balancing’ genoemd. Er is
echter nog veel onduidelijkheid over omstandigheden en oorzaken van soft balancing, en
welke rol de kosten van een dergelijke politiek spelen. Oliestaten, staten die voor hun
inkomsten grotendeels afhankelijk zijn van het exporteren van olie, hebben een grillig
verlopend inkomstenpatroon.
Aan de hand van de casus Venezuela (1989-heden) wordt nagegaan of de verandering van
de hoogte van olie-inkomsten ook daadwerkelijk tot veranderingen in buitenlands beleid
hebben geleid. Immers, met een dusdanig grillig inkomstenpatroon zou men een dito beleid
verwachten. Omdat Venezuela de afgelopen twintig jaar vele politieke- en economische
ontwikkelingen ondergaan, kan er gecontroleerd worden voor andere variabelen. De
belangrijkste bevindingen van het onderzoek zijn: Venezuela heeft verscheidene vormen van
soft balancing toegepast. De intensiteit, schaal en duur van deze initiatieven verschilt echter
sterk en lijkt samen te vallen met verloop van olie-inkomsten tussen 1991 – 2008. In tijden
van (relatief) lage olieprijzen gedurende de jaren ’90 was soft balancing beperkt. Dit geldt
ook voor de eerste jaren van het Chávez regime. Sinds de ‘olieboom’ (2004-2008) nam soft
balancing in intensiteit, schaal en duur toe tot ongekende hoogten.
Echter, van een duidelijk causaal verband lijkt geen sprake te zijn vanwege drie redenen. Ten
eerste heeft de Chávez regering in verscheidene beleidsdocumenten soft balancing
initiatieven aangekondigd, ruim voor de olieboom. De wil om te ‘soft balancen’ was al sinds
2001 aanwezig. Dit hangt mogelijk samen met het de agressieve, imperialistische
buitenlandpolitiek van de regering van G.W. Bush, zoals enkele proponenten van de soft
balancing theorie al aangaven. Ten tweede gaat de regering Chávez door met de soft
balancing initiatieven, ook al zijn de olieprijzen (en dus inkomsten voor de Venezolaanse
staat) aanzienlijk teruggelopen sinds mid-2008. Het lijkt er dan ook ten sterkste op dat olie-
inkomsten an sich geen oorzaak van soft balancing zijn, maar dit gedrag slechts faciliteren in
materiële zin. Enkele kanttekeningen dienen bij de conclusies geplaatst te worden: 1) de
bevindingen slechts in beperkte mate te generaliseren naar andere oliestaten vanwege het
ontbreken van een vergelijking van verscheidene oliestaten. 2) De soft balancing theorie nog
niet voldoende ontwikkeld om wezenlijke verschillen tussen strategieën te kunnen duiden.
6
Introduction
A balance of power Since the end of the Cold War, the United States of America has been the undisputed world
power. Since the fall of the Soviet Union it has surpassed any other power in economic,
political and military capabilities. Since George W. Bush assumed office in 2001, in many
countries concern has grown over American foreign policy. The aggressive, unilateral,
national security strategy of Bush’s administration has attracted widespread criticism from
traditional allies and criticasters alike. Why did the US change its foreign policy course so
profoundly? For over more than a century, International Relations scholars have been trying
to determine why states act the way they do in this seemingly anarchic world system.
Especially Realist thinkers have been explaining state behavior by referring to the balance of
power: whenever a certain state is becoming (too) powerful, other states will invest in their
military apparatus or forge military alliances to counter the power of the hegemon, for the
sake of their own security.1 This type of behavior is generally referred to as balancing (Waltz,
1979). Indeed, there is some evidence that states have enhanced their military capabilities:
after a global decrease that started in 1985 and lasted till the late 1990s (Schiff & Clements,
1996), global military spending has grown over 45% since 1999 (Stockholm International
Peace Research Institute, 2009, p. 10). However, spending varies greatly per country and the
US defense budget is still much larger than that of all other nations combined. Even more
importantly: we are yet to witness the formation of military alliances against US hegemony.
There seem to be various reasons why states have not resorted to balancing: some states
see the US as a close ally and do not fear its foreign policy. Others argue that balancing could
spur an arms race they are unlikely to win. However, most states simply do not possess
sufficient means to increase military spending let alone to match the military power of the
US.
1 The core tenant of the Realist school of International Relations theory argues that the state is the most
important actor in world politics, and that other actors are of lesser relevance. The primary objective of a state is survival. This is the supreme national interest to which all political leaders must adhere. Since no other state or institution can be relied upon to guarantee the survival of the state, nations can only rely on self-help (Dunne & Schmidt, 2008, p. 103).
7
Although at first glance it seems that other countries have little opportunity to directly
balance the hegemon, this does not mean that other countries have given the US a carte
blanche. According to various authors (Pape, 2005) (Paul, 2005) (Corrales) (Hurrell, 2006),
several countries have pursued non-military alternative strategies to block or hamper
foreign policy initiatives by the US which are deemed hurtful to other nations. These
strategies are aptly dubbed ‘soft balancing’ (Paul, 2005, pp. 58-59). Examples of soft
balancing include giving (financial) support to political actors in other countries that oppose
the hegemon, blocking policy-making by the hegemon in international organizations or
providing developing nations with development aid under very favorable (or simply no)
conditions (Corrales).
This new explanation for state behavior in the current unipolar context has sparked a debate
among both defenders and skeptics of the soft balancing approach. Brooks and Wohlforth
(2005, p. 74). argued that the main analytical flaw in the soft balancing argument is the little
attention for alternative explanations of state behavior: even if states act contrary to US
interests, it might be simply to achieve their own foreign policy goals instead of intentionally
balancing US power. Even among proponents of the approach there remain important
differences of opinion. Most authors (Paul, 2005) (Pape, 2005) argue that soft balancing
policies are primarily the result of the behavior of the hegemon and have little to do with
state-specific characteristics. Soft balancing behavior then seems to be a product of the
anarchic international system instead of conscious foreign policy choices by nations. Other
authors, such as Andrew Hurrell leave more room for the idiosyncrasy of the state involved:
states that soft balance typically believe they are entitled to a more influential role in world
politics (2006, p. 2).
Irrespective of beliefs or values that a state may hold, the majority of IR scholars argue that
foreign policy options are heavily dependent on the capabilities of a state. For example:
richer states can invest more in military personnel and equipment than poorer nations
because they dispose over more financial capabilities. Within the soft balancing debate so
far, (too) little attention has been paid to the sources of these capabilities.
8
The Natural Resource Curse One possible, and potentially significant source of income, is the rent that natural resources
generate. Much has been written about the supposed (negative) impact that significant
resource rents have on the domestic characteristics of politics, the economy and society in
resource-rich nations. Yet, less has been written on possible implications of natural resource
(rent)s for foreign policy within the current unipolar context. I think such a debate is long
overdue and justified because these rents may be argued to influence foreign policy,
whether they be soft- or traditional balancing initiatives. Like any other type of (foreign)
policy, costs are involved. Resource abundant countries, and especially petro states dispose
over significant rents which usually can be used discretely by the executive.2 More than in
resource-poor countries these rents can be used to fund soft balancing strategies. Going
beyond the rent generated, lowering oil production or threatening to close the tap (which
happened in 1973 when several Arab petro states refused to sell oil to the US and the
Netherlands because of their support for Israel) can function as instruments for soft
balancing too. What is unknown, however, is whether this access to oil rents simply
functions as an enabler for certain policies (altering the cost/benefit analysis of said policies)
or whether alleged intrinsic characteristics of oil production actually encourage (or perhaps
discourage) soft balancing policy initiatives. Only very few authors, such as Michael T. Klare
(2001) seem to have ventured in the foreign policy dimension of resource abundance. His
work on natural resources and conflict paints a rather grim picture; the world’s powers need
oil to maintain their economic and military power and will therefore resort to force to secure
these energy sources when necessary. Klare clearly focuses on the needs of the oil-
consuming countries and to some extent seems to justify conflict in order to meet these
needs. Susanne Peters (2005) shares similar concerns about oil-consuming countries
resorting to violence (especially within the context of ever shrinking oil reserves), but sees
the relation as less deterministic: In her view, a more equitable distribution of oil and
international energy regimes may mitigate hostile behavior by the oil consuming countries.
Another scholar that studied natural resources and international conflicts is Helga
Haftendorn (2000). Her study on water conflicts argues that water as a resource structures
2 A Petro state in short is a nation heavily dependent on oil rents, generated by the export of this commodity.
The state’s institutions and its relations to the citizenry and the economy for a large part have been shaped through the development of the oil industry (Karl, The Perils of the Petro-State: Reflections on the Paradox of Plenty, 1999, p. 34). For a more detailed description of the Petro state, see section 1.3
9
conflicts between states in such a way that it generates an asymmetric relationship between
upstream and downstream countries, which makes it very hard to resolve conflicts among
them. Oil may then also structure conflicts between states in a certain way, as oil is traded
internationally. All in all, the works by these authors hint that there may be a domestic
dimension of natural resource rents to foreign policy which cannot be captured in the
systemic approach of the anarchic international state system. As such, this dimension
deserves closer attention. This led to the following research question: To what extent and
how does access to significant oil rents generate incentives for soft balancing behavior?
Relevancy for theory and policy The debate on the effects of abundance of natural resources has mainly focused on the
political and economic dimension of the state. Less attention has been paid to possible
consequences for foreign policy. This thesis explores this largely ignored field of study.
Furthermore, I think this thesis could also make a contribution to the soft balancing debate
as to whether incentives for such policies should be viewed as largely systemic in the context
of the international system or whether they can also be caused by domestic factors. The
thesis nevertheless has the potential to go beyond the theoretical dimension and could help
policy makers in resource abundant countries to develop (soft) balancing strategies when a
super power seems to excessively use its privileged position in the international anarchic
system to prey upon other countries’ resources. It may also instruct the hegemon in how to
deal with such soft balancing strategies.
Methodological considerations and case study It is very hard to determine the existence of a causal link between access to significant oil
rents and the application of soft balancing strategies. The limited amount of time and means
available for the realization of this thesis greatly hampers answering the ambitious research
question in full depth. However, since this thesis ventures into relatively unexplored
territory I see great value in exploring the possibilities of such a link, which further research
may (or may not) qualify and specify. I deem a case study to be the most useful way to
investigate such a matter. To investigate the possibility of a causal link, it is very important
that many different processes (decision-making, flow of oil rents to governments,
10
distribution and allocation of rents etcetera) are being studied instead of a mere
quantitative approach involving calculating alleged correlation between the variables ‘soft
balancing initiatives’ and ‘access to significant oil rents’. An in-depth case study also allows
for close attention to possible intervening variables (which are much harder to discover in
quantitative research). That being said, following the logic of the research question, some
expectations are warranted: if oil rents enable or actually give incentives to soft balancing
behavior we should see nations with significant oil rents embarking on soft balancing
initiatives more than countries that do not have access to such rents. Another expectation
would be that higher rents entail more intense soft balancing behavior. Nevertheless, before
such claims can be proven, it is necessary to dive deeper into the logic of the argument than
simply demonstrating a correlation between the aforementioned variables.
Case selection: Venezuela The majority of literature on soft balancing is framed within the (Realist) logic of the anarchic
state system, which currently is unipolar. As rules of the balance of power change according
to the number of major powers within the international system (Waltz, 1979), to ensure
comparable results it is necessary to study foreign policy initiatives since 1991 (the collapse
of the Soviet Union) onwards. It goes without saying that a case study should at least involve
a country that has access to significant oil rents if one wants to study the alleged effects of
oil rents on foreign policy.
The Bolivarian Republic of Venezuela is a textbook example of a country which has access to
significant oil rents. According to the latest figures on the share of oil in the Venezuelan
economy, in 2008: oil accounted for 90% of all export income (about 30 billion USD), 50% of
fiscal revenue and 23% of GDP (Banco Mercantil, 2009). Furthermore, Venezuela has seen
many changes taking place over the past 20 years: high and low oil prices, socialist and
market-oriented regimes, high and low economic growth. Therefore it seems the ideal
candidate to control for different variables when trying to measure the alleged impact of
significant oil-rents in soft balancing strategies of foreign policy. Another reason why
Venezuela is an excellent candidate for this case study, is that it has been an active player
(with differing roles over time) in world politics. It is co-founder of the OPEC oil cartel, was a
close ally of the US for many years, and now strives for the construction of a multipolar
11
world order (Ministerio del Poder Popular para La Comunicación y la Información, 2007, p.
46). The current government furthermore sees the interests of the United States as a threat
to political stability, peace and human rights in the region (Buxton, 2009, pp. 61-72). Limited
time and means strongly discourage an in-depth comparison of the foreign policies of
multiple countries. Therefore I will compare Venezuelan foreign policy under two strikingly
different regimes: the neoliberal-oriented governments of the 1990s and the successive
governments of Hugo Chávez Frías. This allows me to control for the ‘Chávez factor’. This
refers to the idea that Venezuela’s foreign policy might simply be an anomaly, explained by
the idiosyncrasy of current president Chávez Frías.
Structure of the thesis Chapter 1 will be dedicated to a thorough analysis of the debates on soft balancing and the
foreign policy dimension of the natural resource curse. Special attention will be paid to the
conceptualization of key concepts such as soft balancing strategies and the petro state. Also,
the methodological design of the thesis will be explained and justified. Chapter 2 will consist
of a description of the Venezuelan petro state, followed by a close look on its foreign policy
in Chapter 3. In Chapter 4 the data found in the previous chapters will be analyzed by means
of the theoretical framework. In the Conclusion I will present the main findings of the thesis,
the implications of the thesis for both the academic community and policy makers. Finally,
suggestions for further research will be given, based upon the findings of the thesis.
12
1 | Theoretical framework
This chapter will provide the theoretical framework for the thesis. First, a brief overview of
Neorealist International Relations theory will be compared with developments in the
international state system since the end of the Cold War. We then proceed with an analysis
of the role of natural resources in rentier states, and discuss a special type of rentier state:
the petro state. Finally we return the discussion of how foreign policy of petro states may be
(partly) shaped by its dependence on oil rents and how to research this subject.
1.1 The post-Cold War balance of power
The soft balancing argument is best explained when framed into the post-Cold War context
and the challenges this situation poses on traditional IR theories. One of the most influential
theories on International Relations was developed during the Cold War by Kenneth N. Waltz.
In his seminal work, Theory of International Politics (1979), he described state behavior in
the international system. He accepted the realist premises that states are primarily
interested in their own survival, constantly fear losing their sovereignty and are
predominantly reliant on self-help in realizing the aforementioned goals. The innovation of
Waltz’ theory was that he deduced state behavior from the logic of the international system.
According to Waltz, the international system is ordered in an anarchic fashion. Unlike within
nation states, there is no supreme authority. Second, the international system is comprised
of ‘like’ units: nation states. Every nation state is alike in the sense that it is a sovereign
political entity. This is not to say that all states are equal in all aspects, but states perform
similar functions. States however differ greatly in their power capabilities. This distribution
of power capabilities determines the structure of the international system. When three or
more states have much more capabilities than other states, such a system is categorized as a
multipolar system. When two states have much more capabilities than the other states, it is
called a bipolar system. When one country has far greater capabilities than all other states it
is called a unipolar system. As stated before, according to Waltz this structure largely
determines the behavior of states and what outcomes are produced. Waltz argues that a
multipolar system is more unstable than a bipolar system. First, because powers have a hard
time drawing a clear line between friends and foes. Second, because of this uncertainty, it
needs to monitor multiple powers, which leaves room for misinterpretations of risk-
13
assessment. Even when alliances are formed to counter this problem, the defection of one
state can alter the balance of power and thus elevate tensions among the other states
(Waltz, 1979, pp. 168-169). In a bipolar system, states suffer less from these problems.
Because there are only two significant powers, monitoring problems are less common.
Second, even though the powers form alliances with other states, defection is less of a
problem because the powerful state itself does not depend on other states for its own
security. Using Waltz’ theory to identify the structure of the international system during the
Cold War era, we can conclude that it was a typical example of a bipolar international
system. Both the United States and the Soviet Union had far greater military capabilities
than the other nations. During the Cold War, both powers constantly tried to enhance their
military might through investments in military power (for example the nuclear arms race)
and the formation of military alliances (such as the NATO and the Warsaw Pact) in order to
prevent the other pole from becoming too powerful. In that sense the behavior of both the
US and the SU form a perfect example of traditional balancing. Many secondary states chose
to side with either the US or the SU to safeguard their sovereignty and assure the survival of
their state.3
1.1.1 The Absence of balancing behavior
The collapse of the Soviet Union radically transformed the structure of the international
system and reduced the number of world powers to one: the United States. As Waltz had
argued, this changed structure of the international system would change expectations about
state behavior within the system (1979, p. 97). Neorealists predicted that the situation of
unipolarity would not last very long. An ever more powerful United States would mean that
secondary states would have growing fears of losing their sovereignty and ultimately would
jeopardize the survival of the state. Within this context, the logical thing to do for secondary
states was to invest heavily in military capabilities (internal balancing) and form military
alliances with other states (external balancing) to counter the US. Yet since the end of the
Cold War very little balancing among nations has taken place. Although there has been a
significant increase in military expenditure (Stockholm International Peace Research
3 It is important to notice that not every state had the same degree of liberty in choosing its side, especially in
the ‘Global South’. This was due to imperialist policies by both the US and the Soviet Union. Furthermore, a great number of countries (among which Venezuela) chose not to side formally with one of the powers and formed the Non-Aligned Movement. Nowadays it is comprised of Latin-American countries, almost all African nations and various countries in the Middle East and Asia .
14
Institute, 2009), we are yet to witness a military alliance of lesser powers to balance the US.
This led authors such as Thaza Varkey Paul, Robert Pape and Andrew Hurrell to question the
explanatory power of neorealist theory concerning the longevity of the post-Cold War
unipolarity and the seemingly irrational behavior of states within the system.
Paul argues that the most important incentive to balance has been absent since the US has
become the hegemon: the majority of the states do not fear that the US will threaten their
existence as a nation state or erode the national sovereignty of other states.4 They perceive
that the US is constrained by various factors, and Paul identifies three of them as being the
most important ones (2005, p. 53). First, because of the proliferation of nuclear weapons,
many lesser powers now possess nuclear arms. These arms more or less guarantee the
prevention of a direct attack of the hegemon because it would trigger the use of nuclear
weapons and would thus render the enterprise by the US pointless. Second, the US have
largely abstained from direct intervention in secessionist movements in the main other
powers such as China, Russia and India. Third, the powerful force of nationalism and the
asymmetric strategies of (nationalist) groups make permanent occupation of another state
infeasible (Paul, 2005, p. 56). The problems the US and its partners encounter in Iraq and
Afghanistan are vivid examples of these contemporary challenges.
Both Paul and Pape (2005, p. 10) agree that the unilateral, quasi imperialist and aggressive
US security policy implemented during the GW Bush administration has deeply worried a
number of smaller powers. Especially the invasion of Iraq in 2003 in spite of fierce resistance
within the most important international organization to preserve peace – The UN –, has
made these states question whether the US is largely respectful of territorial integrity and
national sovereignty. Now, according to realists these doubts would mean the return of
balancing behavior. However, there is little evidence for such behavior.
4Paul and Pape state that the vast majority of nations do not view the US as a threat to their sovereignty and
but mention certain exceptions such as Iran. I think they underestimate anti-US sentiments in Latin America. In many Latin-American countries the US have intervened (in)directly in domestic affairs. Although interference by the US seems to have diminished in scale and intensity since the Cold War, it has caused a deep sense of mistrust of US foreign policy among Latin-American policy makers and citizens alike (Livingstone, 2009). Recent examples of – at least alleged – US interference in domestic issues in Latin America are financial support for the political opposition and support for the de facto regime in Venezuela in 2002 (Buxton, 2009, pp. 69-70) and support of autonomist movements in East-Bolivia (Golinger, 2009).
15
1.1.2 The Soft Balancing Alternative
What has been missing (especially) in realist works, is the option of alternative strategies for
lesser powers when traditional balancing is either impossible, unfeasible or unwanted. This
need not surprise us as a majority of neorealist writers only deem military build-ups and
alliances (which enhance the capability of the state) as relevant in international relations
among states. Paul and Pope have analyzed the behavior of a number of lesser great powers
and came to the following conclusion (Paul, 2005, p. 58):
In the post-Cold War era, second-tier states have been pursuing limited, tacit, or indirect
balancing strategies largely through coalition building and diplomatic bargaining within
international institutions short of formal bilateral and multilateral military alliances. These
institutional and diplomatic strategies which are intended to constrain US power, constitute
forms of soft balancing.
However, soft balancing strategies do not simply emerge when traditional balancing is not a
policy option. Paul identifies several conditions which need to be met: First, the power
position of the hegemon and its military behavior are of growing concern but do not yet
pose a serious challenge to the sovereignty of second-tier powers. Second, the hegemon is a
major source of public goods in both the economic and security areas that cannot simply be
replaced. Finally, the hegemon cannot easily retaliate because the balancing efforts are not
overt or because they do not directly challenge its power position with military means. This
makes soft balancing such an attractive option for lesser powers since it poses less risks, has
lower costs and – in most cases - is easier to realize.
Although both Paul and Pape agree that the perception that countries hold of the intentions
of the hegemon matter, Pape has a slightly different explanation as why states do not
balance, but soft balance: it is extremely difficult to balance a hegemon in a unipolar system.
Internal balancing is not a viable option because no increase in military might and economic
strength by just one state is sufficient to balance the hegemon. A state that undertakes such
an enterprise would most certainly be met with a harsh response by the hegemon. Within
this context only external balancing has a promising perspective. Nevertheless, as external
balancing implies joint effort by multiple actors, collective action problems are just around
the corner. Even though each nation is better off cooperating with other nations to balance
the unipolar power, each nation’s decisions on whether to balance or not, depends highly on
16
the expectation that others will cooperate (which in turn depends on whether those states
expectations about other states commitment to cooperation). As states do not wish to
confront the unipolar power before the coalition is complete, only when expectations about
cooperation have converged, will there be the possibility to balance. This means that
balancing will take place abruptly or not at all (Pape, 2005, pp. 16-17).
This is a gloomy perspective for states wishing to balance. They therefore might turn to soft
balancing as a second-best policy option. Because soft balancing strategies do not confront
the unipolar power directly and do not involve the military, both risks and costs are lower.
Although this will not greatly alter the power relations directly (benefits are lower as well), it
can delay, complicate or generate substantial costs for the unipolar power to use its power.
Furthermore, it can serve as a basis for future military balancing efforts by generating
converging expectations (Pape, 2005, p. 17).
1.1.3 Conceptualizing Soft Balancing
There seems to be little discussion among the protagonists of the soft balancing debate as to
what constitutes soft balancing. Yet, the abstract formulation of the concept of soft
balancing might be confusing to outsiders. It might therefore be hard to identify typical
examples of soft balancing strategies in foreign policy of countries. Discussing some
examples of such behavior can prove helpful in clarifying the concept of soft balancing. One
example of soft balancing strategy is to entangle the more powerful nation in a diplomatic
context. Even strong states cannot completely ignore the rules and procedures of important
international organizations or accepted diplomatic practices without losing substantial
support for their objectives (Pape, 2005, p. 36). As states bind themselves to certain
international regimes to solve problems they cannot tackle alone, they effectively limit their
policy options because of the aforementioned reasons. At the same time they also enhance
their policy options because certain international regimes give legitimacy to actions (by the
hegemon) which otherwise would not have been acceptable.5
5 For example, if the US was to –unilateraly- invade a certain country, it would be heavily criticized by other
states. Yet if this invasion would be according to the procedures and rules of international law and the UN Security Council, it would gain legitimacy as almost all states have voluntarily committed themselves to these rules and procedures.
17
The United Nations Security Council (UNSC) is an institution of the international peace
regime. Several major powers have a vote within the council, and acting on behalf of the
UNSC requires unanimous support of these major powers. This gives permanent members
China, Russia, France, the United Kingdom and the United States an effective veto.
Another soft balancing option is to invest in certain international regimes to the detriment of
others (Corrales). In Latin America, regional security issues were usually either addressed by
the UN or the Organization of American States (Livingstone, 2009, p. 24).6 However, the role
of these organizations had come under increasing criticism of the predominantly left-wing
governments in the region. First, the dominant role of the US in these organizations
(especially the OAS) had damaged the neutrality of these institutions. Second, both
organizations have a poor track-record in the region. This spurred leaders in South America
to found the UNASUR in 2008 as a regional organization to secure peace and foment political
and economic integration in the region. In several occasions the UNASUR proved to be the
dominant international platform were crisis were discussed by the stakeholders, sidelining
the UN, OAS and the influence of the US.
A further example of soft balancing is social power policy projection (Corrales), which
involves the use of heavy investments abroad, usually in the form of donations and/or loans
to – supposedly – provide poverty relief or promote development. In practice, Corrales views
them as instruments to buy political support abroad. This could be donations to the political
campaigns of allied political actors in other countries or providing credit lines for
governments experiencing financial difficulties. Another option is offering developmental aid
with very low conditionality. This aid competes with aid by the US which comes with very
high conditionality. The former form of development aid is very attractive to the receiving
party as it means access to significant sums of money which can be spent in a highly discrete
manner, whereas the second form of development aid cannot be spent that way.
Territorial denial is yet another way to soft balance. A secondary power can deny the super
power access to its territory for (quasi) military purposes. By denying access, it makes it
harder for the unipolar power to act in that region, complicate its logistical processes and
6 The OAS is a regional multilateral international organization, founded in 1948 to promote solidarity and
cooperation among members and to defend their territorial integrity and sovereignty (OAS, 2010).
18
thus make the employment of the military more costly and thus less attractive. Although
Pape (2005, p. 36) sees this strategy very useful when the unipolar is in war with yet another
weaker state, this tactic could also apply to anti-terrorist or drug enforcement policies of the
hegemon outside its territory. For example, the American military used an Ecuadorian
military base to conduct routine flights to monitor drug-trafficking in the region for over ten
years. However, when a new president was elected on a strong anti-imperialist platform, the
lease of the airbase was not renewed, and so hampered US drug-trafficking monitoring and
forced the US to intensify cooperation with other states in the region (Solano, 2009).
All the aforementioned soft balancing strategies correspond to the description of soft
balancing strategies by Pape (2005, p. 17): what these soft balancing strategies have in
common, is that they do not directly challenge the military supremacy of the unipolar
power, but can delay, complicate or increase the cost of using its extraordinary power. Even
though they are non-military measures, they have an (in)direct effect on the military
prospects of the unipolar power.
1.1.4 Critics of soft balancing
Although the introduction of soft balancing as an analytical tool to account for state
behavior in a unipolar context was generally seen as a welcome critique of neorealism, there
has also been criticism. Critics can be divided in two categories: the first category denies the
existence of soft balancing as a description for certain foreign policy strategies by weaker
states and do not see its analytical relevance. Other critics do accept soft balancing as a
strategy, but argue that its context is not limited to the current unipolar world order.
One of the most important criticisms belonging to the first category has been put forward by
Brooks & Wohlforth (2005, p. 74): they argue that although weaker states adopt foreign
policies that hurt US (military) interests, this might be a mere coincidence and not so much a
specific desire to balance US foreign policy. The main analytical flaw of the theory according
to these academics is the lack of attention for competing explanations such as economic
interests, regional security concerns, policy disputes and domestic political incentives.
Another argument that goes against the soft balancing theory is that the concept of soft
balancing is not distinguishable from normal diplomatic friction, and therefore has little
analytical value (Lieber & Alexander, 2005, p. 125). A third important critique, coming from
19
the second strand, argues that it is unnecessary to place soft balancing within the current
unipolar context. He & Feng (2006) argue that soft balancing is a rational foreign policy
choice for weaker states that are to a certain extent economically dependent on the
hegemon. The greater the power disparities and economic interdependence, the more
attractive soft balancing policies become.
The first category of criticism has been party redressed by academics of the second strand.
He & Feng argue that it is important to distinguish between short term tactics and long term
strategies. Although certain actions by weaker states can (also) be explained by economic
interest, domestic political incentives or policy disputes, they are tactics that in general
should amount to the objective of long term strategies. In a unipolar context the long term
strategy would be the reduction of the power of the hegemon (He & Feng, 2006, pp. 7-9).
They also strongly criticize the notion that soft balancing is just another term for diplomatic
friction. Whereas in a situation of diplomatic friction, two parties seek to achieve the best
possible outcome on a basis of certain different policy options, the soft balancing strategy
actually broadens (future) policy options for the weaker state. The example of soft balancing
strategies I gave earlier illustrates this difference: in the situation of the Bolivian crisis,
normal diplomatic friction would have let to a clash of interests in the OAS, where regional
political disputes were normally discussed. However, the unanimous decision of South-
American heads of state to discuss the matter within the framework of the UNASUR gave the
leaders of this country the possibility to condemn the violence of the autonomist movement
in Bolivia, which the US allegedly supported. By investing in one international regime to the
detriment of another, they broadened their policy options to produce an outcome which
would have been very unlikely within the OAS.
The second category of criticism argues that soft balancing does not only take place within a
unipolar context, and should therefore not be solely linked to the rational logic of states in
such a context. I agree with He & Feng that soft balancing could also take place within a bi-
or multipolar context. Although it would probably make soft balancing less likely as there are
other (perhaps more effective) strategies such as bandwagoning or traditional balancing
instead. I also agree that disparities in military power are an important predictor of soft
balancing power, irrespective of structure the international state system. Yet I do not agree
20
that a higher level of economic dependence on the unipolar power means a higher
possibility for soft balancing. I argue that higher levels of economic interdependence also
makes soft balancing harder and less feasible for weaker states. The exact reasoning behind
this argument has to do with the type of economic interdependence, and especially that of
petro states. If a weaker state is heavily dependent on oil exports for its income, it makes it
harder to soft balance the hegemon, if this hegemon is the most important and non-
replaceable costumer of this commodity. I will dive in to this argument more deeper in the
section on oil as a commodity that structures relations between states in section 1.3.2
1.1.5 Soft Balancing as an integral part of foreign policy
In the ongoing debate it seems as if soft balancing simply is an alternative strategy for
traditional balancing. However, in practice often simultaneous traditional and soft balancing
policies are pursued. It is perfectly possible to spend on the enhancement of military
capabilities of a country, while at the same time trying to block foreign policy initiatives by
the hegemon in international organizations. For example, both China and Russia have
invested heavily in their military apparatus the past ten years. At the same time, both
countries have consistently vetoed US initiatives within the UNSC, that call for actions
against countries that the US deems dangerous for the stability of the international system,
such as Iran and North Korea.7 That being said, every country’s policy mix is different. Some
states may invest heavily in military capabilities while at the same time refraining from too
overt soft balancing initiatives. Other countries might play a lead role in soft balancing
initiatives while at the same time spending moderately on military capabilities.
Here we stumble upon a fascinating paradox. Although Paul and Pape are highly critical of
the systemic and deterministic nature of neorealism, they do to a great extent argue that
soft balancing behavior is caused by the behavior of the hegemon (Pape, 2005, p. 38) and as
such has less to do with the domestic characteristics of the weaker country. I find this
assumption somewhat problematic for various reasons: first, the perception of whether an
act of the hegemon is deemed dangerous for the country at hand may depend heavily on the
7 A fairly recent example of Russia and China blocking US foreign policy took place in the UNSC. In 2008 North-
Korea launched a long-range rocket. According to The United States the launch of such a missile was a clear violation of a Security Council resolution and called for a Security Council meeting to discuss the topic (and to take measures against North Korea). Although all members of the Security Council expressed their concern over the launch of the Rocket, China and Russia called for restraint in the council’s response and effectively blocked the possibility of sanctions as the Security Council can only act unanimously (The Australian, 2009).
21
existing relations with the hegemon, something which Pape acknowledges (2005, p. 14).
Stationing American military personnel in Colombian military bases to fight terrorism and
combat drug-traffickers is seen as very welcome by the Colombian government, while at the
same time it can be considered a threat to regional peace and sovereignty by neighboring
countries Ecuador and Venezuela. Second, every foreign policy initiative has its calculated
costs and benefits. Dependent on for instance financial capabilities, certain foreign policy
initiatives are more viable for some governments than for others. Third, even if two states
have the same view on a certain action of a government, and have roughly equal economic
capabilities, the viability of certain foreign policy options might depend on the type of
economic relation the country has with the hegemon: a state with diverse trade relations
and a diversified economy can afford to damage relations with the hegemon. A state that is
dependent on the export of a single commodity with the hegemon being its important (and
non-replaceable) client cannot afford to damage relations too much. Therefore I think it is
necessary to look into the sources of the very capabilities neorealists argue are so important
in determining the role a state can play within the international anarchic system.
1.2 The Natural Resource Curse
As noted in the previous chapter, states differ greatly in capabilities. These capabilities are
very important to neorealists as they determine a state’s power position vis-à-vis other
states, including the hegemon. In this sense, a state’s capabilities shapes its foreign policy
options. Although neorealists are predominantly interested in a state’s military capabilities,
neorealists all too often seem to forget that these capabilities stem from different sources,
such as a country’s demographics, geographical location, strength of the economy and
access to certain natural resources. Although neorealists emphasize the importance of
capabilities, the sources of these very capabilities are not considered relevant because the
sources of capabilities themselves do not determine the power position of the state in
relation to other states, they are only instrumental to the development of capabilities. This
stands in stark contrast with the academic works by Economists, Political Scientists and
Social Geography scholars alike who have studied the implications of natural resources for
22
the economy, polity, civil society and the environment of the nation state.8 The ongoing
academic debate on this topic is usually referred to as the natural resource curse.
At first sight, large amounts of natural resources seem a blessing for states as they provide a
significant source of income, which the government can use for development policies and
the acquisition of wealth. Especially for less developed countries, the revenues of these
natural resources would allow the governments to ‘buy’ the status of a developed country.
This would also empower the state within the international system, as the enhanced
capabilities of these type of states would better their power position vis-à-vis other states.
Until the late 1980s, this was the generally accepted discourse on the role of natural
resources (Rosser, 2006, p. 7). However at the end of the 20th century the vast majority of
less developed resource abundant countries had still not acquired the level of development
associated with most of the Western world. Several studies have shown that economic
growth in resource abundant countries was actually lower than countries that did not
possess many natural resources (Sachs & Warner, 2001), that states dependent on mineral
exports had worsened living conditions for the poor (Ross, 2003) and that per capita incomes
of resource-poor countries grew much faster than resource abundant countries (Auty, 2001).
So, at least in economic terms these countries had not lived up to expectations associated
with resource abundance.
Yet, the curse does not seem to be limited to a state’s economy. It is also associated with
political instability and civil war. Especially the works by Paul Collier and Anke Hoeffler have
shed light on the link between natural resource wealth and the onset of civil war. They found
(2000, pp. 26-27) that natural resource wealth increased the risk of civil war because it
provides an opportunity for predation of these resources by rebel groups. These groups,
predominantly acting out of greed would generate (further) grievance among other groups.
This, combined with the possibility to finance the conflict through the export of the
resources prolongs the conflict. However, Collier and Hoeffler also conclude that after a
certain level of exports, chances at civil war are actually reduced. Other authors have argued
that natural resources prolong conflicts (Doyle & Sambanis, 2000) or worsen the intensity
(number of casualties) of the violent conflicts in those countries (Ross, 2004).
8 See Rosser (2006) for an interesting overview of literature on the political economy of the Natural Resource
Curse.
23
Besides these domestic dimensions of the natural resource curse, there is an international
dimension to the natural resource curse. The dependence of the West on natural resources
relevant to the growth and maintenance of their economies and military power, has
generated interest of these countries in the states that provide these natural resources
(Klare, 2001). Because the Western states want to secure their access to energy, and these
states are quintessential to that goal, the use of (indirect) military power makes inter-state
conflict more likely (Peters, 2005). The US military intervention in Iraq in 2003 is a often cited
example of an aggressive energy security policy of resource-consuming states versus oil
producing states.
So, instead of being a blessing, natural resources seem to condemn states to slow economic
growth, worsening development indicators for the poor and increased risks of prolonged
and intense civil wars. As if these resources do not spell enough trouble, they also seem to
make these countries easy targets for military intervention by Western, resource-consuming
countries. This is not to say that there is a consensus that the exploitation of natural
resources causes economic underperformance, erosion of the quality of state institutions
and/or (violent) political conflict. Yet the correlation of natural resource abundance and
dependence in less developed countries and economic underperformance, diminished
stateness and the prominence of violent conflicts has puzzled many academics. In the
literature on the Natural Resource Curse various types of resource-abundant countries are
described. In the next section I will present a special variety of such a state: the rentier state.
1.2.1 The Rentier state
Natural resources are not evenly distributed across the world. Some states possess
significant oil and gas reserves, while other countries do not even possess the smallest
amount of fertile land. Often, these natural resources are traded abroad and thus provide
the exporting state with external income. In the literature on natural resources a distinction
is made between states that have a diversified economy and where the rents of some of
these resources is one source of income for the state (but less significant than domestic
taxes and revenues), and states whose economies are practically dominated by such rents.
The former are then classified as diversified economies (Karl, The Paradox of Plenty: Oil
booms and petro-states, 1997, p. 12) or esoteric states (Luciani, 1987, p. 69), while the latter
are referred to as rentier states. The term was first coined by Hossein Mahdavy to refer to
24
the oil economy of Iran prior to the Revolution (Yates, 1996) and has since then been used
by various authors to refer to countries that receive significant amounts of external rents on
a regular base (Mahdavy, 1970, p. 428). Since then, the concept has been refined and one of
the most accepted conceptualizations of the rentier state has been put forward by Hezam
Beblawi. According to Beblawi (1987, pp. 51-52), rentier states share four characteristics that
set them apart from other states with access to natural resource rents. First, in a rentier
economy, rents over natural resources dominate the economy. Second, the economy relies
heavily on external rents. These external rents sustain a non-productive economy and the
state. Only a small group is actually involved in rent-generation. Third, the majority of the
population is engaged in rent-seeking behavior: the distribution and utilization of the
aforementioned rents. Fourth, the government is the most important beneficiary of these
rents.
1.2.1.2 A Political-Economic dimension
A very useful conceptual approach to the differences in the role of the state in rentier
economies compared to diversified economies is the production state versus the allocation
state, a concept developed by Giacomo Luciani. He sees the source of income of states as a
determinant for the role the state plays vis-à-vis its population. In states where the main
source of income of the state is taxation of the local economy and its residents, there is a
mutually dependent relation between the state and its population. For the state to perform
its allocative functions (in providing health care, infrastructure and education) it needs the
revenues generated by the local economy. Strengthening the local economy therefore is an
important task (if not the most important) for the survival of the state. How tax money is
being spent is subject to political debate. Although at times the population does not agree
with the spending politics of a certain government, the system of taxation can only be
maintained if it is being considered legitimate by the population (hence the saying “no
taxation without representation”). This is the main relation between the population and the
state in a production state (Luciani, 1987, p. 73).
In rentier states, the state is predominantly dependent on income earned abroad: the rents
proceeding from exploitation of natural resources are received when traded on the world
market. This world market largely determines how rentable a specific natural resource is. As
Jacks et al. (2009, pp. 3-4) demonstrate, the market for commodities (under which natural
25
resources fall) is characterized by a higher price volatility than for services or manufactures.
The very rent these rentier states rely upon is highly volatile. As these rents accrue directly
to the government, it is the main source of income for the state. The challenge for an
allocation state is to gain as much revenue from the rest of the world. The only link to the
domestic economy is the spending of state revenues and therefore the local economy has no
priority. Even though strengthening the local economy can be one of the goals for which the
rents are used, as long as the domestic economy is not tapped to raise the income of the
state (through taxation), the strengthening of the economy does not entail growing income
for the state. The state therefore has a predominantly allocative function. Since there is little
or no taxation, there is little incentive for the local population to demand a change in
political institutions.
What is typical for these kind of rentier economies, is a different kind of economic behavior
in comparison to productive states. In conventional economies, effort and reward are closely
connected: income and wealth are linked to work and/or risk-bearing entrepreneurship.
Rewards are thus seen as the end result of a (long, systematic, organized) production circuit.
In rentier states such a link hardly exists and the acquisition of income and wealth is more
related to chance or situation instead of work and risk-bearing (Beblawi, 1987, pp. 51-52).
The context of the rentier economy radically changes what is considered to be rational
behavior in an economy. In ‘normal’ economies the rational approach for gaining income
and/or wealth would be investing and/or participating in a productive process as this yields
the best results. In a rentier economy however, trying to tap in to government distribution of
rents yields better results and is less risky than participating or investing in a productive
process or changing the political system. This deviant behavior is called the rentier mentality.
Now, whether such behavior is deemed virtuous or not, is a more philosophical debate and
need not interest us now.9
1.3 The Petro State Now the difference between a rentier state and a ‘tax and spend’ or production state is
clear, a new problem surges: the definition of the rentier state by Beblawi does not specify
nor places much relevance on the kind of natural resource that is being exploited. Yet,
9 For an interesting (historical) overview on rentier behavior and whether it is judged as virtuous or not, see
Yates (1996).
26
looking at some of the general arguments presented by the various strands in the debate on
natural resources, there are reasons to believe that this may matter. States that are
compliant with the rentier state model, and are mostly dependent on oil for their income
are called petro states. This section will explore the notion of the petro state, and why it is
different from other rentier states, and what consequences this has for the political
economy of petro states. An insightful approach to the petro state is presented by Terry
Lynn Karl. According to Karl, Petro states, share a set of properties arising from the
exploitation of petroleum (1999, p. 34): first, the petro state is dependent on a single
commodity, oil. Second, the exploitation of petroleum is more depletable, more capital-
intensive, more enclave-oriented, more centralized in the state and more rent producing
than any other commodity. These characteristics influence the political economy of such
states to a great extent. According to Karl, the overreliance on petrodollars to support
virtually all other economic activities tends to make the needs of the oil industry a top-
priority for governments above all else; a lack of productive linkages and the dominance of
fiscal ones; the perceived mentality to accelerate development before the oil reserves are
depleted and the primacy of the state in the oil industry (1999, pp. 34-35). But perhaps more
interesting is that the political and economic institutions of petro states have been shaped
by the main source of income and that these political and economic institutions tend to be
highly dysfunctional.
1.3.1 The Political Economy of the Petro State
After a comparison of several petro states (Venezuela, Iran, Nigeria and Algeria), Karl
identifies similar political and economic developments in those states. First, the process of
modern state formation and exploitation of oil by international oil companies coincided:
international oil companies moved into countries with significant oil reserves and limited
stateness. This means that none of the aforementioned countries had administrative
structures capable of resisting the petrolization of the state. Executive power became linked
to the fate of the oil industry and the dynamic process of both state centralization and
expansion were thus propelled by oil (Karl, The Paradox of Plenty: Oil booms and petro-
states, 1997, p. 196).
Second, the imposition of income taxes as a prime source of a state’s fiscal revenues and
regime changes that either reinforce or counteract reliance on oil rents (Karl, The Paradox of
27
Plenty: Oil booms and petro-states, 1997, p. 197). With the growing importance of the oil-
sector for the export economy, state decision-making frameworks were molded to facilitate
oil-led development. The outcome of this process is the dependence on petrodollars. Almost
all states that developed oil industries in the past century were characterized by the same
economic policy pattern: maximizing oil extraction rents for domestic distribution through
public spending (according to certain political preferences). The structure of taxation in oil
countries is strikingly different from developed countries with similar GNP per capita: non-oil
taxes are significantly lower and corporate taxes are higher than in developed countries
(Karl, The Paradox of Plenty: Oil booms and petro-states, 1997, p. 198). This access to easy
money radically altered the mentality of both the public and private sector. The public sector
had little incentive for a fiscal discipline, while for the private sector it lowered incentives for
entrepreneurship and work ethics. This then creates an ever greater dependence on oil
income (Karl, The Perils of the Petro-State: Reflections on the Paradox of Plenty, 1999, p.
35), because the oil industry can sustain the rest of the non-productive economy. This
illustrates the typical relation that the state has in a rentier economy: the capacity to extract
the external rents and then distribute this rent internally. According to Karl, in petro states
this principle is taken to the next level. The high rentability of oil compared to other natural
resources, provides the state a exceptional amount of income which is spent in an inefficient
and rather discrete manner: an ever expanding state bureaucracy and white elephant
projects place a heavy burden on the state’s income - a burden still bearable when oil prices
are high. When oil prices are somewhat lower, future oil rents can be used as collateral to
borrow on the international market to maintain government spending even when there is a
budgetary deficit. This makes it very hard for petro states make policy adjustments and
improve fiscal discipline, compared to tax and spend states. This inability to adjust to new
circumstances and lack of sustainable development policies leads to the piling up of
problems which in the long run leads to political and economic crises (Karl, The Perils of the
Petro-State: Reflections on the Paradox of Plenty, 1999, pp. 35-37).
1.3.2 An International dimension?
As much as Karl’s approach tells us about the exceptional characteristics of oil in shaping a
countries economy and political institutions, it tells us little about the foreign policy of a
rentier state. Other authors have shed some light on this issue. Luciani (1987, p. 78) argues
28
that the foreign policy of allocation states are similar to its domestic policies. As allocation
states feel vulnerable because of their abundance of natural resources and the uncertainty
about intentions of other states, governments of allocation states tend to give neighboring
production states a share of the income to appease them, making the allocation state less
vulnerable to military threats from its neighbors.
Now the question surges if it matters what kind natural resources a state possesses, for its
relations with other states. Helga Haftendorn (2000) studied several international conflicts
about freshwater and came to the conclusion that – irrespective of the cause of the conflict
– all water conflicts shared the same asymmetric structure. In such a conflict, one country is
(geographically) the source of freshwater. This state, dubbed ‘upper-lying riparian’, can
control the quantity and quality of the water flow to the other country. When not willing to
wage war, the lower lying state is completely dependent on how the upper-riparian
manages the freshwater source. Haftendorn translates this situation in a game model and
concludes that there is little chance for a satisfactory resolution of the conflict, because
there is little incentive for the upper-riparian state to solve the conflict: it has a privileged
position in terms of freshwater access, and thus has a source of power in hands it will not
likely yield, unless it will be compensated in the form of economic and/or political benefits.
However, for the disadvantaged state it is of the utmost importance that such a conflict will
be resolved, but the aforementioned compensation can put a heavy burden on the
disadvantaged state. Nonetheless, Haftendorn argues that conflicts can be mitigated when
the water conflict is balanced by other factors. For example, the lower riparian may dispose
over resources on which the upper-riparian is dependent. In this mutually dependent
relationship states have an actual interest to provide access to the resource, because when it
fails to do so, the other state can retaliate by withholding their natural resource as well
(2000, pp. 62-63).
For some time, it was believed that oil conflicts were structured asymmetrically too. Because
oil is an irreplaceable commodity to ensure economic and military power of oil consuming
countries, oil producing countries could cripple these states by lowering production quota or
refusing to sell oil to certain countries. In the literature this is referred to as ‘the oil weapon’.
This would then render the oil consuming countries (and especially the US) powerless vis-à-
29
vis the oil producing states in the Middle East (Paust & Blaustein, 1974). Often, the 1973-
1974 oil crisis is used to illustrate the use of the oil weapon to influence the foreign policy of
oil-consuming countries. In 1973 a coalition of Arab states attacked Israel to re-occupy
territory that had been lost during the Six-Day War of 1967. However, several Western
countries supported Israel. To pressure these Western countries to stop selling weapons to
Israel and make Israel respect the borders as they were drawn prior to the 1967 war, the
Organization of Arab Petroleum Exporting Countries (OAPEC) threatened with 5% production
cutbacks as long as these demands were not met. Also, an embargo was imposed on the
sale of oil to Israel’s most staunch supporters: the US and The Netherlands. As a result of the
lower oil production and the political instability of the world’s most important oil-producing
region, oil prices skyrocketed to the detriment of the economic position of the oil-consuming
countries (Stern, 2006). However, the debate about the oil weapon progressed as the 1973-
1974 oil crisis was repeatedly studied by academics. Serious doubts were cast on the
effectiveness of the oil weapon and the alleged dependency of the West on oil from the
Middle-East (Blair, Yali, & Hagt, 2006) (Licklider, 1988) (Stern, 2006). The weapon was
ineffective because it did not produce the desired results: the United States did not change,
and the Netherlands hardly changed their foreign policy concerning the Arab-Israeli conflict
after the oil weapon had been applied (Licklider, 1988, pp. 216-217). It was also ineffective
because – although production cuts were actually made – supply contraction may have been
as little as 4% (Adelman, 1995, pp. 89-140) because of third countries reselling oil and the
availability of non-AOPEC sellers.
Translating this knowledge in the structure-model as proposed by Haftendorn it seems like
oil-producing and oil-consuming countries have a more symmetric relation. The oil-
producing country may have an advantage because it can close the tap or acting through
cartels it can artificially raise the prices. However, this power position is balanced by the fact
that these countries are overly dependent on the rents that petroleum exports generate for
the survival of the regime – and ultimately the state. Therefore the advantaged states will
have an interest in resolving the conflict because they need to sell oil for their survival.
The discussion on the oil weapon had a predominantly oil-consuming country perspective as
oil is the single most important resource for economic growth and military power of the oil-
30
consuming countries (Klare, 2001). As balanced as this relation might be, it does not mean
that petro states need not fear about their survival in the international system. As Susan
Peters (2005) points out, the growing demand and declining reserves will lead to an oil crisis
in the near future. This will lead to growing tensions between oil-consuming states and oil-
producing states, as some oil-consuming states (such as the United States) will probably not
abstain from the use of force to obtain the resources they need for maintaining their
economic and military power. From the perspective of the oil-producing country, this places
extra importance on a cautious foreign policy which reduces tensions with oil-consuming
states while at the same time investing in achieving greater military capabilities (a form of
internal balancing) or forming international military alliances (external balancing) or put use
funds for soft balancing strategies. Because financial means are indispensable when trying to
implement foreign policy, and rents from natural resources can be a big source of
government income, I think it pays to study more closely the alleged relation between
resource rents and foreign policy
1.4 Methodological considerations The starting point of the thesis was the failure of neorealist theory to explain the absence of
balancing behavior by secondary states against the current world power, the US. According
to neorealists, this balancing behavior is almost law-like and prevents states from becoming
too powerful. This is necessary, because ultimately a too powerful state will threaten the
sovereignty and existence of secondary states. Yet instead of outright balancing behavior we
have been witnessing soft balancing strategies: the use of non-military strategies to hamper
US foreign policy that is perceived as threatening to secondary states. There seems to be a
consensus (Pape, 2005) (Paul, 2005) that these strategies were caused by a more aggressive
US policy and have little to do with the characteristics of the secondary state itself. Only
Andrew Hurrell (2006) thinks that beliefs about what role a certain state should play in the
international system can be an important factor for the type of foreign policy.
However, there is something missing in these analyses: in order to realize a certain foreign
policy, a state needs capabilities to do so. These capabilities stem from different resources
and these resources are frequently overlooked when analyzing inter-state relations. Singling
out natural resources seems justified for analysis as they 1) generate rents that can be used
31
to enhance capabilities of a state and 2) there seems to be some evidence that natural
resources structure relations with other nations.
When talking about the relevance of natural resource for a state (and not just foreign policy)
I made a distinction between states with a diversified economy and rentier states. In the
former natural resource rents are just a part of the states income and domestic taxation and
revenues are the most important source of income for the government, while in rentier
states the government is highly dependent on external rents generated by natural resources.
Whilst discussing the relevancy of natural resources in generating both rents and structuring
international relations, I remarked that oil seems to have certain characteristics (its high
rentability, and its tendency to structure foreign relations in a symmetric way). Therefore I
have chosen to focus on a very specific kind of rentier state: the petro state. Studying the
relevancy of oil for foreign policy of the petro state has been done to some extent before
(especially the earlier mentioned oil weapon), but usually from the perspective of the oil-
consuming nation and not the oil-producing state. Studying the role of oil in foreign policy of
petro states can be a small step into answering more general questions of the soft balancing
debate (such as if foreign policy is largely determined by systemic features or characteristics
of specific states) but at the same time can shed new light on questions of the relevancy of
the type of resources for the generation of capabilities – which are essential to a state’s
position in the international system. This resulted in the following preliminary research
question:
To what extent and how does access to significant oil rents generate incentives for soft
balancing behavior?
1.4.1 Methods of research
As I stated before it is very hard to determine the existence of a causal link between the
access to significant oil rents and the use of soft balancing strategies in foreign policy. Since
the specific subject covered in this thesis is relatively unknown territory, both the research
design and the thesis itself will have a largely explorative character. However, for the
purpose of theory testing it is necessary to formulate some sound hypotheses that will help
us answer the research question. First, we need to know whether petro states actually soft
balance. If significant oil rents enable or give incentives to soft balancing behavior, petro
32
states should be involved in soft balancing efforts. The second hypothesis has to do with the
volatility of oil rents: if the capability to soft balance depends heavily on the level of oil rents,
petro states should demonstrate more soft balancing behavior when oil prices are high, than
when prices are low. As the main source of generating the capabilities of the state, oil is
traded on a very volatile market, so the amount of petrodollars available for soft balancing
efforts varies greatly.
It would be tempting to simply quantify soft balancing behavior and oil rents and try to
determine whether those two hypotheses hold in the real world. Quantitative research with
statistical analysis will just show correlation of the variables, but tell us next to nothing about
the alleged processes at work. While these processes are the main reason for designing this
research. This is not to say there is no merit in using quantitative data at all: it has been
exactly the extensive quantitative research on natural resource dependence that has
identified possible relations between oil rents and certain policy behavior.
However, gathering and analyzing this data is not the sole goal of this thesis. The data is a
mere instrument in trying to identify the aforementioned causal link. An in-depth case study
of the foreign policy of a petro state may help us out here. It allows me to dive deeper into
questions of foreign policy decision making, soft balancing initiatives, and the characteristics
of the petro state.
Both hypotheses can be tested by analyzing the characteristics of the petro state and the
foreign policy of an oil dependent country. What do official policy documents and
statements tell us about the role a government sees for its nation in the international
system? How does it think its policy can be implemented? And what role does oil (if any)
play in these plans? At the same time we should look beyond words. What is the foreign-
policy track record of said state? How does traditional balancing and soft balancing relate to
each other in the foreign ‘policy mix’ of state and (how) do they change over time as oil rents
go up and down? This is the somewhat more qualitative part of the research. But to see how
both variables connect, the theories about the petro state need to guide us in the research.
Having added the hypotheses, the research question has become more specific:
33
To what extent and how does access to significant oil rents generate incentives for soft
balancing behavior by the Venezuelan petro state?
1.5 Case Selection: Venezuela The majority of literature on soft balancing is framed within the (realist logic) of the anarchic
state system, which currently is unipolar. As rules of the balance of power change according
to the number of major powers within the international system, to ensure comparable
results it is necessary to study foreign policy initiatives since 1991 (collapse of the Soviet
Union) onwards. It goes without saying that a case study should at least involve a country
that has access to significant oil rents if one wants to study the alleged effects of oil rents on
foreign policy.
The Bolivarian Republic of Venezuela is a textbook example of a country which has access to
significant oil rents. According to the latest figures on the share of oil in the Venezuelan
economy, in 2008: oil accounted for 90% of all export income (about 30 billion USD), 50% of
fiscal revenue and 23% of GDP (Banco Mercantil, 2009). Furthermore, Venezuela has seen
many changes taking place over the past 20 years: high and low oil prices, socialist and
market-oriented regimes, high and low economic growth. Therefore it seems the ideal
candidate to control for different variables when trying to measure the alleged impact of
significant oil-rents in soft balancing strategies of foreign policy. Another reason why
Venezuela is an excellent candidate for this case study, is that Venezuela has been an active
player (with differing roles over time) in world politics (Corrales). It is co-founder of the
OPEC-cartel, was a close ally of the US for many years, and now strives for the construction
of a multipolar world order (Ministerio del Poder Popular para La Comunicación y la
Información, 2007, p. 46). The current government furthermore sees the interests of the
United States as a threat to political stability, peace and human rights in Latin America
(Buxton, 2009, pp. 61-72).
1.6 Use of sources In order to answer the research question, a case study is constructed by means of a wide
range of different sources from different academic disciplines (Political Science, Economy,
History), government documents, interviews with policy makers and reports by international
34
(governmental) organizations. The vast and rich literature on Venezuelan politics and its
petro economy provides very detailed and useful information, yet it poses challenges too:
First, there are very different narratives of the past twenty years in Venezuelan history. Even
the academic debate is so polarized to the extent that there exists disagreement about
certain factual events and statistics. The controversy of the person of Hugo Chávez also
contributes to this situation. Whenever there is great disparity in the narrative of the case
study, this will be explicitly mentioned. Second, a significant amount of the authors of the
aforementioned works are (or have been) stakeholders. For instance Bernard Mommer, a
well respected academic expert on economics and oil, has worked for as vice-president for
PDVSA and vice-minister of the Ministry of Mines and Energy during Chávez’ regimes, but
also supported Caldera’s presidential candidature in 1994. Another example is Gregory
Wilpert, who is married to a high-ranking PSUV member which is currently Consul of
Venezuela in New York. Another source that should be interpreted with care is US
SOUTHCOM (which is responsible for all military activities in Latin America and thus acts in
US interests). Nevertheless, all these various viewpoints shed a bright light on the existing
literature and help highlight the different dimensions (which are frequently obscured or
omitted from other academic analyses) of the Venezuelan economy, politics and
international relations.
Another problem is the lack of reliable statistics and consistent time series of relevant data.
Even though some institutions like the World Bank or United Nations provide vast amounts
of information, often the data they use is provided by national governments. Unfortunately
the Venezuelan bureaucracy has a cumbersome reputation when it comes to providing data,
especially since Hugo Chávez assumed power.
35
2 | The Venezuelan Petro State
This chapter provides an extensive description of Venezuela’s development into a petro
state. Although the thesis is focused on oil and foreign policy since the 1990s, it is important
to have a general idea of how Venezuelan history has shaped contemporary developments.
Therefore this chapter starts with a brief overview of Venezuelan history which sets out the
context in which political and economic institutions were built and oil-policies have been
developed.
2.1 From Colonial Outpost to Independent Nation (1498 – 1900) Like many other Latin American nations, Venezuela was ‘discovered’ at the turn of the 16th
century. The Spanish conquerors showed little interest in the territory that nowadays
comprises Venezuela as there were no precious metals to be found. After the conquest of
the territory, exploitation of natural resources started at a modest scale (Lombardi, 1982,
pp. 59-66). By the beginning of the 18th century Venezuela as a colony had achieved some
prosperity thanks to the growing cacao trade with Mexico and Spain. Trade turned the city
of Caracas into the country’s most modern, dynamic economic and political center
(Lombardi, 1982, pp. 83-85). The economic development gave rise to a local elite and
bourgeoisie with interests increasingly diverging from those of the Spanish Crown. This
proved to be a fertile ground for the growing independence movement in the early 19th
century. This movement, led by Simón Bolívar, would – after a long, arduous battle that
lasted more than 12 years - achieve Venezuelan independence (Lombardi, 1982, pp. 115-
156). With the common enemy gone, battles ensued on how to shape the country, along a
centralist/federalist cleavage. The federalist faction won in the Civil War (1858-1863) and
the country would be led by local strongmen until 1935. In this era two figures stand out.
First, Antonio Guzman Blanco, whose regimes left a heritage of a technically competent
bureaucracy to administer Venezuela’s import-export economy and large national revenues
from foreign contracts and loans (Lombardi, 1982, p. 197). Second, Juan Vicente Gómez
(1908-1935). Modernization of the army allowed him to check the power of the Caracas
bureaucracy which he needed to administer Venezuela’s economic and political affairs while
it could also be used to intimidate, imprison and kill political opposition. Yet his rule
36
provided political stability and a framework for economic growth (Lombardi, 1982, pp. 206-
208).
2.2 The birth of the Petro State (1901 – 1942)
Between 1920 and 1960 Venezuela transformed from an isolated, rural society dependent
on agricultural exports to an industrializing, urban, extractive society with close ties to
North-Atlantic politics and economics (Lombardi, 1982, p. 211). The transformation of
Venezuela into a petro state started in the early 20th century. The order and political stability
that dictator Juan Vicente Gómez achieved, enabled the petroleum industry to develop
(Lombardi, 1982, pp. 205-206). Although minor concessions had been granted during the
second half of the 19th century, president Cipriano Castro enacted the first Mining Law that
would develop into the legal ground for oil concessions (PDVSA, 2005).10 Lacking funds and
knowledge to develop an oil industry, governments were dependent on foreign companies
to develop the industry. Therefore a system of concessions was applied: foreign companies
could exploit the oil reserves under certain conditions (usually including a lease fee) but
could not own the oil riches themselves (Randall, 1987, pp. 19-20). It would not take long for
the first commercial oil concessions to be awarded, and international oil companies such as
Royal Dutch Shell and Standard Oil soon became the most important producers of oil in
Venezuela. These companies – and the oil industry in general - demanded a basic
infrastructure in telecommunications, roads and ports to export the oil. Also, they
demanded more sophisticated, technical and government services (Lombardi, 1982, p. 244).
This proved to be the kick-start for the modernization of Venezuela. Between 1920 and 1935
(the end of Vicente Gómez’ reign), oil exports as share of total exports rose from 1.9% to
91.2% (Tugwell, 1975). It had become the world’s second largest oil producer (290,000
barrels per day), and most important oil exporter (PDVSA, 2005).
Although Venezuela’s administrative capacity as a state was very weak when the first
concessions were awarded, Venezuelan oil politics advanced through a series of reforms:
after World War I, the state saw to enhance its income from petro-related activities and to
10
Under Hispanic law, all mineral deposits belonged to the Crown. After gaining independence, ownership was transferred to the newly established governments and these rights formed part of the inalienable patrimony of the nation.
37
renegotiate its concessions, which resulted in the 1920 Hydrocarbons Law. The law was
characterized by higher tax and royalty rates. Yet, the foreign oil companies exerted great
influence over the Venezuelan state apparatus and managed to get the Minister responsible
for the 1920 law to be removed from office and the tax and royalty rates were reduced again
(PDVSA, 2005). By 1935 the oil industry had grown so rapidly that Venezuela’s per capita
GDP had grown from one of the region’s lowest to the region’s highest (Crow, 1980, pp. 616-
617).
2.3 The Developmental Petro State (1943 – 1988) The petroleum reform of 1943 marked both change and continuity in Venezuelan oil policy:
the new Hydrocarbons Law was the first law to especially cover all the oil concessions in the
country. These concessions were updated according to new terms, in which the principle of
rents and royalties were maintained but higher tariffs would be applied.11 Even though the
concession system as such was maintained, the new terms would give the government a
bigger slice of the petro cake. One of the most important instruments in achieving this
objective was a new income tax, applicable to all the concessions. The level of the tax rate
on profits had become the sole prerogative of the Venezuelan government (Mommer, 1996,
p. 133). Another important aspect of the 1943 Hydrocarbons Law was that foreign oil
companies could not make greater profits than the amount paid to the Venezuelan state in
taxes and royalties (Wilpert, 2003).
The 1943 Hydrocarbons Law greatly improved the power position of the Venezuelan
government vis-à-vis the foreign oil companies. Nevertheless, national policymakers were
less than satisfied with the results of the legislation as they believed that foreign oil
companies and major consumer companies kept oil prices artificially low. This way they
would lower their profits and minimize their fiscal contributions to the Venezuelan state.
Applying this logic, increasing the fiscal share of the government in the oil economy would
yield meager results. Therefore a new strategy was adopted by the government, aimed at
controlling supply and prices as means to better secure state income from the oil sector
(Mommer, 1996, p. 133). Whether or not these assumptions were true is still open to
11
Royalty payments which averaged 9% in the era preceding the 1943 Hydrocarbons Law, would be set at a minimum of 16.66% under the new concessions (PDVSA, 2005).
38
discussion. What is not open to discussion however, is the effect of the development of the
petro-industry on the Venezuelan economy: Venezuela’s GDP grew by more than 10% per
year during the 1940s (Faria, 2008, pp. 520-521).
2.3.1 Experiments with democracy and PuntoFijismo
It was within this context of high economic growth that a short-lived experiment with
democracy took place: In October 1945 Acción Democrática (AD) and a group of young
military officers staged a coup d’état to reform Venezuela’s political system. Presidential
elections were held by the new junta and AD icon Rómulo Gallegos was elected president.
What followed was a radical transformation of the political economy of Venezuela: land
reform benefitted poor peasants and organized labor movements were legalized. Oil
reforms were quite modest: no new requests for concessions would be granted (Tugwell,
1975, p. 45). AD strategists saw these measures as natural steps towards a modern social-
democratic Venezuela. However, according to Lombardi, the radical agenda and the solistic
approach to reform by AD distanced the party from the more moderate political parties
COPEI and URD, the military and the Catholic Church. In 1948 the military took over
government again, and a 9-year dictatorship by Márcos Pérez Jiménez would follow (1982,
pp. 223-225).
From the 1950s onwards world oil prices declined because of overproduction, mainly caused
by growing production in the Middle East (Wilpert, 2003). Under Jiménez the moratorium on
new oil concessions was lifted whilst the regime profited from the oil income generated by
earlier enacted laws. The Venezuelan economy boomed: real per capita output grew by 5.4%
per year during 1950-1957, resulting in an astonishing 87% increase in real per capita output
in the same time span (Faria, 2008, pp. 520-521). A significant amount of oil income was
invested in infrastructure works – mainly in the Greater Caracas region. The creation of state
enterprises in the steel, petrochemical, hydroelectric and telecommunications sector. In
spite of economic successes, ruthless repression by the regime helped galvanize the political
opposition to form a broad front (the Junta Patriótica) against the dictator, consisting of PCV
(the communist party), the outlawed AD, COPEI and URD. In January 1958 Pérez Jiménez was
finally ousted by a military coup, backed by the Junta Patriótica (Ellner, 2008, pp. 48-49).
39
For the return to democracy to be sustainable, key actors in Venezuela realized that an
equilibrium needed to be found to balance the interests of different sectors. Although AD
was by far the most popular party and in theory could rule Venezuela without support from
the other parties, its alleged radicalism was not acceptable for the more conservative
sectors. Therefore a political pact was signed between AD, COPEI and URD in which the
parties promised to form coalition governments irrespective of the winner of the elections
effectively making it a power-sharing pact. This inter-party agreement came to be known as
the Punto Fijo Pact. Sharing power would also mean shared access to the oil wealth which
accrued to the government. The rules established in the pact would dominate Venezuelan
political life until the 1990s. Concerning government policies, a minimum program was
concluded. The program called for an economic policy that would allow for state
intervention within a capitalist framework, respecting the spheres of influence of the Church
and the Army and including them in debates about the role of these institutions within
Venezuelan society, and negotiations concerning economic policy with organized labor and
business organization FEDECAMERAS (Ellner, 2008, pp. 58-59). Now, as much as this pact
generated political stability hitherto unknown in Venezuela, it also effectively depoliticized
politics and excluded more radical (leftwing) segments of society, of which some would take
up an armed struggle during the 1960s.
Concerning oil policy, several legal steps were taken to work towards more state
involvement in the oil sector. In 1960 the first Venezuelan state oil company was founded,
the Corporación Venezolana de Petróleo (CVP) (Mommer, 1996, p. 133). The goal of CVP was
to (ultimately) perform all the tasks that the foreign oil companies had hitherto performed,
clearing the way for direct participation in the oil industry. This is a clear hint towards a
future nationalization of the oil sector (Novoa Monreal, 1979, p. 28). This was by all means a
challenging task, given the fact that by the 1970s about 20 predominantly British, North-
American and Dutch companies had monopolized the technology, production, processing,
transport and commercialization of oil products (Novoa Monreal, 1979, p. 22). The 1971
Reversion Act made sure that all terrains and goods belonging to the concessionaries made
under the 1943 Hydrocarbons Law (which would expire in 1983) would be transferred to the
state upon non-renewal (Novoa Monreal, 1979, p. 22). The nationalization of the gas
industry by law in 1971 ensured state control over production and pricing of natural gas. In
40
1973 a law was passed that reserved the exploitation of hydrocarbon products for the
domestic market to the state. Policy makers however were well aware that – to able to
receive better prices for exported petroleum, world market prices needed to rise. The
foundation of the Organization Of Petroleum Exporting Countries (OPEC) in 1960 (in effect
an oil cartel) was a foreign policy tool to introduce production quotas and to secure ‘just’ oil
prices for the oil exporting countries.12
2.3.2 Nationalization, boom and bust
The biggest push towards the realization of the petro state took place under the government
of Carlos Andres Pérez. In 1975 (Mommer, 1996, p. 133) the Ley Orgánica que Reserva al
estado la Industria y el Comercio de los Hidrocarburos effectively nationalized the oil
industry. The concessionaries received rather generous compensations for the expropriation
given the fact that their concessions would expire in 1983. This however, did not mean that
the role for foreign companies was played out. The law reserved the possibility of joint-
ventures in oil exploration (as long as the state had a majority share) and special
commercialization and technical assistance contracts were signed with the previous
concessionaries (Ellner, 2008, p. 74). The new state entity that would assure that the oil
industry would be ran in an orderly, modern and efficient manner was Petróleos de
Venezuela, Sociedad Anónima (PDVSA), replacing CVP. PDVSA inherited an internal
management culture that was above all technocratic and corporate, like the management of
the previously owned private companies. Not only was managerial autonomy an important
demand of the foreign company managers (who were going to work in PDVSA), but it was
also a wish of the government to secure efficient management. This resulted in a special
relation between PDVSA and the government: PDVSA and affiliates would run the oil
industry as efficient as possible and would pay due taxes. The government in turn, would
collect the taxes and spend them according to political preferences, like before the
nationalization (Philip, 1999, p. 366).
Under the Carlos Andres Pérez regime, these political preferences advocated bigger state
involvement in the economy to sow the petroleum. More than any other president before
him, Pérez saw the oil industry as key to the development of Venezuela into a modern
12
See Chapter 4 for an in depth analysis of OPEC as a foreign policy tool of the Venezuelan state.
41
country. The sharp rise of oil prices that coincided with his presidency enabled him to invest
in social programs, full employment and the steel, aluminum and electricity sectors (Ellner,
2008, pp. 71-72). As a consequence, since 1958 per capita GDP had risen gradually from
5400 USD to 6500 USD at the end of Pérez’ term, which represents a 20% rise in real terms.
Graphic 1 illustrates the development of Venezuelan GDP per capita from 1959 to 1998.
Source: World Bank Catalog (2010)
However, the oil boom also resulted in relaxed financial policies. Even though fiscal revenues
tripled under Pérez, the government borrowed heavily to finance the government
enterprises (Faria, 2008, p. 523). Several developments in the 1980s led to the unraveling of
the carefully constructed Punto Fijo pact: 1) Oil rents declined dramatically: crude oil prices
had skyrocketed in the late 1970s, but halved during the 1980s. As oil export were the
government’s primary source of income, less and less petrodollars were available. 2) From
Pérez’ government onwards, Venezuela had heavily indebted itself. This was not a problem
when oil prices were high and interest rates were low, but with plummeting oil prices and
the debt crisis, this became a serious problem: Venezuela’s external debt skyrocketed from
less than 10% of GNI in 1975 to 81% of GNI in 1989 (World Bank, 2010). So a significant part
of the already diminished state income had to be used for debt-servicing. Of the remaining
available funds the majority was grossly misspent due to erratic economic policies by the
governments of Luis Herrera Campins (1979-1984) and Jaime Lusinchi (1984-1989), further
aggravating the economic crisis. These developments had a detrimental effect on
$ 0
$ 1.000
$ 2.000
$ 3.000
$ 4.000
$ 5.000
$ 6.000
$ 7.000
Chart 1. Venezuelan GDP Per Capita
Venezuelan GDP Per Capita
42
government spending on social services, which greatly disillusioned the Venezuelan
population which was already heavily hit by the economic recession. But also within the
pact, the declining amount of money available to distribute according to the clientelist
distribution scheme angered the sectors that were cut out. As the spoils of the pact were
distributed under an ever smaller part of society, and widespread disillusion with the
political system was met by rising authoritarianism, tensions grew to unpreceded levels
(Buxton, 2009, p. 59).
2.4 The Oil Opening and Neoliberal reforms (1989 – 1999) The Punto Fijo Pact functioned relatively well in preserving political stability during the 1960s
and 1970s when many Latin American states fell prey to ruthless dictatorships. It led many
authors, such as Lombardi to believe that Venezuela was a model democracy, achieving
political stability, economic growth at little cost. A growing number of academics (Buxton,
2009) (Ellner, 2008) (Karl, The Paradox of Plenty: Oil booms and petro-states, 1997) have
questioned this romanticized notion of Venezuelan democracy and see the aforementioned
developments in the 1980s as witness to the malfunctioning of the system. In the 1990s, two
presidents were entrusted by the Venezuelan people to reform the Venezuelan economy,
the political system and the oil industry: Carlos Andres Pérez (1989 – 1993) and Rafael
Caldera (1994 – 1999). As both had been presidents before and in the past had vehemently
supported the Punto-Fijo regime, it is remarkable that they were to lead the reform process.
What is even more interesting is that although both had campaigned on an anti-neoliberal
platform, once in office, they embraced neoliberalism (Ellner, 2008, pp. 89-90).
2.4.1 Pérez: The Shock Doctrine
Just weeks after assuming office, Andres Pérez presented his neoliberal economic plans for
his presidency. Pérez apparently had signed a letter of intent with the IMF, promising
neoliberal reforms in return for a multi-billion dollar loan to restructure the Venezuelan
economy. The proposal, along the lines of the ‘Washington Consensus’, meant a departure
from the Import Substitution Industrialization model (funded by oil rents) which had been
Venezuela’s lead development strategy since the 1940s. Instead of investing in the national
industry, key state companies were privatized. Instead of protecting local producers, import
tariffs were slashed and the country was opened to foreign investment. Also, price controls
43
on many basic commodities were reduced and/or lifted, exposing the population to rapid
decreases in purchasing power (Ellner, 2008, pp. 91-92). Although these economic reforms
were unprecedented in Venezuelan history, the reforms were far less drastic than in other
neoliberal champions in Latin America, such as Argentina, Chile or Peru (CGD Task Force,
2009, p. 44).
Yet the economic reform plans triggered widespread popular protest. There are several
reasons for these protests which seem to align closely with Javier Corrales’ (2003, pp. 82-85)
approach on resistance to market reforms: first, there was a credibility gap: the state had
underperformed and not delivered during the 1980s, making it difficult for the population to
believe the promises of the government. Especially Pérez’ credibility was at stake as he
made a 180 degree turn on economic policies within weeks in office. Second, the
asymmetrical distributive consequences of the reforms: the lifting of price controls, state
subsidies, labor market flexibilization and rapid price increases hit the poorest sectors of
society most. This was unacceptable to most Venezuelans as they now had to pay for
mismanagement by the elite who were left relatively untouched by the reforms. Third,
although it is generally believed that political and economic crises raises tolerance for
reforms under the population, in Venezuela this was obviously not the case: as subsidies on
petrol were lifted, petro prices increased over 100% resulting in huge increases in
transportation costs. Infuriated by the neoliberal policies the protests devolved into riots
and looting all over the country. The government’s response was heavy handed and during
the looting some 270 up to 2000 are believed to have been killed (Ellner, 2008, p. 94).
However, protest to Pérez´ policies were not limited to the people in the streets: the leaders
of his very own party (AD) had supported another candidate from the 1987 primaries
onwards. After winning the presidential elections, Pérez appointed mainly technocrats
instead of important AD members. He had also failed to inform the party of the letter of
intent of the IMF. This greatly angered a large part of the orthodox faction of the party,
which were not at all fond of Pérez’ neoliberal turn. During the 1991 internal elections for
party leadership, the orthodox social democratic faction gained all but complete control over
the party. As the party leadership determined the voting behavior of the AD faction in
parliament, Pérez reform plans were under heavy attack from his own party which resulted
44
in the abandoning of several reform projects (Ellner, 1996, pp. 94-95). Unwilling to moderate
his reform projects, Pérez had alienated AD from his government.
A third key actor in resistance to Pérez’ reform project was the military. In 1992, two failed
coup attempts took place: in February military officers linked to Lieutenant Colonel Hugo
Chávez clandestine MBR-200 movement took key points in several major cities – but vainly
waited for popular and air-support. Later that year, in November, Navy and Air Force officers
rose up and could count upon substantial – yet not sufficient popular support. However, the
coup attempts did catalyze support for a more legitimate way to remove Pérez from office.
An investigation into corruption charges of the Pérez government took shape, and the
President stepped down in May 1993 (Ellner, 2008, pp. 95-97).
It is tempting to think of the protests against neoliberal policies as being purely based on an
ideational perspective. This might well be the case, but it is nevertheless useful to look at
Pérez’ economic track record: although the Venezuelan economy GDP shrank 8.6% in 1989,
overall growth during Pérez’ term was 2.8%, outperforming the 1980-1988 period were
growth was 0,8%. Poverty had slightly augmented from 1989–1993 rising from 9,2 to
10.9%.13 Income inequality had diminished somewhat, reflected in a GINI-index of 44.1 in
1989 to 41.7 in 1993. Unemployment rose to 10,3% in 1990 but fell to 6.7% in 1993. Inflation
reached a staggering 84% in 1989, then falling back to 30-40% in 1991-1993. Yet average
inflation from 1980 – 1988 had been 16.2%. State tax-revenues as percentage of GDP fell
from 18.1% in 1990 to 13.4% in 1993. Tax levels on income, profits and capital gains fell
from 86% in 1989 to 68% in 1993. With hindsight Pérez’ economic reforms do not seem to
have delivered what was promised, but with the exception of inflation, the Venezuelan
economy performed better during his presidency than during the ‘lost’ decade of the 1980s.
In contrast to the neoliberal economic reform program, Pérez oil policy was less ambitious.
Calls for changes in the industry came mostly from PDVSA management. During the 1980s,
PDVSA had experienced rising production costs, lower oil prices, OPEC quotas and
governments unwilling to ease PDVSA taxation. To cope with these problems, PDVSA had
plans to increase production (2,8 million b/d to 3,5 million b/d in 1996), refinery and
petrochemicals. Although the government initially accepted these plans, two anti-PDVSA
13
Measured as percentage of the population living off of less than 2 USD per day.
45
positions within the government resisted: first, old style politicians who did not have a
problem who did not want to alter the status quo and second, Pérez market-oriented
reforming ministers aiming at opening the oil market to private investment and future
privatization of PDVSA instead of committing public funds of the already heavily indebted
state for PDVSA projects. PDVSA in turn thought that allowing for too much foreign
investment would weaken PDVSA’s position in the oil industry and vis-à-vis the government.
Effectively, during the Pérez’ years in office little changed in the oil industry because both
reforming forces (PDVSA management and Pérez’ technocrats) could not come to terms to
form an alliance against those satisfied with the status quo. A remarkable exception to the
lack of new policy was the progress made on opening up the oil sector for foreign
investment. Arguing that PDVSA did not have the funds nor the technological skills to
develop heavy crude oil fields, Congress approved of foreign investment in joint venture
projects which where to exploit these fields (Philip, 1999, pp. 367-369). This legislation
would prove to be the backdoor entrance for further privatization during Caldera’s second
term in office.
2.4.2 Caldera: gradual reforms and PDVSA privatization
The winner of the 1994 presidential elections, Rafael Caldera, had opposed Pérez’ neoliberal
policies and campaigned on a centre-left platform. During the first 18 months of his term he
pursued an economic policy that promoted state intervention in the economy. However, the
results of this policy were disappointing (for example, real wages declined fast), and he was
confronted with the collapse of the privatized banking sector. 1996 saw the introduction of
the Agenda Venezuela, a package of neoliberal reforms, granting access to IMF loans. The
state’s telephone and steel companies were privatized, demands on foreign capital were
relaxed and the 1997 reform of the Labor Law opened the door to privatization of the health
and retirement branches of the social security system (Ellner, 2008, pp. 99-102).
Caldera’s oil policy however, had been more neoliberal oriented from the start, also allowing
for strategic associations with PDVSA minority shares. National Congress was only able to
stiffen the terms, but could not prevent the privatization process nor start a public debate
on the issue (Ellner, 2008, pp. 102-103). PDVSA’s new plans consisted of increasing
production while allowing for foreign investment in the sector, thus bridging the gap that
had existed during the previous administration. The government backed these plans by
46
approving various oil production contracts involving foreign capital, also for non-heavy oil. It
did mean defying the OPEC-production quota, but PDVSA returned the favor by publicly
backing all government decisions, creating a strong political alliance with key power groups
in the government and society. The opening had mixed results: on the one hand, the
increased sales income by PDVSA facilitated investments by the company and resulted in
increased tax revenues which reduced the effect of the collapse of the Venezuelan banking
system and boosted the local economy somewhat (Philip, 1999, pp. 370-372). On the other
hand, the legislation and decision-making procedures had been rather dubious, negatively
affecting the legitimacy of the privatization process. Furthermore, some of the joint ventures
were highly unprofitable for PDVSA under low oil prices while guaranteeing profits for their
foreign counterparts (Buxton, 2009, pp. 61-62). Finally, creative accounting by PDVSA meant
that although the company contributions in tax revenues were significant in absolute terms,
PDVSA contributed less and less in relative terms.14
2.5 The Chavista Petro State (1998 – present day) During the 1998 presidential elections, Hugo Chávez Frías campaigned under the umbrella of
the polo patriótico, a multiparty anti-establishment and anti-neoliberal platform consisting
of various left-of-centre parties. Having been involved in the February 1992 coup, he had
gained a lot of support under part of the population that was fed up with the Punto-Fijo
regime. He campaigned for an overhaul of the political system to make it more democratic
and transparent. A second key issue of the campaign was the reversal of neoliberal policies
of the 1990s. A third issue was the corruption of the establishment, who had enriched
themselves over the past 30 years while the vast majority of the Venezuelan population
were living in poverty. Chávez provided an attractive alternative to the – by that time heavily
discredited – political class of the ancién régime. The 1998 presidential elections resulted in
a landslide victory for Hugo Chávez, gaining 56% of the votes, versus 40% for Henrique Salas
Römer, the main candidate of the traditional parties (CNE, 1998).
The first years of the Chávez regime were geared towards the restructuring of the
Venezuelan political institutions and the relation between the state, society, and its natural
14
From 1976 to 1989, PDVSA’s tax contributions and operating costs had a 80/20 proportion. From 1990 to 1996 this had changed into 67/33, mounting to 20/80 in 2000: a complete reversal the 1989 situation (PDVSA, 2006).
47
resources. One of the first acts of Chávez was to decree a consultative referendum to
establish a National Constituent Assembly (ANC) to rewrite the Constitution. The members
of the ANC were elected by the people of Venezuela (but the ANC-elections were boycotted
by the opposition), and Chavistas obtained 125 out of the 133 seats (Ellner, 2008, p. 111).15
In December 1999 the new Constitution was ratified by a popular referendum.16 Regarding
the content of the Bolivarian Constitution, it combined centralization of power in the
executive with some remarkably democratic characteristics.17 Furthermore it explicitly
stated that activities in the oil industry are reserved for the state (Article 302) and that all
PDVSA stocks should be in hands of the state (Article 303). The articles effectively rendered
privatization of PDVSA impossible and clearly defined the role of the state in the oil sector.
Because of the new Constitution, all democratically elected positions within the states
representative institutions had to be legitimized again. The Megaelections held in the year
2000 were to serve this purpose: Venezuelans could once again choose their own
representation; local councils, mayor’s, governors, national deputies and President. Chávez
was reelected by a comfortable majority, his party MVR won 91 seats in the National
Assembly and opposition parties Proyecto Venezuela, AD and COPEI combined obtained 45
out of 165 in the National Assembly (CNE, 2000).18
2.5.1 Reversing neoliberalism
The comfortable majority in the National Assembly paved the way for further reforms: the
assembly passed the Ley Habilitante (Enabling Law), which gave the executive power the
possibility to rule by decree on certain policy terrains during one year.19 Exactly one year
later, Chávez issued 49 decrees, the majority of them reversing the neoliberal socio-
economic policies of the 1990s, and thus jeopardizing the interests of those privileged under
15
A Chavista is a person that identifies him/herself with the Bolivarian Revolution and its leader Hugo Chávez. 16
71.8% voted in favor of the new constitution. 55.6% of the electorate did not participate (CNE, 1999) 17
Most important changes were: 1) The expansion of the presidential term from five to six years (including the possibility of a onetime immediate reelection). 2) Complete presidential control over promotions within the Armed Forces. 3) Disbandment of the Senate. 4) Presidential discretion in activating a referendum without authorization by the legislature. 5) No more public financing for political parties. 6) The possibility of recalling the mandate of mayors, governors and the president under certain conditions (Monaldi & Penfold, 2006). 18
Hugo Chávez Frías won the presidential election with 59.8% of the vote, runner-up Francisco Arias Cárdenas obtained 37,5% of the vote and abstention reached 43.7% (CNE, 2000). 19
The ‘enabling law’ authorized the president to rule by decree (but with the judicial status of law) in some – in the law itself agreed upon – subject matters such as finance, social and economic reforms, infrastructure and the functioning of the state (Gaceta Oficial N. 370076, 2000)
48
the Punto Fijo regime (Ellner, 2008, pp. 112-113). The two most controversial laws were the
Ley de Tierras (Law of the Lands), which concerned expropriation and redistribution of idle
lands, and the Ley Orgánica de Hidrocarburos (Organic Hydrocarbons Law), reforming the oil
industry. The new Hydrocarbons Law stipulated that all primary oil activities are either
reserved by the state, or by a joint venture with a minimum of 51% state ownership (Gaceta
Oficial N. 37323, 2001). From the perspective of the Venezuelan government, these oil
reforms were badly needed: oil production had fallen steeply since 1998, oil exports were
down as well, and oil prices (although climbing slowly) were relatively low as well (Santos,
2009). The oil income was badly needed for Chávez socio-economic plans for a more equal
and just society. Therefore privatizing PDVSA was not a policy option.
However, the new hydrocarbon legislation was not welcomed by PDVSA management, oil-
expert politicians and certain other sectors of society, because of their pro-privatization
stance. What angered many Venezuelans that did not have a direct stake in the reforms, was
the way in which these new laws were passed: without much public debate and by decree.
This put anti-government forces (and especially the PDVSA management) head to head with
the government and led to the firing of several managers of PDVSA by Chávez (Ellner, 2008,
p. 114).
The sectors opposed to the new legislation were poorly represented within parliament and
took their protests to the streets. Political polarization led to massive street protests and
(violent) clashes between Chavistas and anti-Chavistas. On April 11th 2002, after months of
protests, strikes and rising political tension a military coup removed Chávez from office.
Chairman of FEDECAMARAS, Pedro Carmona, presided the de facto government.20 21
However, the provisional government was weak from the start as it suffered from internal
dissent. Only the most reactionary forces within the political opposition were well
represented within the new government. Its first measures were to temporarily abolish
democratic institutions, to reverse the 49 decrees and to reinstate the 1961 Constitution.
The more moderate forces (such as the labor union CTV) by that time had already decided
20
This thesis does not permit sufficient space to extensively clarify all the motives, actors and consequences of the coup, so its description is limited to the most essential aspects of coup and its implications for Chávez policy. However, it still is not clear what the actual motives of the key actors were as investigation into the matter by Venezuelan authorities, private media outlets and academics is heavily biased. 21
FEDECÁMARAS represents the Venezuelan business community.
49
not to support the new government. As public discontent with the new regime grew, the
provisional government became more and more isolated: a civic-military alliance brought
Chávez back in power just 48 hours after removal (Ellner, 2008, pp. 114-115). The coup also
had an international dimension: the Bush administration had supported the coup in various
ways: it had financially supported various opposition organizations, met various opposition
leaders without discouraging them from taking power by force, justified the coup by blaming
Chávez for the political tension and rallied support for the Carmona regime directly after
taking office (Ellner, 2008, pp. 198-199).
After the coup, in order to appease the opposition and to depolarize the political climate,
Chávez called for a time of reflection and consensus. One of the most symbolic gestures of
the government was re-hiring the previously fired PDVSA managers and the appointment of
OPEC secretary-general (and political moderate) Alí Rodríguez Araque as head of PDVSA.
However, this did not prevent the company’s management from continuing their political
agenda. In December 2002 PDVSA management, FEDECÁMARAS, CTV and the political
opposition parties called for a national strike. The idea was simple: a lock-out of the national
economy would foster widespread discontent with the government which would lead to the
ousting of Chávez (Ellner, 2008, pp. 118-119). The results of the strike were mixed and an
analogy can be drawn from the situation in PDVSA. Where senior- and middle management
favored the strike, most petro-unions did not support the strike. Nevertheless, oil production
came to a virtual standstill because of the lock-out. In the rest of the economy a similar
pattern was visible: the economic elite and a majority of white collar workers supported the
strike, whereas blue collar workers and those working in the informal economy needed and
wanted to work, but could not because business owners would temporarily shut down their
businesses. Yet, for the national economy the outcome was disastrous: plummeting oil
production catalyzed a deep economic recession (GDP fell by 7.8% in 2003) and resulted in
mounting tensions between the government and PDVSA (Buxton, 2009, p. 67). Although the
economic lock-out heavily weakened the Venezuelan economy, the preceding years the
economy’s performance had been weak as well: economic growth had been mainly
negative, GDP per capita had not grown since 1998 and had shrunk by 2003 and inflation
was hovering around 15-25% per year (Santos, 2009).
50
The coup and the subsequent strikes had made Chávez realize that he could not count upon
sufficient support from the business community, labor unions, the infrastructure of the state
bureaucracy and other political parties to realize his project. Starting in 2003, Chávez started
to invest in parallel government programs, Missions, designed to bypass the bureaucracy
and power of the existing government structures, lower dependence on private actors and
deliver much needed goods (food) and services (health care and education) to the country’s
poorest sectors (Panizza, 2009, p. 206). However, for the missions to really make an impact,
funds were needed – and PDVSA was to provide them. As the post-coup appeasement
politics of the government had not yielded the desired results, the government fired an
estimated 18,000 PDVSA employees (predominantly higher- and middle management staff)
for supporting the strike and jeopardizing national interests (Economides, Martínez, & Puky,
2007). This gave the government the opportunity to restructure PDVSA’s organization and
redefine its relation with the company. The most important changes have been that 1)
management and workers are now predominantly Chavista.22 2) PDVSA lost virtually all of its
autonomy as it is now once again under control of The Ministry of Energy and Petroleum and
3) PDVSA has expanded its role into non-petroleum business; the majority of the
aforementioned missions is directly funded by the company and/or is partly executed by
PDVSA itself.23 Some argue that this central role that PDVSA plays in financing the missions is
detrimental to the investments in the oil sector raising the possibility of lower oil production
levels in the future (Buxton, 2009, p. 73). According to PVDSA from 2004-2006, it contributed
to the state over 80 billion USD, of which 29% was directly destined for social programs,
among which the missions. In the three preceding years it had in total contributed 31.5
billion of which a mere 0.4% was destined for social programs. Graph2 illustrates the
changes in PDVSA contributions to the state under the Chávez government.
22
In November 2006, president of PDVSA and Minister of Energy and Petroleum Rafael Ramírez declared that all PDVSA workers and managers should be committed to the Bolivarian revolutionary project and that the company should be roja-rojita (the colors of the Bolivarian movement) (Panizza, 2009, pp. 209-210) 23
A prime example of such a non-core business initiative is Producción y Distribución Venezolana de Alimentos (PDVAL), which provides subsidized food articles.
51
Source: PODES (2006)
After losing the Megaelections in 2000, the disastrous coup in 2002, and the failed economic
lock-out in 2002 and 2003, the opposition tried yet another strategy to remove Chávez from
office: the recall referendum.24 For months, different polls showed a clear win for the
opposition, but in August 2004, 59% of those that went to the polls (70% of the electorate)
voted against the recall (CNE, 2004). Although there seems to be disagreement about what
caused the change in attitude towards the Chávez government, there is reason to believe
that improving social and economic indicators favored the government: poverty went down
from 62.1% (2nd semester 2003) to 53.9% (2nd semester 2004), extreme poverty went down
from 29.8% (2nd semester 2003) to 22.5% (2nd semester 2004), unemployment shrunk from
19% (January 2004) to 13.9% (2nd semester 2004) and of those employed a growing number
participated in the formal economy. Also, the Chávez government had improved its UN
Human Development Indicator score from 0.8- (2000) to 0.82 (2005) (Institutio Nacional de
Estadística, 2010). Whether these indicators merely reflect the rebound of the economy
after the oil strike or are the first tangible results of the missions: the indicators all favored
the government. Another reason why Chávez might have won the recall vote, is the lack of a
clear socio-economic policy alternative of the opposition: the main goal had been to oust
Chávez and not to present policy alternatives. While that might have been enough for anti-
Chavistas to support the recall, it probably did not convince the swing vote and helped
Chávez win the referendum by a comfortable margin (Ellner, 2008, p. 120).
24
Article 72 of the Constitution stipulates that every elected official can be subjugated to a referendum and is subject to removal when a majority of voters think the powers of the elected official should be revoked.
$ 0
$ 10
$ 20
$ 30
$ 40
$ 50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bill
ion
US
Do
llars
Chart 2. PDVSA (Social) Contributions
PDVSA Contributions to the State
PDVSA Contributions for Social Development
52
2.5.2 Petro-boom and deepening the process
2005 marked the start of the latest petro-boom in Venezuelan history. Although prices had
gradually climbed since Chávez assumed office (the price of one barrel of Venezuelan crude
– 10,57 USD - was at a 17 year low at the time), reaching 40 USD in 2005, oil prices exploded
in the following years, topping 129 USD in July of 2008. Although production would decline
in 2005, 2006 and 2007, this was compensated by the additional income for the Venezuelan
state due to higher oil prices and a bigger share in profits of the PDVSA joint ventures. This is
also reflected in public and private consumption.
Table1 / Year Private Cons. growth Public Cons. growth Total Cons. growth
2005 – 2006 18.32% 6.8% 15.78%
2006 – 2007 196% 5.29% 16.69%
2007 - 2008 1.69% 6.03% 2.48%
Source: Banco Central de Venezuela
As Table 1 clearly demonstrates, private consumption grew much faster than public
consumption and came to a virtual standstill in 2008 (with oil prices falling in the second
semester), while government spending kept growing irrespective of the falling oil prices.
The additional income worked in favor of Chávez in two ways: he could increase social
spending and expand the missions, while high oil prices also facilitated the payment imports
which grew at an annual rate of 44% from 2003 – 2007 (Santos, 2009)
Source: PODE (2006) and OPEC Annual Bulletin (2010)
$ 0
$ 10
$ 20
$ 30
$ 40
$ 50
$ 60
$ 70
$ 80
$ 90
$ 100
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Chart 3. Ven. Oil Price (Spot Market)
Price Venezuelan Basket
53
Concerning the oil industry, in 2005 the government published the Plan Siembra Petrolera
2005-2030 (Sowing the Oil Plan, a policy document containing the governments strategic
vision on the quintessential sector for Venezuela’s development strategy. The first phase
(2005 – 2012) consists of 56 billion USD investments in upgrading and expanding refinery
capacity in Venezuela, opening 27 blocks for oil exploitation, investing in off-shore gas
exploitation, investments in (industry) infrastructure, international cooperation to assure
Latin America’s energy security and integration through PETROCARIBE and PETROSUR and
studying the reserves of the Orinoco Belt (Ministerio del Poder Popular para la Comunicación
y la Información, 2006). In the same year the Hydrocarbons Law was reformed (Gaceta
Oficial N. 38443, 2006) raising royalty tariffs for the heavy crude projects in the Orinoco belt,
which had previously been shielded from some of the tax-norms established in the 2001
Hydrocarbons Law. Also foreign interests were forced to accept the Venezuelan state’s 60%
ownership of mixed companies (founded in the 1990s) and employees were transferred to
PDVSA’s payroll (Ellner, 2008, p. 127). In 2008, when oil prices peaked a windfall oil tax was
levied.25 However, when oil prices fell, the tax was quickly lifted again. The latest move of
the Chávez government has been the nationalization of service companies and their assets in
the primary sector and the transfer of personnel to PDVSA (Gaceta Oficial N. 39173, 2009).
Chart 4 illustrates Venezuela’s crude oil production level and export earnings under Chávez.
Several elections were held during the boom years. In December 2006, Chávez was elected
once again as president of Venezuela (CNE, 2006) winning by the highest percentage of vote
in democratic Venezuela (62.9%). With the Missions in full effect, skyrocketing oil prices and
windfall oil income this need not surprise us. In 2007, the government’s attempt to change
some articles in the 1999 Constitution (the most controversial one removing term limits for
the presidency) lost by a narrow margin. Yet in 2009 succeeded in passing the reforms,
extending the removal of term limits for all democratically elected positions.
25
The windfall oil tax was levied over marginal income resulting from oil prices surpassing 70 U$ and 100 U$ per barrel, applying tax rates of 50% and 60% respectively (Gaceta Oficial N. 38910, 2008).
54
Source: OPEC Annual Statistics Bulletin 2007 & 2008
2.5.3 Ten Years of Chávez
It has been 10 years since Chávez assumed office, and since then gradual but profound
changes have been made in state, society and the oil sector in particular. The institutional
changes made in the 1999 Constitution and the subsequent Hydrocarbon Laws of 2001 and
2006 have resulted in bringing PDVSA under state control again – and more specifically the
Ministry of Energy and Oil. This has transformed the role of PDVSA from a highly
autonomous state agency with its own goals and interests to a state company whose goals
and interests are aligned with those of the state. This is reflected in the characteristics of the
new PDVSA, which has become increasingly participative in the domestic economy,
functioning as an executive state agency both inside and outside the oil sector, serving the
economic and social interests of the nation. The institutional changes have also led to a
relative reduction of foreign participation in the oil sector and new contracts have been
concluded mainly with foreign state oil companies that share Venezuela’s geostrategic
interests. Furthermore, the changes have led to increased state income from Venezuela’s
natural reserves, reversing the neoliberal high production, low prices strategy of the 1990s.
Oil production however, has varied greatly under Chávez’ rule (see Figure 1: Crude Oil
Production Venezuela 1998 – 2008), thanks to multiple strikes in from 2000 – 2003,
subsequent changes in PDVSA’s organizational and operational structure (and the brain
$ 0
$ 10
$ 20
$ 30
$ 40
$ 50
$ 60
$ 70
$ 80
$ 90
2,4
2,5
2,6
2,7
2,8
2,9
3,0
3,1
3,2
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Bill
ion
s
Mill
ion
sChart 4 Ven. Petroleum Exports and Production
Value Petroleum Exports in U$
Crude Oil Production Venezuela (barrels/day)
55
drain associated with this process), and alleged underinvestment. Both the fluctuation of
production levels and the world oil market prices have influenced Venezuela’s export
earnings. However it has become clear that the rise in income which in 2004 reached 1998
levels, is mainly due to windfall oil prices in 2008.
56
3 | Venezuelan Foreign Policy
In the introductory chapter, the notion that state behavior is exclusively determined by the
international anarchic system was criticized on various grounds. Then, the Natural Resource
Curse and possible effects of oil rents on foreign policy were introduced and made
reasonable. After the provision of the Venezuelan political and economic context since 1958
(and especially the regimes during unipolarity). Now the reader should be familiar with the
characteristics of the Venezuelan petro state, we can direct our attention to the foreign
policy to see whether these initiatives correspond more to policies expected on basis of the
international system or the characteristics of the petro state, or whether intervening
variables apply. This chapter starts with an overview of Venezuelan foreign policy since
1958. This context is very useful in measuring how much policies have actually changed since
the surge of the unipolar world system (which neorealist theory predicts). We then fast-
forward to the Venezuelan governments of 1989 and the Chávez era, comparing the policies
of the different governments. Measurement of alleged changes in foreign policy will be
made through assessment of policy along the lines of various concepts used by the different
theories on state behavior. Within the neorealist school of thought, what matters is whether
states are involved in traditional balancing behavior, that is: investing in military capabilities
or the construction of military alliances. For the soft balancing school of thought what
matters is to what extent soft balancing strategies such as diplomatic entanglement,
territorial denial and social power policy projection. Key to both theories are Venezuelan –
US relations, so special attention will be given to this relation. Given Venezuela’s remarkable
characteristic of being a petro state, special attention will be paid to international oil-related
policies, as various theories in the theoretical framework hinted that the relations of the
petro state might be structured by them.
3.1 The 4th Republic and the World
Although the governments of the 4th Republic (1958–1998) usually have been portrayed by
the current regime as close allies (or even subjected to the interests) of the US, empirical
evidence suggests a more nuanced assessment. A brief historical context of Venezuelan
foreign policy antecedents is offered to better compare and understand foreign policy
57
choices by the administrations of Carlos Andrés Pérez and Rafael Caldera in the 1990s and
Hugo Chávez’ governments from 1998 onwards.
After the conclusion of the 1958 Punto Fijo Pact, which served as the basis of democratic
rule in Venezuela, the subsequent Minimum Program stated the basic values which should
underlie Venezuelan (foreign) policy, on what international platforms it should act and in
what manner it should promote national interests in the international system. First,
Venezuelan policy should be based on the values of peace and cooperation. Second,
Venezuela condemns every act against the right to self-determination of any people –
especially concerning the countries of the Americas. Third, international problems should be
solved in a peaceful manner by international institutions deemed competent for the task.
The Program therefore called on the ratification of UN and OAS membership. Fourth,
Venezuela should honor its international obligations. Fifth, Venezuela should play an active
role within the America’s, revising its relations to make sure that these are based upon
democratic principles and economic cooperation. Sixth, Venezuela should promote
commercial trade by means of bilateral agreements using petroleum and other natural
resources as trade instruments (Aveledo, 2007, p. 264).
Like many other foreign policy documents, the goals are rather vague and ambiguous.
Therefore actual foreign policy initiatives need to be studied. A short assessment already
shows that the above stated principles were not always respected to the same degree. In
line with a strict interpretation the Betancourt Doctrine Venezuela did not recognize the
Castro regime in Cuba during the 1960s (Aveledo, 2007, p. 266).26 Yet Venezuela also
condemned the 1965 US military intervention in the Dominican Republic (Kelly & Romero,
2005, p. 37). At the same time Betancourt’s government condemned Soviet interference in
the hemisphere and usually voted in line with the US in the OAS (Kelly & Romero, 2002, p.
29). In the 1970s Venezuelan governments did not automatically back US foreign policy
decisions either. The oil bonanza flooded the Venezuelan state with income, providing for a
more active foreign policy: Venezuela pursued more equality in international trade, transfer
of technology and UN reform trough the Non-Aligned Movement and the G77 (Aveledo,
26
The doctrine stated that Venezuela should not have diplomatic relations with governments which had come to power by undemocratic means, such as a coup d’états or rigged elections (Kelly & Romero, 2005, p. 137).
58
2007, pp. 270-271).27 It also restored formal relations with Cuba, defying the Betancourt
Doctrine. Concerning international oil policy, the Venezuelan government did not want to
jeopardize its special relation with the US. Facing growing competition from petro states in
the Middle East, such as Iran and Saudi-Arabia, the Venezuelan government wanted to
present itself as a stable oil supplier for the US. It had already sought preferential access to
the US market for its oil products, yet with no success. Furthermore, the nationalization
process in Venezuela had worried the US as it saw the interests of some of its petroleum
companies jeopardized. In this context it need not surprise us that Venezuela did not join the
Arab OPEC member’s production cuts during the Arab-Israeli War of 1973. Abstaining from
the use of the oil weapon worked in two ways: 1) Venezuela could take over market share at
the cost of those involved in the boycott. 2) Venezuela could prove its reputation as a stable
oil provider. The US took notice of Venezuelan protagonism and its more autonomous line, it
valued Venezuelan as a stable oil provider and a beacon of democracy and political stability
in the hemisphere (Kelly & Romero, 2002, p. 22) (Tugwell, 1975, pp. 140-141). Given the US
support of non-democratic regime in that very time span, one could well argue that the US
valued stability over democracy. Nevertheless, the Venezuelan regime provided both and
therefore was an interesting ally for the US in a continent which lacked both stability and
democracy in the 1970s.
In the previous Chapter, the dwindling oil prices and their influence on domestic state
finances has already been discussed. Yet there were also international consequences: as the
state apparatus could not adapt itself to the new reality of low oil prices and high interest
rates, Venezuela’s foreign debt skyrocketed in the early 80s and the international activism of
its government waned. The government’s posture itself changed little. Caracas continued to
share Washington’s strategic vision that Soviet and Cuban influence in the region was
unwanted. Yet the Venezuelan government was very critical of US intervention and
considered them undue meddling in internal affairs. The various armed conflicts in Central
America during the 1980s illustrates this point: while the US supported and armed the
27
The Non-Aligned Movement, born in the mid 1950s, represented those countries that did not want to get involved in the Cold War and therefore refused to align with either the US or the Soviet Union. The Movement also had a strong socio-economic agenda: one of the main objectives was to create conditions for sustainable development of the NAM-members. This, stemming from the perception that the more developed nations dominated world politics and this jeopardized the safety and socio-economic development of the non-aligned (Non-Aligned Movement, 2010).
59
Nicaraguan contras, Venezuela supported moderates and tried to mediate in the conflict
(Kelly & Romero, 2002, p. 24). During the Malvinas/Falklands War it supported Argentina’s
cause against one of the last vestiges of colonialism although Argentina was led by a
dictatorial regime. In that case Latin-American solidarity took priority over notions of
democracy. These examples serve to show that 1) the goals stated in the Minimum Program
of 1958 were not always respected and broadly interpreted. 2) Venezuela’s foreign policy
does not seem to have been a mere copy of US foreign policy.
Venezuelan foreign policy formulation during the 4th republic took place within the following
institutional context. Although, like in most countries foreign policy formulation is
concentrated in the executive and the ministry of Foreign Affairs (Hill, 2003, p. 53), in the 4th
Republic various other actors were heavily involved in policy formulation and the
distribution of their mutual power relations: 1) The Punto Fijo Pact assured domination of
parties AD and COPEI over the political system. 2) The relatively well developed internal
organization of COPEI – but especially AD – gave the parties independent authority and
power to challenge the executive, even if office was held by a party member (Levitsky, 2001,
pp. 50-51). 3) PDVSA had obtained significant autonomy from the rest of the state apparatus
and had developed its own vision on what role the company and state should play in the
international system (Trinkunas H. , 2009, pp. 17-18). 4) The ever presence of the Armed
Forces, which role is further discussed in the next section.
3.1.2 Traditional balancing behavior
Within the realist notion of international relations traditional balancing consists of investing
in the military articles and services, or concluding military alliances with other nations. In this
section, expenses and civil-military relations are studied (according to the relevance of the
institutional setup discussed earlier).
In Chapter 2, the tense relation between the military and the democratic governments of
the 80s and 90s has already been discussed. The growing discontent of especially younger
officers with the regime (because of corruption, mismanagement and neoliberal economic
policies) distanced these groups with the senior officers and the government. The military’s
heavy handed response to the 1989 riots proved to the young officers that they were serving
an illegitimate government and corrupt senior officers. These junior officers identified
60
themselves more with the people than the establishment: like the vast majority of
Venezuelan society their economic situation had increasingly deteriorated during the 1980s.
Although military spending as such had been left relatively untouched in spite of the
economic crisis, spending patterns within the military had changed: more money was spent
on the high command and arms, while less was destined for salaries and other social needs
of these junior officers (Trinkunas H. A., 2002, pp. 51-53). The Pérez government itself had
been unaware of the schisms within the military as - because of the autonomous position of
the military - the executive branch could only oversee total spending of the military
apparatus. Discontent with Pérez neoliberal policies and the inept army leadership triggered
the two 1992 coups which – ultimately – signaled the end of Pérez presidency. The coups
also triggered increasing US-Venezuelan cooperation by intensifying Venezuelan training
missions by the US military (Trinkunas H. A., 2002, p. 58).
Returning to the topic of military expenditure, Chart X.X demonstrates the level of military
spending during the second administrations of both Pérez and Caldera.28 Venezuela’s
military spending as percentage of GDP remained stable during the 1990s, with few
exceptions. Starting at 1.9% in 1991, spending declined in 1992 and peaked at 2.2% in 1993.
The 1993 spending boom needs to placed in the context of the two subsequent coups in
1992. Acknowledging the rather precarious situation of the Venezuelan democracy after the
two failed coups of 1992, Caldera radically altered military-civic relations and restored civil
supremacy over the armed forces.29 Even taking into account these ‘appeasement’ expenses,
Venezuela’s military spending during the 1990s remained modest comparing to the growing
expenses of neighboring Colombia. Like in many other Latin-American countries, Venezuela’s
spending remained at the same levels or fell modestly (see Chart 6 below).
Although military spending in absolute dollar terms fell during the Caldera administration,
internal shifts in spending appeased the military: the social needs of the officer corps which
had been ignored for a long time, were addressed by generous pay raises (Trinkunas H. A.,
28
Reliable data for 1989 and 1990 are not available and therefore are not included in the graph. 29
Caldera reestablished himself as chief of the armed forces by firing his defense minister and replacing him by a junior officer, effectively forcing out various senior generals who would rather resign than server under a junior officer. Soldiers involved in the 1992 coups (amongst others Hugo Chávez) received a presidential pardon under the condition that they would resign from the military. By expelling both the military high command and the MBR- 200, Caldera purged the officer corps of its two most politicized extremes and allowed the rest to return to their professional duties (Trinkunas H. A., 2002, p. 62).
61
2002, p. 63). This seems to indicate that spending on defense articles and services had to be
lowered to realize the pay raises.
Source: World Bank Data Catalog (2010)
Statistics on arms and services agreements and sales with Venezuela’s hitherto most
important military trading partner (the US) seems to confirm this suspicion. 1996 – 1999
figures on Venezuelan military agreements and defense articles and services from the US are
relatively modest: 101 million USD was spent on military agreements, while another 156
million USD was spent on US defense articles and services. Although this places Venezuela in
the top 5 of US’ most important clients within the America’s, the actual amounts pale in
comparison to other purchasers in the region.30 The aforementioned figures total a 257
Million USD expense, representing a mere 3.7% of total Venezuelan military expenditure.
However, the data mentioned above does not cover all military expenses. According to the
IISS, the Venezuelan armed forces have historically received funding from the Ley Paraguas
(Umbrella Law) fund up to 500 USD million per year (IISS, 2010, p. 60).31
30
Leading purchasers of US Defense agreements of the Americas (in Millions): 1) Canada 397 USD 2) Colombia 196 USD 3) Brazil 109 USD 4) Venezuela 101 USD 5) Argentina 47 USD. Leading purchasers of US defense articles and services of the Americas (in Millions): 1) Canada 451 USD 2) Colombia 242 USD 3) Brazil 204 USD 4) Venezuela 156 USD 5) Mexico 52 USD. 31
The Ley Paraguas was originally used as a savings fund for newly contracted debts or the repayment of old debts (Ministerio de Finanzas, 2005).
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
1991 1992 1993 1994 1995 1996 1997 1998
Chart 6 Mil. Expenditure as %GDP
Argentina
Brazil
Chile
Colombia
Mexico
United States
Venezuela, R.B. de
62
Based on the limited data provided in the preceding sections and the spending pattern of
the neoliberal governments of the 1990s (especially Caldera), military spending seems to
have been geared towards appeasement of the military vis-à-vis the government rather than
bolstering Venezuela’s military might. Traditional balancing efforts thus seem to have been
completely absent during the governments of both Pérez and Caldera.
3.1.3 Carlos Andres Pérez
The demise of the Soviet Union and the transformation of the international system from a
bipolar to a unipolar structure largely coincided with Carlos Andrés Pérez second term in
office. An important pillar of Pérez’ foreign policy strategy was the strengthening of the
Organization of American States. He saw the organization as key to promoting democracy,
economic growth (along neoliberal lines), security issues and resolving the US – Cuban
conflict. However, giving a new impulse to the OAS was only possible getting rid of the old
vices of the OAS: its anticommunist bias, tolerance of right-wing dictatorships and inaction
against aggressive US unilateralism (Pérez, 1990). Proof of Pérez dedication to uphold and
maintain democratic regimes in the region can be found in his efforts to guide the
Nicaraguan transformation to democracy after a bloody civil war in the 1980s and to prevent
Haiti fragile democracy from descending into chaos after the overthrow of Aristide’s
government in 1991 (Kelly & Romero, 2005, pp. 202-203). There also seems to be evidence
that Pérez actively lobbied within the OAS to create a mechanism against coup d’états, not
in the last place because he increasingly feared a coup in Venezuela during his presidency,
because of his unpopular – neoliberal - policies (Bloomfield, 1994, pp. 181-182).
3.1.3.1 OPEC
Although production increases were not stimulated by the Pérez government due to reasons
discussed in Chapter 2, Venezuela raised its production under Pérez by 28.3%. Under Pérez,
OPEC quota discipline was weak, in spite of the significantly higher assigned quota because
of the Gulf War and the associated instability of OPEC Middle East oil producers.
Table 2 Venezuela OPEC Quota Discipline under Carlos Andrés Pérez32 (in 1000 barrels /p day) Jan89 –
Jun89 Jul89 – Sep89
Oct89-Dec89
Jan90-Jul90
Aug90 Apr91-Sep91
Feb92-Sep92
Jan93-Feb93
Mar93-Sep93
Quota 1636 1724 1812 1945 1945 2235 2147 2360 2257
32
There were country-specific production allocation agreements from September 1990 – March 1991, October 1991 – January 1992 and October 1992 – December 1992.
63
Production 1910 1910 1910 2140 2140 2380 2370 2450 2450
Overproduction 16.7% 10.8% 5.4% 10% 10% 6.5% 10.4% 3.8% 8.6%
Source: Energy Information Agency, OPEC and own calculations
3.1.3.2 Credit lines by International Financial Institutions
In the previous chapter the domestic consequences of Pérez’ deal with the IMF have been
briefly mentioned. In this very paragraph the international ramifications of the deal are
scrutinized. The 1989 IMF was part of the so called ‘Brady Plan’ which was intended to
restructure the economies of states that had large foreign debts to service. The Extended
Fund Facility of the IMF offered approximately 3.9 Billion USD (of which 2.3 billion was
actually used by the Pérez government) (IMF, 2010).33 The funds were conditional upon
neoliberal restructuring of the Venezuelan economy. The Pérez government tied itself to the
US-dominated IFI and reduced its sovereignty in economic policy making. It also legitimized
the position of the fund and the neoliberal Washington Agenda. The government’s was even
more orthodox than the fund in repaying its IMF debt: the 4,5 year grace period was not
used and repayments started as soon as 1991 (Ibid.).
3.1.4 Rafael Caldera (feb ’94 – feb’99)
Like his predecessor, Rafael Caldera had campaigned on a anti-neoliberal platform,
consisting of various left of centre political parties like the Movimiento Al Socialsmo (MAS –
Movement towards Socialism) promising the Venezuelan electorate a return to the golden
days of the 4th Republic. Statist intervention in the economy and a nationalist approach
where the cornerstones of Caldera’s campaign. However, also Caldera would eventually turn
to neoliberalist policies.
3.1.4.1 Caldera’s oil policies
Caldera’s new oil policy, consisting of opening up the oil sector for private companies and
raising production levels had important ramifications for Venezuela’s behavior within OPEC.
As the organization had been assigning production quota per country since 1982 by means
of production quota agreements, Venezuela was bound by these rules. Table XX.XX clearly
shows that in spite of being granted higher production levels, the Venezuelan government
preferred the realization of higher production levels over abiding the OPEC treaties and
33
The Extended Fund Facility is a facility of the IMF to assist member countries in overcoming balance of payments problems that stem largely from structural problems and require a longer period of adjustment than is possible under a Stand-By Arrangement. Countries must repay EFF resources over a period of four and a half to 10 years (IMF, 2003).
64
became a notorious quota buster. The voluntary production cuts were agreed to during the
March 1998 Extraordinary Meeting of the OPEC Conference and were due to earlier market
misreading, when OPEC raised total production quota by 10% while the Asian economic
crisis raged. While demand dwindled, production had been raised, causing the price of crude
oil to fall by 40% (Kohl, 2002, p. 211). It is safe to say that for the Caldera administration,
OPEC had little relevance.
Table 3 Venezuela OPEC Quota Discipline under the Caldera administration (in 1000 barrels /p day) Mar93 –
Jun93 Jul93 – Sep93
Oct93 – Jun96
Jul96 – Dec97
Jan98 – Mar98
Apr98 – Jun98
Jul98 – Mar99
Quota 2257 2257 2359 2359 2583 [-200] 2845
Production 2450 2450 2699 3166 3170 [3170] 3057
Overproduction 8.6% 8.6% 14.4% 34,2% 22,7% 7.5%
Source: Energy Information Agency, OPEC and own calculations
3.1.4.2 International Financial Institutions and the Caldera government
Caldera had highly criticized Pérez’ government’s policy of effectively handing monetary and
economic policy to international financial institutions such as the IMF and the World Bank.
Yet as Venezuela faced the collapse of the national banking system, the Caldera government
changed its rhetoric and switched to the same neoliberal discourse of its predecessor. In
1996 Caldera solicited IMF financial assistance. A Standby Agreement was reached and the
IMF disbursed 350 million USD (IMF, 2010).34 The IMF provided the funds under the
conditions that state-owned companies would be privatized and the public sector would be
reformed. Nevertheless, the Caldera government hardly implemented the reforms. To a
certain extent Caldera faced the same problems as Pérez: the position of his government vis-
á-vis the opposition was weak, and even within the government Caldera had many
opponents. In civil society neoliberal reforms were highly unpopular too. In other words,
Caldera’s government was too weak to realize most of the reforms (Lupia & McCubbins,
1998, pp. 37-38).35 Somewhat ironically one could conclude that the only part of the Standby
Agreement that was actually honored by the Caldera administration were the imposed
repayment conditions.
34
Stand-By Arrangements enable IMF member states to use IMF financing up to a specified amount to overcome short-term or cyclical balance of payments difficulties typically cover a period of one to two years (although they can extend up to three years). Repayments are to be made over a period of three and a quarter to 5 years (IMF, 2003). 35
Chapter 2 provides a more detailed overview of the reform efforts of the second Caldera administration.
65
3.1.4.3 Towards a Free Trade regime
Perhaps the most significant hemispheric economic foreign policy initiative by the US during
the 1990s was the desire to create a free trade area that would extent over the entire
Americas. In 1994 the US had already concluded such an agreement with Canada and
Mexico, the North American Free Trade Area (NAFTA). As most Latin American countries
were ruled by governments that were convinced of pro-market arguments, the US seized the
opportunity to extend the agreements southwards and to construct a Free Trade Area of the
Americas (FTAA). In the ambitious 1994 Declaration of Principles the 34 countries, among
which Venezuela committed themselves:
to [..] to construct the "Free Trade Area of the Americas" (FTAA), in which barriers to trade and investment will
be progressively eliminated. We […] conclude the negotiation of the "Free Trade Area of the Americas" no later
than 2005, and agree that concrete progress […] will be made by the end of this century (1st Summit of the
Americas, 1994).
This is not to say that there were no reservations amongst government in Latin America:
many feared that the US would reap most of the benefits of the agreement, because of its
privileged economic position, while benefits for Latin-American countries would be more
uncertain and varied per country. The vast majority of nations in the region therefore chose
to negotiate in blocks. Venezuela joined forces with the other members of the Andean
Community to have a stronger position in negotiating the terms for the FTAA vis-à-vis the
United States. Yet by 1998 it had become clear that only modest progress had been made in
negotiations. Nevertheless, during the second Summit of the Americas in Chile, Venezuela
and the other nations nevertheless reiterated their support for the realization of the FTAA by
2005 (Kelly & Romero, 2002, pp. 115-116).
This is not to say that Venezuela did not clash with the US during Caldera’s regime,
concerning the conditions on free trade. In 1993 Venezuela summoned the US because of a
breach of the GATT Article 3 by discriminatory treatment of Venezuelan gasoline exports to
the US. In 1994 the US summoned the Venezuelan government because of alleged dumping
of steel tubes (Aveledo, 2007, p. 279). These incidents hint that although the Venezuelan
government agreed with the free trade doctrine (actively promoted by the US), they did try
to constrain the US by effectively using the rules of the game against its major player, even
though Venezuela itself did not always respect the rules of the game either.
66
3.1.4.4 Drug trafficking and environmental issues: clashes with the US.
It must be clear by now that various economic issues have both divided and united foreign
policy goals of Venezuela and the US. However, narcotrafficking obtained an increasingly
important place on the US foreign policy agenda. Although Venezuela has never been a
major drug producing country (unlike its neighbor Colombia), the country is considered a
major narcotics transit country since the mid-90s by the US Government (USGAO, 2009, p.
5). As far back as 1978 a Memorandum of Understanding was signed between the US and
Venezuela to fight trafficking. But by the mid 90s the problems had gotten out of control, at
least from a US-perspective. The US increasingly started to monitor and certify anti-narcotics
policy in the region and Washington considered Caracas’ efforts half-hearted. This greatly
worried US Government which sought closer cooperation with Caracas. Although a modest
Memorandum of Understanding was concluded in September 1994 on the matter, the
Caldera government felt little for allowing US radar stations to be placed on Venezuelan
territory or far reaching cooperation with the US Drug Enforcement Agency because of
sovereignty issues (DEA) (Kelly & Romero, 2002, p. 105).
Another dimension of international relations which has slowly but surely emerged on the
international agenda was the environment. Especially carbon-dioxide emissions have proven
to be an important topic. In 1997 the Kyoto Protocol was signed in order to lower the
emission of greenhouse gasses, and the Caldera government supported the initiative, in
spite of the fact that Venezuela belongs to the top-5 greenhouse emitters in Latin America
and has a share of about 0.5% of worldwide emissions. However, it would be during Chávez’
second term that the Bolivarian government actually ratified the Kyoto protocol (Gaceta
Oficial N. 38081, 2004).
3.2 Bolivarian foreign policy
As the preceding sections show, since its rise as a petro state Venezuela became an ever
active player in Latin America. However, through both style and content, Chávez has
managed to put Venezuela in the limelight of world politics. Concerning style, the
flamboyant discourse of the president and his frequent clashes with world leaders such as
George W. Bush and Spanish King Juan Carlos attracted a lot of media attention. Concerning
content, what the Bolivarian government is trying to achieve in terms of foreign policy is
67
radically different from its predecessors. Furthermore the lead role Venezuela plays in the
surge of the New Left in Latin America has few precedents.36
The Venezuelan government is very clear about its foreign policy objectives, which are
explicitly mentioned in the policy document General Lines of the Plan for the Economic and
Social Development of the Nation.37 In the document the Bolivarian government explicitly
states it seeks to accomplish is the construction of a new multipolar world order, to replace
the current unipolar order which is dominated by the United States as the hegemon. This
goal is to be achieved by the creation of various counter-hegemonic power blocks (Gobierno
Bolivariano de Venezuela, 2007, pp. 42,45-46). The principles on which these blocks are
founded are social justice, solidarity, and sovereignty of the people. These terms are to be
interpreted as anti-imperialist, anti-neoliberal and anti-globalization. In terms of defense, its
goals are to protect the Bolivarian revolution in Venezuela and to minimize the influence of
domestic and foreign actors that disagree with the ideals and the manner in which the
revolution is carried out (Trinkunas H. , 2009, p. 19). Venezuela’s foreign policy documents
go beyond mere statements on goals, it also addresses the issue on how to realize the
aforementioned goals. They also address how to realize the aforementioned goals.
Concerning Venezuela-US relations, Venezuela seeks to better relations at the grassroots
level (such as social movements) rather than fomenting bilateral diplomatic relations.
Improving information about Venezuela through alternative media is another instrument.
Venezuela even promises help for and solidarity with the excluded sectors of US society
(Gobierno Bolivariano de Venezuela, 2007, p. 49).
Venezuela’s agenda for Latin America and the Caribbean is both straightforward and
challenging: the most important goals are the political, economic and cultural integration of
Latin America and the Caribbean through international organizations such as MERCOSUR
and UNASUR. Another important goal is improving relations with Cuba and Bolivia to
36
The ‘New (Latin-American) Left’ is an umbrella term used to describe the various left of center governments that have governed various nations in Latin-America, usually characterized by the following features: 1) Plurality of strategies and articulation of decentralized forms of organization. 2) Multiplicity of social bases and political agendas. 3) Prominence of Civil Society. 4) Reformism 5) Deepening democracy (Barrett, Chávez, & Rodríguez-Garavito, 2008, pp. 12-17). 37
The most important ones being the Líneas Generales del Plan de Desarollo Económico y Social de la Nación 2001 – 2006 & 2007 – 2013.
68
develop the ALBA as a viable economic integration alternative to the neoliberal FTAA.
Diminishing the relative importance of the US for Central America is key to the integration
efforts (2007, p. 48).
Regarding international oil policy, Venezuela prioritizes creating tighter relations with OPEC
member states and other petroleum-exporting countries (such as Russia). Increasing
commercial trade of technological and scientific knowledge, services and goods with
countries in the Middle-East is another important goal (2007, p. 49). Relations with countries
such as Iran, Syria and China the government’s goals concentrate in creating a political anti-
imperialist alliance against the US. Coordinating a common position within international
organizations is a key instrument in this strategy (2007, pp. 48-49).
Although policy document analysis is an important instrument to determine a country’s
foreign policy (goals), what really interests us here is actual state behavior. The virtue of
including actual state behavior is that it can be contrasted with theory to assess hypotheses
concerning state behavior in the international system. Another virtue is that including actual
state behavior and comparing it to discourse, makes it easier to distinguish between mere
diplomatic courtesy and actual goals of states. Earlier in this Chapter we have already been
witness to the rather ambiguous foreign policy of various governments of the 4th Republic,
when contrasted to its original foreign policy guidelines as presented in the Minimum
Program. The same approach will be used in the next few sections, in which Venezuelan the
aforementioned guidelines of foreign policy are contrasted with the behavior of the
subsequent Bolivarian governments, headed by Hugo Chávez, in the international system.
3.2.1 Signs of hard balancing?
According to the Stockholm International Peace Research Institute (2009), worldwide
military expenditure has risen some 45% in real terms since 1999. In the same time span,
military consumption by the Chávez government, has remained relatively stable.
Government military expenses have been hovering between 1.2% and 1.7% of GDP. Except
for the 2003-2007 interval, a slight negative trend is identifiable resulting in a mere 1% of
GDP expenditure in 2008 (World Bank, 2010). The table below clearly shows that Venezuelan
military spending as percentage of GDP is modest compared to other big countries in the
region such as Brazil, Colombia and Mexico. Venezuela under Chávez has stayed well below
69
the regional average of 1,7% and the US (4%) (World Bank, 2010).
Bron enzo.
Because of the volatility of Venezuela’s GDP (caused by dependence on oil rents), the
aforementioned data tells us too little about real military expenditure. After carefully
examining statistics provided by the World Bank, a downward trend is identifiable from 1999
(about 2 billion USD) to 2003 (about 1.2 billion USD). Between 2003 and 2006 Venezuela’s
military budget almost doubled to 2.4 billion USD. After that, military spending plummeted
and hit 1,8 billion USD. While worldwide military expenditure rose some 45% in real terms
between 1999 and 2008, Venezuelan expenditure rose a mere 8.5%. Venezuelan military
consumption therefore does adhere to the overall trend, except for the 2003 – 2006
interval. Some reservations need to be made concerning the official data. Various analysts
(Nueva Mayoria, 2008) suggest that additional military spending has taken place in recent
years through extra budgetary funds as the FONDEN (National Development Fund), up to
over 3 billion USD in total (IISS, 2010, p. 60). This form of extra budgetary spending seems
similar to the aforementioned Paraguas fund of the 4th Republic. Other analysts claim that
there is little reason to believe significant amounts of money are unaccounted for (Sánchez,
2009).
What has changed under Chávez however, are Venezuela’s main providers of military
training and defense equipment. Traditionally, Venezuelan military officers had the
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%
Argentina
Brazil
Chile
Colombia
Mexico
United States
Venezuela, R.B. de
70
possibility to get an education in the US or Europe. In 2004, Chávez ordered to cease training
of Venezuelan soldiers at the ‘School of the Americas’. Some of the key military figures in the
2002 coup were graduates of the School (Catholic New Times, 2004).38 Since 2005, Cuban
military personnel is increasingly involved in training Venezuelan soldiers and participates in
Venezuelan defense, intelligence and communication systems (James, 2010). Besides
military training cooperation, arms purchases have shifted from the US to countries such as
Russia, China, Cuba, Iran and Spain (Trinkunas H. , 2009, p. 15) (IISS, 2010, p. 61). This is
partly the result of the 2006 US embargo on the sale of defense materials to Venezuela,
because it deemed Venezuelan anti-narcotics and terrorism efforts half-hearted (National
Archives and Records Administration, 2006).
Source: World Bank Data Catalog (2010)
3.2.2 Spreading the oil wealth: petro dollar diplomacy
The vast majority of Venezuela’s oil exports are traded on the world oil market and traded
against market prices. In this framework, the export of oil functions as the prime source of
income for the state. However, over the past few years Venezuela has greatly expanded the
number of oil barrels traded under preferential conditions and against discounted prices. A
38
The School of the America’s (now renamed to Western Hemisphere Institute for Security Cooperation) is a training school for Latin-American soldiers. It has the rather dubious reputation of training some of the region’s most notorious dictators and human rights abusers. Several training manuals used by the institute advocate the use of torture, illegal executions and the use of coercion against civilians (Livingstone, 2009, pp. 40-42).
$ -
$ 0,5
$ 1,0
$ 1,5
$ 2,0
$ 2,5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Bill
ion
s
Reeks1
71
key example of such an initiative is PETROCARIBE.39 About 198,000 barrels of oil are traded
daily within the framework of the program (Ellner, 2008, p. 203), which represents about a
quarter of all the Venezuelan oil exports to Latin-American countries. The PETROCARIBE
member states buy Venezuelan oil against generous terms: 1) the Venezuelan government
offers credit lines for the acquisition of the oil (the higher the oil price, the larger the share
to be financed) and annual interest-rates as low as 1%.40 2), there is a two-year grace period
on repaying the loans. 3) the agreement allows for the repayment of the debt in services or
goods against preferential tariffs (PETROCARIBE, 2005). For the predominantly poor
countries of the Caribbean, the Venezuelan oil is attractive for several reasons: since the
Caribbean countries themselves do not possess big oil reserves nor refining capacity, their
economies are very dependent on oil imports. Since price on the oil market fluctuate heavily,
their economies are vulnerable to high oil prices. The generous financing possibilities
mediate oil shocks for these countries. The option to repay debt over many years and in
goods and services relieves the stress on the scarce foreign currency reserves of these
countries.
The institutional structure of the PETROCARIBE can be classified as highly intergovernmental
and underdeveloped: as Venezuela is the sole provider of the commodity distributed
through the organization it is by far the most important player within the organization.41 It is
therefore very unlikely that the member state would vote against Venezuela within the
organization as this would probably threaten the very existence of the organization (and
thus the cheap access to oil of the member states).
Since the foundation of PETROCARIBE, several political decisions were made regarding
(aspiring) members of PETROCARIBE. In 2005 Haiti was not invited to the summit where the
original framework agreement was signed because Venezuela did not recognize the Haitian
government as president Jean-Bertrand Aristide was removed from office by the US and
39
Similar agreements have also been concluded with countries in the South of Latin-America such as Argentina and Uruguay, creating the PETROSUR. 40
Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Nicaragua, Suriname, St Lucia, St Kitts and Nevis, Guatemala, and Saint Vincent and the Grenadines 41
The statutes of the organization identify two organs within the organization. The Ministerial Council (comprised by all the Ministers of Energy of the participating countries), which is the highest advisory organ and decides by unanimous vote. The executive branch of the organization is the Secretariat and is ascribed to the Venezuelan Ministry of Energy and Oil (PETROCARIBE, 2005)
72
France (Ishmael, 2005). Haiti was able to join the PETROCARIBE only after the restoration of
democracy. Also in July 2009 the Venezuelan government halted PETROCARIBE oil supplies
to Honduras (20,000 b/d). The Honduran president Manuel Zelaya had been ousted by a
military coup because he allegedly had breached the country’s constitution. Caracas did not
acknowledge the legitimacy of the new de facto government, which it labeled a dictatorship
(EFE, 2009). As Zelaya had brought Honduras into PETROCARIBE and ALBA, he had become a
close ally of Venezuela. The new de facto regime on the other hand was distinctively pro-US
and anti-Chávez. Venezuela therefore used PETROCARIBE as a pressure tool for the de facto
government to step down and reinstate Zelaya as the legitimate ruler of the country.
However, Caracas’ attempts failed as new elections were held and a new right-wing
president was sworn in. Over more, several countries have reinstated (or promised to
restore) diplomatic ties with Honduras, among which the US (Associated Press, 2010).
One might ask why Venezuela so generously hands out one of the world’s most valuable
commodities when the country itself is still classified only as an upper-middle income
country by the World Bank. And in spite of this status, its lopsided income distribution has
left the overwhelming majority of society without access the country’s own oil wealth.
Given the abundance of oil in Venezuela, it is anything but scarce (domestically) and thus
less risky to donate than more scarcer good and services. In literature regarding Chávez’
foreign oil policy two sets of views dominate: the first perspective lauds Venezuela’s
commitment to economic, social and humanitarian development of other states in the
region creating political goodwill. Also, these cooperation agreements could provide the
base for further political and economic integration of Latin America. Such development
would greatly enhance the power of Latin American countries vis-à-vis the US and would
contribute to the realization of a multipolar world order, effectively reducing US control over
the region (Ellner, 2008, p. 203). In such a framework oil is a means to an end, and the costs
can be justified. A more cynical approach to agreements of PETROCARIBE views the social,
economic and humanitarian ideals as a simple smokescreen to divert from the real goal of
Chávez policy: gain influence in the region by buying support of local allies in international
organizations such as the OAS by means of practically ‘giving away’ oil (Ishmael, 2005)
(Corrales).
73
However, these international handouts are not limited to crude oil. Media outlets have
repeatedly reported on Venezuelan investments or developmental aid in countries as
diverse as Argentina and the US. For example, in the US, the Venezuelan state owned CITGO
oil company provided tens of thousands of low-income families in New York with low-cost
heating oil (King, 2010). In Argentina, the Venezuelan Socio-economic Development Bank
(BANDES) provided a 135 million USD loan to dairy cooperative Sancor (Quixote Center,
2007). Javier Corrales has extensively studied this kind of Venezuelan foreign policy. Two
characteristics stand out in this context: 1) Venezuela’s investments are predominantly
carried out by the state, and 2) the investment projects include large sums for development
projects (Corrales, 2009, p. 99). The numbers are impressive: bolstered by oil windfall profits
since 2007 Venezuela has surpassed the US in direct funding for the region, pledging some
8.8 billion USD in the fiscal year 2005. The majority of the funds tend to benefit left-leaning
governments which are sympathetic to Venezuela’s main foreign policy goal: diminishing US
influence over the region. For example, Venezuela helped Argentina pay off its IMF debt by
buying 5.1 billion USD in Argentine bonds, sponsored 20 million USD worth on eye-clinics in
Bolivia and promised 772 USD million on developmental aid for Nicaragua, the Dominican
Republic and Haiti (Obiko Pearson & James, 2007). A third – but very important – feature is
the almost non-existent conditionality of the funds. The high discretional nature of the funds
makes the funds hard to track down, and the governments receiving them prone to
corruption, which endangers the (supposedly laudable) goals of the funds (Corrales, 2009, p.
107)
Venezuelan funds are not limited to aid funds. There is reason to believe that Chávez’
government has provided (im)material support for political allies in Latin America. The most
striking example thus far has been Valijagate. In September 2007 a Venezuelan was
apprehended while trying to smuggle 800.000 USD (out of 4.000.000 USD) into Argentina in
the wake of presidential elections. According to the suspect, the money was destined for the
campaign of Cristina Fernández (wife of close ally and former Argentine president Nestor
Kirchner).42 Previously, Chávez had publicly stated his support for particular candidates in
42
Both the Venezuelan and Argentine government deny any involvement in the matter. However, the suspect traveled from Venezuela to Argentina in an airplane rented by both governments and accompanied by PDVSA officials. Furthermore, the suspect was later seen during the ceremony of an oil deal signing between Chávez and the Argentine government in the presidential palace (Alconada Mon, 2008).
74
Peru and Bolivia (Ollanta Humala and Evo Morales respectively), and some argue even
financial support – although strong evidence is missing to back up these claims. In both cases
however, the public support of Chávez was perceived as meddling with domestic affairs and
actually benefitted other presidential candidates (Corrales, 2009, p. 109). Yet, this conclusion
needs to be nuanced as both Morales and Fernández won their respective elections with
comfortable majorities.
3.2.3 UNASUR: Defending Latin-American sovereignty
The Chávez government sees political cooperation and integration of the South-American
nations as an important step towards the construction of a multipolar world order. Inspired
by the legacy of Venezuela’s liberator Simón Bolivar (who envisioned Latin-America as one
continent inhabited by a brotherhood of people, and strived to make it a single political
unit), Venezuela has been one of the protagonists in the construction of UNASUR (Unión de
Naciones Suramericanas). Although UNASUR was recently founded, it was used as a
decision-making platform during two recent political crises in South-America.
Rising tensions political and civil tensions in Bolivia in 2008 provided the first challenge for
UNASUR. Bolivia’s political unity had come under threat due to a growing divide between
the political center of power (La Paz) and concentration of economic prosperity in Santa Cruz
province. The divide roughly coincides with an ethnic cleavage (predominantly indigenous in
the Highlands and La Paz versus predominantly mestizo and white in the Eastern Lowlands)
and the geographical distribution of natural gas reserves (which are concentrated in the
Eastern Lowlands) (Segura & Bellamy, 2009, p. 1). 43 In an attempt to address the grave racial
and socioeconomic inequality in Bolivian society, the socialist-oriented government of Evo
Morales, sought to redistribute (natural gas) wealth, which is concentrated in the Eastern
Lowlands and reassert the power of the federal government. The political opposition on the
other hand, wanted to secure regional autonomy in order to maintain access to the natural
gas rents. Since 2005 the writing of a new constitution and the organization of referenda had
been characterized by disrespect for rules and procedures by both camps, further
aggravating the political tension. When violent protests erupted and the US government
held an ambiguous attitude towards the protesters, the Bolivian government accused that
43
The term ‘mestizo’ refers to a mix of European and autochthonous ethnicity.
75
the American Embassy in La Paz had played a key role in fomenting separatist sentiments
and thus was conspiring against Bolivian unity and democracy. Morales’ party MAS even
went as far as claiming that the US Ambassador, Mr. Goldberg had been involved in secret
meetings with “right-wing political and business leaders and was also responsible for a
media-war against the Morales government to incite the violent takeover of government
institutions to force Morales out of office” (Friedman-Rudovsky, 2008).44 In solidarity with
Evo Morales, Chávez also expelled the US ambassador from Venezuela and recalled his
ambassador in Venezuela.
During the crisis, various international organizations, such as the UN, the OAS and UNASUR,
had expressed their concern and willingness to mediate in the conflict between the
government and the opposition. Morales however rejected mediation by the UN (as
relations had lukewarm ever since Morales’ assumed office). Because of US involvement in
the autonomist movement, the US-dominated OAS too could not function as a neutral
platform for mediation.45 This proved to be an excellent opportunity for the UNASUR to
function as an alternative platform for mediation without US intervention. The platform was
also attractive because it provided Venezuela and Brazil the opportunity to consolidate
themselves as regional powers (Segura & Bellamy, 2009, p. 3), while for other nations like
Argentina a quick resolution was of utmost importance because gas-exports from Bolivia had
halted since the outbreak of the conflict. All South-American leaders followed suit and called
for an extraordinary of meeting of UNASUR to resolve the political crisis (Philips, 2008).
The members of UNASUR unanimously decided to back Evo Morales’ government and issued
the Declaración de la Moneda (UNASUR, 2008). The document stated that the UNASUR-
members will not recognize any Bolivian authority but Morales’ government, condemn the
actions of “destabilizing groups which jeopardize Bolivian democracy” and call for the
preservation of the unity of Bolivia. It was a clear message to the political opposition in
Bolivia, but even clearer to the US: foreign meddling in domestic affairs by the US is not
44
After extensive research, Eva Golinger and Jim Bigwood indeed conclude that US government and US semi-governmental bureaus such as USAID, had been spending more than 97 U$ million on decentralization and regional autonomy projects, training for opposition politicians and have been the principal funders of the political opposition to Evo Morales’ government (Golinger, 2009, pp. 1-6) 45
The US has historically used its weight as the hegemonic power to shape the policy and actions of the OAS – even if these were contrary to the interests of the member nations as stated in its Charter. US endorsement of the invasion of the Dominican Republic in 1965 was a clear breach of the promotion of territorial integrity and sovereignty of the member state. The expulsion of Cuba from the OAS in 1962 is another example.
76
tolerated by the Bolivian government nor the other UNASUR member states. When political
stability in the region is at risk, these events will be discussed among South-American
nations and not on platforms which are dominated by the US, such as the OAS. Or to put it in
the words of Bolivian President Evo Morales: “Now we don’t have to go to the United States
for solving conflicts in Latin America, because political leaders who before meddled are
extinct” (Segura & Bellamy, 2009, p. 3).
Another important issue within UNASUR is US military presence in the Andean and
Caribbean region. Their presence sits uneasy with the majority of the governments in Latin
America, given the dubious track record of military and political intervention of the US in
Latin American countries. The US rents Forward Operating Locations (FOLs) in El Salvador,
Aruba & Curaçao (since 2000) and Ecuador (2000 – 2009) (SOUTHCOM, 2009).46 Yet US
military presence is most visible in Colombia, where the US heavily finances the government
to fight left-wing insurgents from the FARC and ELN and to diminish coca and poppy
cultivation, the basic ingredients of cocaine and heroin production.47
The non-renewal of the FOL lease in Ecuador by the government of Rafael Correa urged the
US government to find an alternative host country. A secret Defense Cooperation
Agreement (DCA) was signed with Colombia, which went beyond the mere transfer of the
FOLs to Colombian territory.48 This triggered widespread protests from various Latin
American governments. These bases have been the subject of controversy from the start for
several reasons: first, although SOUTHCOM claims that only drug-trafficking activities are
monitored, critics say that the bases are also used to protect the host nation against threats
from neighboring countries. Second, the uncertainty over the intentions of US military
presence in Latin America is certainly not helped by the rather dubious track record of US
(military) interventions in domestic affairs. Third, many Latin-American governments view
the FOLs as unnecessary as long as drug consumption in the US itself is not reduced.
46
FOLs are existing airports which are used to carry out surveillance missions to detect illicit drug trafficking 47
Colombia has received over 5,5 U$ billion from 1997 – 2008 (over 70 % of all military aid to Latin America). Half of that sum is spent on training the Colombian military, but the US has also provided military equipment. Furthermore, there are about 800 US soldiers permanently stationed in Colombia and 600 private US Contractors who carry out several functions such as operating radar sites, reconnaissance and intelligence sharing (Livingstone, 2009, pp. 162-163). 48
The DCA consists of giving US military personnel access to 7 Colombian military bases, will facilitate effective bilateral cooperation on security matters in Colombia, including narcotics production and trafficking, terrorism, illicit smuggling of all types, and humanitarian and natural disasters (US Department of State, 2009)
77
Given the deep concerns among many South-American heads of state and an extraordinary
meeting of the UNASUR was held to address the issue. A clear division was visible among
South American leaders: Chávez, Correa and Morales were the most vociferous critics of US
military presence in Colombia, arguing that the bases threaten the sovereignty of Latin
American nations. This fear is especially present in the highest echelons of Venezuelan
government, given the US-backed coup of 2002, the only moderately less hostile current US
government and the virtual surrounding of Venezuelan territory by FOLs. Chávez found
himself backed by regional allies Morales and Correa who share similar ideas about US
presence in Latin America. However, they were unable to convince the ‘moderate left’ in
Latin America such as Chile’s Bachelet en Brazil’s Lula da Silva. The 12 heads of state
concluded a joint declaration which called for the preservation of the continent as a peace-
zone, mutual respect of the sovereignty of member states and that foreign military presence
cannot threaten the sovereignty and integrity of any South-American nation and thus the
peace and security of the region (UNASUR, 2009). Chávez and allies have thus far not been
able to stop the implementation of the DCA.
3.2.4 ALBA and the Banco del Sur: Alternative models for economic integration
For many Latin-American countries, the US is an important trading partner. Since the 1990s,
one of the main goals of the US has been the creation of a Free Trade Area of the Americas
(FTAA), spanning from Canada to Argentina. In 1994, at the zenith of neoliberal thought
hegemony, an agreement was reached among 36 American states (including Venezuela) to
progressively reduce trade and investment barriers, fomenting privatization and reducing
state intervention in the economy (Vivas-Eugui, 2003). However, by Hugo Chávez, the FTAA
is seen as an imperialist organization which primarily benefits the US and has little economic
advantages for the less developed countries. During the 4th Summit of the Americas in Mar
del Plata (Argentina), Venezuela and the MERCOSUR member states stated their opposition
to the FTAA, effectively burying the neoliberal project (Fischer-Hoffman, 2005).
Chávez did not only challenge Washington’s FTAA, but constructed an alternative by creating
an alternative economic integration platform, the ALBA. The ALBA has radically different
notions of economic integration, prioritizing the reduction of poverty and social exclusion,
unequal exchange in international relations and renewed attention for state intervention in
the economy and political participation in the integration process. In 2005 Venezuela and
78
Cuba founded the ALBA by means of a bilateral agreement which was later joined by Bolivia
(2006), Nicaragua (2007) and Dominica and Honduras (2008) (Lievesley & Ludlam, 2009, p.
6). What is typical for ALBA’s approach to economic integration is that it is clearly anti-US,
anti-capitalist, not mercantile based and a revolutionary and political tool of member states
which prioritizes political criteria over economic interests (Bossi, 2009). This is reflected in
the ‘success’ of the ALBA: although economic merits for members of the organization are
doubtful, some political goals have been achieved. First, a start has been made with the
normalization of relations with Cuba, promoting the reintegration of Cuba into Latin
America: under the ALBA umbrella many projects for Cuba have been developed, such as the
restoration of oil refineries on the island, the sale of discounted oil (through PETROCARIBE)
and the construction of undersea cables for better telecommunication services on Cuba.
Other non-ALBA members have also intensified their trade with Cuba, such as Brazil (now
the second most important trade partner for Cuba) (Ludlam, 2009, p. 124). The ALBA
member states also coordinate their common position within other international institutions
such as the OAS and the UN, functioning as an anti-hegemonic block in these organizations.
A recent example of such behavior was Chávez speech at the Copenhagen Climate Summit,
where he stated ALBA’s position on the follow-up to the Kyoto protocol, saying capitalism
was to blame for destroying the ecological balance of the world (Cuban News Agency, 2009).
However, confronted with the setback in FTAA negotiations, the US has started to negotiate
with countries individually in order to conclude free trade agreements. The strong anti-US,
anti-capitalist and non-mercantilist characteristics of ALBA has not proven to be an attractive
alternative for other Latin-American countries that have a more moderate attitude towards
the US. Some of these countries have entered into negotiations with the US. This hurts
Chávez’ interests in two ways: the US bargaining position versus other Latin America is much
stronger when negotiating with individual countries instead of blocks of countries.
Furthermore, countries that accept the terms of the bilateral FTA will not support Chávez’
counter-hegemonic block. To date, three South-American countries have entered in such
agreements: Chile in 2004, Peru in 2009 and Colombia’s FTA is currently pending approval in
US Congress. When Colombia’s FTA will enter into force, the US will have FTA with three out
of six biggest economies of South America, measured by GDP (CIA, 2009). The signing of the
FTAs prompted Venezuela to leave the Andean Community (a customs unions) of which it
79
had been a member for 33 years. Peru and Colombia had failed to notify other members
(which they were obligated to do so). Steve Ellner (2008, pp. 201-211), in this context, places
emphasis on the potentially disastrous economic consequences for the Venezuelan economy
if Venezuela would have stayed in the Community.49
In the light of the attitude of the Bolivarian government towards economic integration along
neoliberal lines such as the FTAA or the CAN, its April 2006 declaration to join MERCOSUR
might be somewhat surprising. Because it was exactly the MERCOSUR that had risen in the
1990s to become the most successful example of neoliberal oriented economic integration,
lowering tariff barriers and spurring free trade among its members. Yet upon close
inspection it seems to make sense. MERCOSUR had been envisioned as a trading block to
withstand economic pressure by the US and the EU, South America’s most important trading
partners. Operating as a block they would improve their economic and power positions vis-
à-vis economic giants the US and the EU. Although it abided the WTO/GATT free trade
regime (which corresponds to US interests according to Venezuela), it used special
arrangements which allowed for exceptions to the regime: the regional trading blocs (Bouzas
& Soltz, 2000). The MERCOSUR countries were able to block progress in the Doha
Development round of the WTO since 2003, the 2005 FTAA agreement and are still
negotiating for a better deal on a EU-MERCOSUR free trade agreement (EU Council, 2006).
One can imagine that for Venezuela, joining MERCOSUR has some distinct advantages: 1) it
could function as a gateway for improving relations with the more moderate governments of
Brazil, Argentina, Paraguay and Uruguay for which association within the ALBA is unfeasible
because of ideological differences. 2) Being a MERCOSUR member it can enjoy economic
advantages of the trading block. 3) It can stall MERCOSUR-EU negotiations or negotiate fairer
terms instead of becoming isolated within Latin America. For the existing MERCOSUR
members, Venezuela’s accession is a mixed blessing: access to cheap oil is very welcome for
countries like Paraguay, Uruguay which have no significant oil industry, but also for
Argentina en Brazil where although significant oil production capacity exists, it does not keep
49
US products would enter the Community easily and would then be re-imported to Venezuela through Colombia or Peru and flood the Venezuelan market. Yet this argument is not very convincing as Venezuela produces virtually next to nothing and the US already has a steady 26-27 % share in Venezuelan imports (INE, 2010)
80
up with demand.50 Also, Venezuela’s internal market is an interesting market for producers
Argentina and Brazil, especially since Chávez actively seeks to replace US and Colombian
imports. On the other hand, Venezuela could be a Trojan horse blocking any proposal
towards further free trade arrangements with the US/EU or within the WTO as Venezuela is
ideologically opposed to such treaties. In fact, Chávez has already confirmed that although
MERCOSUR started out as an economic project, it should now become a distinctly political
project prioritizing social issues (Baribeau, 2005). The left-of-centre governments of Brazil
and Argentina acknowledge that the social dimension of FTAs and that of MERCOSUR have
been ignored too long, but are willing to sign FTAs when conditions are sufficiently favorable
for the member states (Klonsky & Hanson, 2009). These worries are reflected in the tedious
ratification process of the Venezuelan adherence: the Argentine and Uruguayan parliaments
do not need to ratify international agreements according to their respective constitutions,
but the Brazilian and Paraguayan Senate have repeatedly expressed their concern over the
possible accession of Venezuela to MERCOSUR.51 Thus, Venezuela still is not a full-fledged
member of MERCOSUR.
3.2.5 The role of International Financial Institutions
Aside from trade agreements and international organizations designed to foment regional
economic integration, several international financial institutions (IFIs) and especially the
International Monetary Fund and the World Bank have assisted the restructuring of many
Latin-American economies along the lines of the Washington Agenda. Chávez sees these IFIs
as agents of imperialist policies by the US and thus represent interests that contrast with
those of Venezuela and the region.
Under governments of the 4th Republic, Venezuela had contracted significant amounts of
foreign debts with various IFIs such as the IMF and the World Bank. Under Pérez 2.3 Billion
USD was borrowed from the IMF, and under Caldera an additional 350 Million USD was
disbursed. Another 3.3 billion USD was owed to the World Bank. In line with Chávez criticism
of these IFIs, the Bolivarian government sought to repay all outstanding debts as soon as
possible. By 2001 all IMF debts had been repaid and the local IMF branch closed (IMF, 2010).
50
According to statistics provided by the US Energy Information Administration (EIA, 2010) 51
In December 2009 the Brazilian Senate ratified the accession of Venezuela, yet the Paraguayan Senate still has not ratified the Protocolo de adhesión de Venezuela al Mercosur (El Universal, 2009).
81
In 2007 the entire World Bank debt was returned – five years ahead of schedule. Chávez has
even announced (but not acted) to withdraw from all US dominated IFIs such as the IMF and
the World Bank (World Bank, 2010) (World Bank, 2009) (Tran, 2007).
A striking feature of Chávez’ foreign policy has been that it not only sought to liberate
Venezuela from IFIs, but that it has actively helped and encouraged friendly nations in the
region to do the same: Chávez bought Argentine state bonds (approximately worth 5 billion
USD) to help repay their IMF debts by 2006. Argentina currently has no outstanding loans
with the IMF (IMF, 2010). Chávez efforts however have not been limited to bilateral efforts:
one of the initiatives in the context of UNASUR (but formally not yet part of the
organization), in which Venezuela has played an important role, is the creation of the Banco
del Sur (Bank of the South). This institution is supposed to become a viable alternative to the
IMF and the Inter-American Development Bank as a source of loans for the states of South
America. Countries that have joined the Bank so far are Argentina, Bolivia, Brazil, Paraguay,
Uruguay and Venezuela. Its aim is to raise 7 billion USD on the short term, but the Bank’s
funds should finally amount to 20 billion USD. Venezuela would be the largest contributor,
having promised 1.4 Billion USD to the bank’s funds. The seven billion are much more than
Latin-American countries contribute on a yearly base to the Inter-American Development
Bank (IDB), and comes close to the ten billion USD available for members of the Andean
Development Corporation (CAF), it is still a far cry from the more than 100 billion available
for Latin-American states through the IDB, IMF or World Bank funds (Bank Information
Center, 2008). Yet the Banco del Sur would be the sole multilateral lender without US
presence and capital and when its reserves will augment, it can prove to be a viable
alternative for South American nations, reducing the power of the US in the region.
3.2.6 OPEC: Multilateral oil diplomacy
Venezuelan policy makers soon realized that domestic government policies aimed at
maintaining and increasing state income from the petro-industry were severely limited
within the framework of the world oil market. The rise (of production output) by the petro-
states of the Middle East had lowered crude oil prices, and competition among oil producing
states increasingly favored the oil companies’ power over the market. This provided an
important challenge for the Venezuelan government: for the developmental policies to
continue, state income needed to be increased. Venezuela could increase output of the oil
82
industry, but this would eventually drive down prices (because total supply for the oil market
would grow). An alternative policy option would be to raise taxes and royalties. However, if
the tax regime would strain oil companies too much compared to other petro states, the
badly needed investments in the oil industry would not materialize (Randall, 1987, p. 35).
In the late 1950s, Pérez Alfonso, Minister of Mines and Hydrocarbons during the
government of Rómulo Betancourt, saw to address this problem by the creation of an
international organization of oil exporting countries. This organization was to limit and
proration the supply of oil entering the world market. If a significant percentage of oil supply
could be administered by the organization, it would give Venezuela and other oil exporting
countries the possibility to influence oil prices (Tugwell, 1975, p. 60). Venezuela lobbied
intensively to realize the formation of such an organization. It was the 1960 slump in oil
prices that convinced many of the Middle-Eastern countries to join the organization. In
September Iraq, Iran, Kuwait, Saudi Arabia and Venezuela founded the Organization of
Petroleum Exporting Countries (OPEC) (Tugwell, 1975, pp. 61-62). The main goals of the
organization are: 1) Coordination and unification of petroleum policies of member countries
and determination of the best means to safeguard their interests. 2) Ensuring the
stabilization of oil prices in the world market to eliminate harmful and unnecessary
fluctuations. 3) Securing steady income for the producing countries, providing an efficient,
economic and steady supply for oil consuming nations and a fair return on capital to those
investing in the petroleum industry (OPEC, 1961). OPEC’s influence as an oil cartel had
dwindled steadily since the early 80s: once responsible for about 80% of world crude oil
exports, by the late 90s OPEC’s share had fallen to about 55% (OPEC, 2008, p. 8). Several
reasons can be found for the diminished relevance of OPEC: 1) The increased use of nuclear
energy, natural gas and coal had substantially reduced the share of oil in primary energy
demand from 60% in 1973 to little over 41% in 1996. 2) Non-OPEC oil supply has risen
considerably because of investments in countries such as Norway and the United States. 3)
Whereas oil used to be traded on the spot market, now the majority of the transactions are
being handled on the futures market providing more certainty and transparency for both
buyers and sellers.52 4) The revolution in high-tech oil technology had substantially reduced
52
The Futures Oil market has several advantages over the Spot Oil market: 1) It can be used to identify the persistence of oil-price shocks and to provide an indicator of the rate at which the shock will diminish. 2) The
83
the expense and risk of developing oil production in high-cost areas (Chalabi, 1997-1998, pp.
132-136). Besides these external factors, behavior of OPEC-members themselves constitutes
an important internal factor of diminishing relevance of the cartel. In 1982 a production
allocation system was implemented, assigning specific production quota for each member
state to control the total OPEC-supply to the world market, by means of a production
allocation agreement. Whenever prices were either too high or too low, production output
would be heightened or lowered. However, OPEC member states have tended to defy
production quotas (Kaufmann, Dees, Karadeloglou, & Sánchez, 2004). Especially Venezuela
under the second Caldera administration had built up a reputation of cheating on quota
(Kohl, 2002, p. 214). During the 1980s Venezuela had overproduced about 7% of its quota,
being one of the minor offenders within the cartel. At the same time that other notorious
quota busters such as the United Arab Emirates (UAE) and Kuwait significantly reduced their
overproduction, Venezuela became the second biggest quota buster with 10%
overproduction, only being surpassed by Qatar with 14% (Molchanov, 2003, p. 7). The
motivations given by Philip for Venezuelan non-compliance under Caldera seems credible in
the light of other studies that indicate that there is no evidence that real oil prices affect the
degree to which OPEC-Members cheat on the quota (Kaufmann, Dees, Karadeloglou, &
Sánchez, 2004, p. 82).53
As described extensively in Chapter 2, Hugo Chávez had markedly different plans with the
domestic oil industry when compared to his predecessors in office. This policy change was
also reflected in Venezuela’s foreign oil policy strategy: 1) strengthening of the OPEC and 2)
sell crude oil structurally at higher prices. This fits within the overall counter-hegemonic
strategy of Venezuela trying to limit and diminish US military and economic power. A
stronger OPEC could facilitate higher oil prices. As crude oil is an indispensable commodity
for the maintenance of US military and economic power, limiting its availability and raising
its prices weakens US power.
difference between the current futures price of oil and the spot price can be interpreted as an indicator of the precautionary demand for oil. 3) oil-futures prices can be used to a certain extent to forecast spot prices (Alquist & Arbatli, 2010). 53
Funds needed for investment (PDVSA) and public spending (Caldera Government)
Table 3 OPEC Quota Discipline under Hugo Chávez 1st term (in 1000 barrels /p day)
84
However, the previous section clearly demonstrated that OPEC’s track record has been
mixed at best: not only because of the structural non-compliance with production quota and
the dependence on petrodollars, but also because of internal divisions between price-hawks,
intermediate and moderate OPEC members in developing the organization and improving
compliance.54 For Venezuela’s strategy to succeed, it needed to reach consensus within
OPEC to realize higher prices. So, in 1999 when oil was trading at very low prices, Chávez
seized the opportunity to overcome the internal differences in OPEC and formed a coalition
with Iran and Saudi Arabia which led the cartel to withdraw 2.1 million barrels per day from
the world oil market, driving prices up. This is reflected in the April 1999 – March 2000
Production quota, where Venezuela is assigned 125000 barrels per day less than in the
previous production allocation agreement.
In 2000 Chávez visited all fellow OPEC member nations to successfully rally support for a
new proposal to systematically stabilize oil prices at higher oil levels (Ellner, 2008, pp. 206-
207). However, table XX clearly shows, in spite of these initiatives, that overproduction
continued, if to a lesser extent than before.55
Chávez controversial domestic oil policies, implemented during his second term, resulted in
various strikes and negatively influenced production levels, especially in 2003. Also the
brain-drain within the petro industry, caused by the firing of 18000 PDVSA employees and
the alleged underinvestment by the company in the existing oil infrastructure, meant
production would not recover pre-strike levels during Chávez’ second term in office.
However, as oil priced slowly but surely started to climb, the loss in production was offset by
54
Price hawks (Algeria, Nigeria, Indonesia) have small oil reserves and big populations and therefore have an interest in higher prices to address the needs of the population. The moderates (Saudi Arabia, Kuwait and UAE) have enormous oil reserves and (relatively) small populations making these states want to extend the commercial life of oil over a long period of time. Intermediate states (Iran and Venezuela) have both big oil reserves and big populations, making their behavior less predictable (Kohl, 2002, p. 225). 55
The goal of the system was to stabilize the price of crude oil between USD 22 – 28. When oil prices would stabilize under US22, member states would withdraw 500,000 barrels per day. Whenever prices rose steadily to over U$ 28, an equal amount of barrels would be withdrawn from the oil market.
Jul98-Mar99
Apr99 - Mar00
Apr00- Jun00
Jul00 – Sep00
Oct00 Nov00 – Jan01
Feb01 – Mar01
Apr01 – Aug01
Quota 2845 2720 2845 2926 3019 3077 2902 2786
Production 3057 2913 3160 3160 3160 3177 3010 3010
Overproduction 7.5% 7.1% 11.1% 7.9% 4.6% 3.2% 3.7% 8%
85
higher oil prices. It also meant that Venezuela could easily respect the OPEC allocation
quota, without missing out on state income.
With PDVSA under control, Chávez’ had eliminated an important obstacle in pursuing his
foreign oil policy. Within OPEC however, Venezuela still faced Saudi Arabia: being the
world’s biggest producer it plays a pivotal role within the organization. It shares with
Venezuela the interest in wanting to strengthen OPEC, to better control oil prices. Yet it does
not aim at too high prices and does not share Venezuela’s criticism of US hegemony: this
greatly hinders Venezuela’s counter-hegemonic strategy. But even with full OPEC support
Venezuela is not quite there yet. As OPEC’s production share has diminished substantially,
cooperation with non-OPEC producers is necessary to really influence price levels.
Therefore Venezuela has sought closer ties with Russia. Russia is an interesting partner for
two reasons: 1) it is the world’s second largest crude oil exporter, providing about 10% of
total oil export supply. 2) It shares Venezuela’s criticism of the unipolar world system
dominated by the US. For Russia, Venezuela’s oil reserves provide business opportunities to
Russian petroleum enterprises and the Venezuelan arms purchases have proven to be very
lucrative for Russia (Katz, 2006). After little successful efforts from 2001 – 2004 because of
improved US-Russia relations, from 2005 onwards Chávez has intensified relations with
Russia, and has become its most important arms buyer in 2008. Some authors, like Corrales
(2009, pp. 105-106) see this as leverage to get Russia on board of OPEC oil restrictions to
influence oil prices. In spite of repeated pledges of Russia to support OPEC and cut
production, it has done the exact opposite: after OPEC member states reduced output in
2009, Russia actually augmented its production and took advantage of the available market
Table 4 OPEC Quota Discipline under Hugo Chávez 2nd term (in 1000 barrels /p day) Time Sep01-
Dec01 Jan02 – Dec02
Jan03 Feb03 – May03
Jun03 – Oct03
Nov03 – Mar04
Quota 2670 2497 2647 2819 2923 2819
Production 3010 2600 2340 2340 2340 2472
Overproduction 12.7% 4.1% -11.5% -16.7% -19.9% -12.3%
Time Apr 04 – Jun 04
Jul ’04 - Aug 04 – Oct 04
Nov 04 – 16 Mar 05
17 Mar 05 – Jun 05
Jul 05 – Oct 06
Quota 2704 2934 2992 3107 3165 3223
Production 2560 2560 2560 2560 2560 2559
Overproduction -5.3% -12.7% -14.4% -17.1% -19.1% -21.5%
86
share (Korosec, 2009). This (at least temporarily) defeated Chávez objectives in
strengthening OPEC and pushing prices up.
3.2.7 Eschewing cooperation and promoting sovereignty
In the very same year Hugo Chávez assumed office, a natural disaster took place in the
coastal area of the state of Vargas. The mudslides, caused by torrential rains, killed an
estimated 30,000 persons and destroyed a large part of the infrastructure and buildings in
the coastal area. Many countries offered humanitarian aid in the form of goods, services and
personnel. The US sent 20 million USD, and ships filled with machinery to rebuild the
infrastructure, goods to offer personal help to victims and 450 military engineers. Yet Chávez
refused entrance of military personnel (claiming that Venezuela’s sovereignty would not
permit American military personnel on Venezuelan soil), even when he did accept the
financial aid and machinery. The ships had to return to the US. Refusing the aid came as a
surprise as – according to the US Department of State – the Venezuelan Minister of Defense
had explicitly solicited military engineers (Naim, 2005, p. 205). It remains unclear whether
this situation was the result of internal communication problems within the Chávez
government, or whether Chávez refused the aid to score a symbolic point.
Although intensive cooperation between Venezuela and the US took place from 2002 –
2005, since then US-Venezuelan anti-narcotics cooperation has diminished. In 2009, the
Government Accountability Office reported to the US Senate that it is deeply concerned
about the unwillingness and inability of the Venezuelan government to actively fight drugs
trafficking. Of the 9 cooperation operations functioning in 2002, only 2 were still functioning
in 2009. From 2004 to 2007, the estimated amount of cocaine being trafficked through
Venezuela increased fivefold from 50 metric tons to 250 metric tons per year, that increasing
corruption of Venezuelan officials hampered anti-drug operations and that since 2005 the
Venezuelan government has structurally failed to meet its counternarcotics obligations
(USGAO, 2009, pp. 6,15,20). Although the Venezuelan government has acknowledged a rise
in trafficking volume, it does not accept that this is due to its unwillingness to cooperate and
refers to anti-drug cooperation agreements with various other nations. Furthermore, it
dismisses the report’s claims on Venezuela’s inability to fight drugs, referring to increased
success of drug seizures, demolition of drug laboratories, detained drug traffickers etcetera.
The statistics used by the GAO are questioned and politicized (because they were produced
87
under the GW Bush administration) and the Venezuelan report reiterates that cooperation
with the DEA was halted in 2005 because several officers had been involved in spying
(Venezuela Information Office, 2009, pp. 1-3). Unsatisfied with the lack of cooperation of the
Venezuelan government concerning anti-terrorist and narcotics, the US Government decided
to implement a Defense arms embargo against Venezuela, which effectively means that the
United States will no longer authorize the export of defense articles and defense services to
Venezuela (National Archives and Records Administration, 2006).
3.2.8 The Obama administration and Chávez
Throughout the previous sections and chapters, US-Venezuelan relations have been
described from cordial to outright hostile, especially under the G.W. Bush presidency. When
Barack Obama assumed office in 2009, there was hope for better relations among Venezuela
and the US. And in discourse Obama has delivered change: the administration has sought a
moderate strategy to diminish Chávez’ influence in the political arena. Secretary of State
Hillary Clinton (2009) stated the importance of healthy diplomatic relations with Venezuela:
[W]e’re trying to lower the temperature. We want to make it clear that there are ways for us to have a conversation with
people we don’t agree with on many issues. We don’t want to see interference with other countries’ internal affairs. We
want to see a vibrant democracy that reflects the very best that countries have to offer. We would like very much to see
leaders being effective in helping to create greater economic opportunity for poor people. But we think there are ways that
that can work that are not anti-democratic [..] leaving room for constructive and legitimate criticism.
However, confronting rhetoric with deeds the Obama administration shows a rather poor
track record in implementing discourse: The ban on military exports to Venezuela is still in
place, the military bases deal with Colombia has deteriorated both US-Venezuelan and
Colombian-Venezuelan relations (Radio Netherlands Worldwide, 2010), and the re-activation
of the 4th fleet (although technically a decision taken by the Bush administration) has not
been canceled (US Navy, 2008). Also, apart from a brief encounter during the Summit of the
Americas last year, Obama has yet to invite Chávez for an official meeting to discuss
problematic relations between the two nations. This while Chávez has repeatedly said he
wanted better relations with Obama and the US (Associated Press, 2009). As this gesture has
been consistently ignored by the Obama administration it need not surprise us that there is
little to no evidence that Chávez has ceased or diminished soft balancing behavior.
88
4 | Analysis
In this fourth chapter, the findings of the case study are linked to the theories presented in
Chapter 1. First an assessment is made to what extent Venezuelan foreign policy has
included traditional balancing, and how this behavior corresponds to the realist theory on
balancing. Second, a closer look will be taken at Venezuela’s soft balancing initiatives to see
whether they are more in tune with access to oil rents (or maybe other variables that have
been identified in the case study). Third, we evaluate how successful soft balancing
initiatives have been thus far, by assessing to what extent Venezuela’s foreign policy goals
have been achieved.
4.1 Near absence of traditional balancing The case study demonstrates that Venezuela seemingly has not been involved in structural
traditional balancing efforts since 1989: first, no explicit military alliances have been formed
by the governments of Carlos Andrés Pérez, Rafael Caldera nor Hugo Chávez. Second,
according to data provided by the IISS, SIPRI and the World Bank, Venezuelan military
expenditure has declined modestly both as percentage of GDP and in real dollar terms since
1991. During the neoliberal era of Andrés Pérez and Caldera, military spending hovered
around 1.7% of GDP. During the Chávez years, average spending on the military has been
around 1.4%. Because of Venezuela’s volatile GDP, I also looked at real military spending in
constant dollar terms. Expressed in year 2000 USD, military spending from 1991-1998
averaged about 1.9 billion. Since 1999, spending declined to 1.74 billion per year in 2008.
89
Some reservations about the data need to be made however. First, because of limited
transparency of the military budget, and extra budgetary spending through the Paraguas
Fund and FONDEN, all the Venezuelan governments have probably spent more on the
military than official statistics suggest. Yet this is not a typical Venezuelan issue as most
states in the region lack the same transparency (IISS, 2010, p. 59). Nevertheless, when
comparing Venezuela’s official spending under Chávez, expenditure in 2008 was 8.4% higher
than in 1999. In 2008 worldwide military spending was up 45% from 1999 . For Venezuela to
be on par with the rest of the world, it should have spent an additional 640 million USD in
2008. Given the aforementioned extra budgetary spending and extraordinary oil income in
2006 and 2007 this is quite possible, but based on this data one cannot draw definitive
conclusions.
The absence of conclusion of military alliances under the governments of Pérez and Caldera
need not surprise us too much. The realist argument that for a state to balance it actually
needs to fear (future) belligerent actions by the hegemon seems to hold for the 1990s. The
Venezuelan governments in this era did not fear use of excessive power by the US that
would jeopardize Venezuelan interests. The case study demonstrates that the Venezuelan
governments thought the very opposite: they sought to maintain their special relation to the
USA as a stable and trustworthy oil supplier. Also, the military spending by these
governments seemed to be geared more towards appeasement of the military
$ 0,0
$ 0,5
$ 1,0
$ 1,5
$ 2,0
$ 2,5
$ 3,0
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
19
91
19
92
19
93
19
94
19
96
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Bill
ion
Chart 6. Ven. Military Expenditure
Military Expenditure in Y2000 U$ Military Expenditure as % of GDP
90
(understandable considering the two failed coup d’états of 1992) than investing in military
equipment or defense services as balancing behavior.
Chávez initial stance towards the US government was one of caution, but not outright ‘anti-
American’. The case study indicates that the posture of the US government towards Chávez
became more and more aggressive with each initiative the Venezuelan government took
that would (potentially) hurt US interests, especially the nationalization of the oil sector (in
which many US companies were active). Also the US backed (the failed) coup of 2002, which
radicalized Chávez position towards the US and made the government actively strife for a
multipolar world order. Yet realist theory cannot account for the absence of military
alliances under Chávez, nor the decline in real military spending under his governments, in
spite of growing government income. In the midst of an almost unprecedented oil boom,
military spending has remained modest compared to regional and worldwide military
expenditure (see section 3.1.2.). It thus seems that neorealist theory cannot account for the
absence of balancing behavior.
4.2 Soft balancing According to the proponents of the soft balancing strategy, such as Pape, this need not
surprise us: as much as Venezuela spends on expanding its military or might, the spending
gap with the US is simply too big to become a real threat to US military might. As we saw in
Chapter 3 and the previous section, Venezuela destines a rather modest percentage of its
GDP on military spending compared to the US, and US GDP is about 42 times bigger than
that of Venezuela. Concerning external balancing, the formation of military alliances in a
unipolar world is very hard considering – although each nation individually would be better
of cooperating against the hegemon – there is high uncertainty about the willingness of
other countries to balance. For a single country, like Venezuela, to propose a military alliance
against the US would be very risky as it does not know on how much support it can count,
and retaliation would be just around the corner.
According to Paul, Pape and Hurrell, the soft balancing alternative would be a much more
attractive policy for states like Venezuela. And indeed, Chapter 3 clearly demonstrates the
various soft balancing initiatives that Venezuelan governments have undertaken: from the
91
foundation of the OPEC oil cartel in the 1960s, defying US foreign policy by reestablishing
bonds with Cuba in the 1970s, to eschewing anti-narcotics cooperation with the US in the
1990s and the investment in various anti-hegemonic blocks under the Chávez government.
By now it must be clear that Venezuela has been showing soft balancing behavior from the
very start of the 4th Republic and has continued to do so till present-day. Yet, the case study
has also shown us that different soft balancing strategies have been applied over time, and
that the intensity and scale of these initiatives has varied greatly and which will be discussed
in the following sections.
4.2.1 OPEC and the Oil Weapon revisited
In the previous section the case study seems to suggest that the Venezuelan government has
not been involved in traditional balancing efforts. In Chapter 1 we briefly introduced the
notion of the oil weapon, a non military but real threat to consuming countries: by limiting
the amount of oil available to consuming countries they have a hard time to maintain their
economies and armies (which are highly dependent on oil) and/or pay higher prices for oil.
Nonetheless, the weapon could only function when 1) producing countries would cooperate
instead of filling in each other’s market share. 2) oil would not be resold by intermediaries.
In the case of Venezuela one would then expect at the very least, cooperation from the
OPEC member countries.
But apart from the behavior of other OPEC allies, the case study shows clearly that under the
Venezuelan governments of the 1990s there was actually little interest in strengthening
OPEC. Under the Pérez and Caldera governments, 16 production quota agreements were co-
signed by the Venezuelan government, yet none was respected: Venezuela progressively
became known as a notorious quota buster. From day one of the Chávez administration a
different approach to OPEC was chosen: the various efforts by the Bolivarian government to
revitalize OPEC are testimony to this strategy. This is not to say that under Chávez OPEC
production quota agreements were immediately respected: during Chávez first
administration overproduction hovered round 8% (see Chapter 3). Yet it is important to
recall that PDVSA and the Venezuelan government were on increasingly friendly terms
because of Chávez nationalization policy and tougher fiscal regime. Yet, the domestic
policies did seem to work: from 1999 to 2002 onwards production gradually declined yet the
oil industries’ contributions to the state had almost doubled since Chávez assumed office.
92
It is true that Venezuelan oil exports to the US have diminished under the Chávez
governments. In 1998 1.7 million barrels a day were destined for the US. By 2008 exports
had dropped to 1.1 million bpd. This 35% reduction in oil exports to the US roughly
corresponds to the 35% reduction in total oil exports. The US thus remains Venezuela’s most
important export market. At the same time Venezuela’s importance as oil supplier for the US
has dwindled: whereas under the government of Rafael Caldera, Venezuela was with 16%
one of the most important suppliers of oil, this share has been reduced to 9% and Canada,
Mexico and Saudi Arabia have larger shares than Venezuela (EIA, 2010).
But in spite of Chávez’ vociferous attacks on the US government, the Bolivarian government
has never voluntarily closed the tap to the US. In the case study the effects of the oil strike
were compared with US consumption. Thanks to production increases in other countries
(including OPEC members), the US strategic reserve had not even been used. In 2002 the US
could do without Venezuelan oil for 450 days (USGAO, 2006, p. 35). Using data from the year
2008, now the US could do without Venezuelan oil for 630 days, greatly reducing its
dependence on Venezuelan oil. In the case study we also saw that in spite generally close
relations, with Russia – which shares Venezuelan anti-hegemonic outlook, Russia decided to
increase production and fill in the OPEC market share lost.
So given the unwillingness of OPEC member states to consequently cooperate, non-OPEC
predatory market share behavior and Venezuela’s progressive irrelevance as a supplier to
the US, the viability of the oil weapon decreases by the day. In Chapter 1, I modified
Haftendorn’s theory, trying to indicate that relations between oil producing and oil
consuming countries might result in mutual dependence: although oil consuming countries
are dependent on oil to maintain their economic and military might, regimes in petro states
need oil income to stay in power.
So even in a (for Venezuelan government notions) perfect world where OPEC and non-OPEC
members would support production cuts, the US as an important oil consumer needs to be
replaced by other buyers. And given today’s technological and logistical challenges – China –
cannot fulfill this role, leaving Venezuela very much dependent on US oil imports. The
Chávez government therefore has very little room for maneuver if it seeks to deploy the oil
weapon. Successful cooperation with (non) OPEC member states to realize higher prices per
93
barrel seem more viable than cutting delivery oil delivery to the US and thus Venezuelan
dependence on US imports persist.
4.2.2 Economic Integration Alternatives
Another clear example of the use of different soft balancing strategies are Venezuelan
governments’ positions on economic integration. The case study demonstrates that during
the neoliberal governments of the 1990s, both Carlos Andrés Pérez and Rafael Caldera
embraced neoliberal notions of economic integration once in office. The most striking
example of such a policy was the support of the Caldera government for the construction of
the FTAA and the declarations signed during the First Summit of the Americas in Miami
(1994) and the Second Summit of the Americas in Santiago de Chile (1998). With Chávez in
office since 1999, the Venezuelan position on the FTAA started to change. During the Third
Summit of the Americas in Quebec (2001) the Venezuelan delegation had already expressed
its explicit reservation of FTAA implementation by 2005 as unfeasible because of domestic
developments in Venezuela (read: the reservations of the Chávez government concerning
free-trade). By 2005 developments in many other Latin-American countries (which were now
governed by critics of free trade agreements) had resulted in a strong anti-FTAA coalition.
During the Fourth Summit of the Americas in Mar del Plata (2005) the Venezuelan
delegation all but buried the FTAA.
Where under Caldera, Venezuela sought (in economic terms) to make sure to gather as
much economic rewards within the scheme of the FTAA (but adhering to it nevertheless) it
virtually accepted the scheme of the FTAA as such. The Chávez government however has
rejected the neoliberal notion of economic cooperation and integration but went even
further. By constructing the ALBA and the Banco del Sur it realized completely new platforms
to realize alternative forms of economic integration. Or to put it in more abstract forms:
while previous governments merely used diplomatic friction to secure a somewhat more
favorable outcome within an existing set of outcomes, the Bolivarian government has
increasingly sought to soft balance and create new outcomes in foreign policy which
(potentially) could be more beneficial than any of the pre-existing outcomes.
94
4.3 The role of domestic institutions and petrodollars The analysis so far suggests two things: first, traditional balancing against the US is not a
viable policy option for Venezuela given the economic and military disparity between the
countries and the collective action problems related to constructing a military alliance within
a unipolar context. Second, Venezuelan governments have resorted to various soft balancing
strategies, differing in both scale and intensity, in order to better their position in the
international system since 1958. Yet the application of the oil weapon as a soft balancing
strategy is not viable since Venezuela’s dependence on US petrodollars, as the United States
cannot be replaced as Venezuela’s major client.
However, there are two important variables that have not been taken into account so far by
the soft balancing proponents, which have surfaced during the case study. 1) Venezuela’s
particular institutional setup provides more than a context, and might influence decision
making processes concerning foreign policy as well and, 2) Petrodollars have been used to
fund the various soft balancing initiatives. First, as Chapter 2 demonstrated, transformations
in the institutional setup of the country have radically changed power positions within the
state. Venezuela moved from being a formal democracy, dominated by two political parties
and several extra-parliamentary actors such as PDVSA, the Church and the Armed Forces to
a democracy with a weak party system, concentrated power in the executive and very
limited influence of extra-parliamentary actors. It was not just the 1999 Constitution that
changed these power positions, but also the post-2002 coup d’état purges that effectively
removed political opponents from both PDVSA and the military. Now my point is not that
the Venezuelan institutional configuration can better explain foreign policy initiatives than
theories on (soft) balancing. What I am arguing however, is that the institutional
configuration under Chávez has greatly diminished the influence of actors which (at least in
the past) have not favored policies aimed at limiting US power, such as political parties
COPEI and AD, PDVSA management and the military. In the Venezuelan case, foreign policy
decision making has become the sole prerogative of the executive power. The weak position
that both Pérez and Caldera held vis-à-vis their own parties and the other extra-
parliamentary actors limited their policy options does not exist anno 2010.
Now, as I stated before, Venezuelan governments have been soft balancing. So this
argument than would not hold, because according to the logic presented above, under the
95
4th Republic soft balancing would not be tolerated by various political actors. However, if we
look carefully at the kind of soft balancing initiatives of the 4th Republic, and compare those
with the soft balancing initiatives of the Bolivarian governments there is a clear difference:
where soft balancing under Pérez and Caldera was incidental, practical and quite limited (in
both scope, scale and resources), soft balancing under Chávez’ government has become
more structural clearly anti-hegemonic in nature and has destined considerable resources
for this kind of foreign policy. A very clear example of these differences are the posture
towards the OAS. Where Pérez sought to better Venezuela’s position within the OAS, Chávez
has tried to sideline the institution all together and construct alternative platforms for
international cooperation without influence of the US.
Second, the role of petrodollars. In Chapter 2 and 3 oil income has been mentioned several
times as an important factor in political economy of the Venezuelan state. Yet its influence
on foreign policy has been less clear. The case study clearly demonstrates that, irrespective
of the fact that Venezuelan government has been using soft balancing strategies, there are
remarkable differences in type, scale and intensity of these strategies. During the 1990s, soft
balancing efferts were quite limited, practical and incidental, this coincided with low oil
prices and (relatively) low oil rents. Under the Chávez government soft balancing has
increased in scale and intensity and practically dominates foreign policy. Yet oil income has
not been high ever since Chávez assumed office. During the first five years in office oil prices
were low and oil income was modest at best. It was not until 2005 that the oil bonanza
flooded the Venezuelan government with additional income, as I demonstrated in section
2.6.1. And it was not until 2005 that Chávez’ soft balancing efforts really materialized:
PETROCARIBE, ALBA, UNASUR, Banco del Sur, and the Argentine bond bailout all took place
after the oil boom took off. It would be tempting to draw the conclusion these more
structured soft balancing initiatives were caused by the sudden rise in oil income. Yet I think
that such a conclusion cannot be drawn that easily for two major reasons. First, since the
early 2000s, the Chávez government policy documents have explicitly mentioned the
construction of such anti-hegemonic regimes in its most important policy document Lineas
Generales... The strategy of the government had thus already been thought out. However, as
construction of these regimes have high initial costs and place a constant burden a state’s
budget, given the weak state of Venezuela’s economy during the late 90s early 2000s, such a
96
policy was simply not feasible. The second argument is that in spite of dwindling oil prices
since the second half of 2008, the Venezuelan government has continued to invest in these
regimes or even launched new institutions. Therefore I think that the oil boom has more
than anything, facilitated the switch to more capital intensive, structural soft balancing
strategies, rather than caused soft balancing.
4.4 Soft Balancing a success? Now, the question regarding what causes soft balancing behavior is interesting for both
academics and policy makers alike. But once confronted with soft balancing strategies
employed by an adversary, the policy maker is interested in whether these policies are
actually effective. Given the extensive description of various soft balancing initiatives by the
Venezuelan government, a first assessment is in order. Assessing the success of soft
balancing initiatives can help policy makers in petro states and oil consuming countries
develop a more specific cost-benefit analysis of these strategies.
The great variety of strategies hitherto discussed makes it clear that it is hard to assess soft
balancing as one single category. Therefore I propose two categories, for analytical
purposes.56 The first kind of soft balancing strategies has concrete goals and is applied to
achieve success in the short term. The second type of soft balancing strategies has more
diffuse goals and is to produce results in the medium to long term.
Examples from the first type seem to be very effective on the short term. For example, the 5
billion USD of Argentine debt that Venezuela purchased to enable the Argentine government
to leave the US-dominated IMF. This directly liberated Argentina from IFI-imposed economic
policy making. The social policy projection strategy of offering developmental aid at very low
conditionality can achieve the same effects: it can buy influence from the receiving regimes
within the context of international institutions such as the OAS or UN. Yet, its effectiveness
on the long term can be questioned and is highly uncertain: a simple change of government
in a beneficiary country can mean the immediate loss of support for Venezuelan foreign
policy. Or, as the case of the Venezuelan arms spending spree in Russia demonstrated:
56
I dive deeper into this matter in my recommendations for further research in the Conclusion.
97
Russia ignored its promises to Venezuela concerning oil production to take advantage of the
market gap created by lower OPEC production quota.
Examples of the second kind of soft balancing strategies have the following in common: they
offer structural alternatives for the goods, services or platforms that hitherto have been
provided by the hegemon. They requisite high initial investment costs, yield little result in
the short run, but can develop into stable parallel regimes to those of the hegemon in the
long term. Examples from the case study are the Banco del Sur, PETROCARIBE, ALBA
etcetera. The problem is that these regimes have been developed only recently which makes
a premature assessment rather unfair. Yet, for the sake of the argument I will continue the
example of the Argentine debt buy. Although it temporarily cut Argentina loose from the US-
dominated IFIs such as the IMF and the World Bank, it was all but a permanent solution.
Whenever Argentina would run into financial trouble again, it had no choice but to return to
these IFIs and accept the heavy conditionality imposed upon economic and monetary policy
by these organizations.
However, the Banco del Sur initiative was started to offer a South-American alternative for
countries in need of short-, medium or long term financing. In spite of the high initial
investments by Venezuela and the other member states (which placed a heavy burden on
these countries’ budgets), now South-America has its own IFI which is not based on the
neoliberal values of the US, but tuned to the interests and plurality of economic
policymaking in the region. If the Bank is able to help out countries in financial distress it will
prove to be an attractive alternative for South-America and greatly diminish the influence of
the US over economic policy making – even in times of economic hardship. Yet, such a stable
regime can only be created when countries stay committed to investing in these regimes.
This poses an heavy challenge on countries like Venezuela who can invest in times of oil
boom, but have a hard time investing when oil prices are low. And even when a regime is
function, political changes in one of the member states can prompt them to leave the
international regime, as the case of Honduras in PETROCARIBE (section 3.2.2) has
demonstrated.
98
Conclusion
In the introductory chapter I reminded the reader of the exploratory character of the thesis.
Venezuela has proven to be a compelling case study at the junction of International
Relations theory and the Natural Resource Curse. In this section, we first return to the
original research question, highlight the usefulness of the Venezuelan case, present the main
findings of the thesis and review the theoretical and practical implications these findings
have. Then several methodological and theoretical remarks are made to better fit the thesis
in the ongoing debates on soft balancing and the Natural Resource Curse. Finally, several
suggestions for further research will be made.
Research Question Puzzled by the lack of explanatory power of neorealist theory of contemporary international
relations, the various soft balancing approaches promised an intelligent approach because it
seemed to more accurately describe state behavior in the current unipolar world system.
However the arguments why and when states balance needed further development, as
especially the economic dimension of (soft) balancing had received little attention. There
was little clarity about the costs of soft balancing. The debate on the Natural Resource Curse
on the other hand, has extensively studied the income for countries with natural resources
such (and petro states in particular), but had largely ignored the foreign policy of such
countries. While combining the two approaches, the (research) surged:
To what extent and how does access to significant oil rents generate incentives for soft
balancing behavior?
The Venezuelan case Given the limited time and means, a single case study seemed the best approach to study
the processes at work in the alleged relation between external income from oil extraction
and foreign policy. Various reasons favored the choice of Venezuela as the main case study
for the thesis: first, because the country is a petro state, highly dependent on oil rents. The
thesis seeks to explore whether there is a relation between oil rents and foreign policy
behavior. If there is such a relation, they should be most visible in a petro state as their oil
99
rents are higher and more volatile than tax and spend or production states. Second, as the
debate on petro state characteristics and its alleged relation to foreign policy is still in its
infancy it would be unwise to rule out other explanation for foreign policy outcomes (such as
neorealist theory or explanations based on domestic economic and institutional variables). It
is within this context that Venezuela as a case becomes very interesting. Venezuela’s
political economy has undergone many changes over the past twenty years. It has had both
neoliberal and socialist-oriented regimes and the country has been governed under various
institutional arrangement. Last but not least, as oil prices have fluctuated heavily, oil income
has varied significantly during the past two decades. At first glance, variation in the
aforementioned variables did not seem to take simultaneously but rather sequentially. This
makes the Venezuelan case very useful for controlling for these variables. Last but not least,
as Venezuela has been an active international player since its transformation into a
democratic state, changes in foreign policy are easier to compare than in states that have
never shown much interest in participating in the international system.
Main Findings In order to answer the research question, two important subquestions had to be answered:
first, do petro states (like Venezuela) actually soft balance? The case study clearly showed
that Venezuela has indeed applied soft balancing since the inception of democracy in 1958,
be it in differing intensity, scope and scale. Second, for oil income to actually be related to
foreign policy (and soft balancing in particular) one would expect more soft balancing when
oil prices are high and the state has more funds to use for foreign policy. The case
demonstrated that soft balancing was modest under Pérez and Caldera and pre-oil boom
Chávez, and heavily increased in both scale, scope and intensity during and post-oil boom
Chávez. Yet, for various reasons I cannot conclude that there is a simple causal relation
between the level of oil rents and scale, scope and intensity of soft balancing: first, even
though oil prices and income were low during Chávez’ first few years in office, policy
documents laid out plans and guidelines for intense soft balancing, striving for the
construction of anti-hegemonic blocks to diminish US power and influence over the rest of
the world and Latin America in particular. Second, (and this will more extensively be
commented on in the next section) the role of the hegemon within this scheme has been left
100
out of the picture: a state like Venezuela may have huge oil income during a boom period,
but does not necessarily use it to soft balance when it does not see the hegemon as a threat
(as was the case in the 1960s and 1970s in Venezuela). This very point was made by Andrew
Hurrell in Chapter 2 and seems to be confirmed by the case study. Third, during the case
study, and especially Chapter 2, the relevance of transformations in power positions within
Venezuela’s political system seems to have made foreign policy options available for the
government that hitherto had not been available. Removing various actors with quasi veto
points in the foreign policy decision making process, a more aggressive soft balancing
approach was a viable policy option for the Chávez government, while it would have been
unthinkable for Paz and Pérez. Not so much because of their relatively pro-US stance, but
because of the weak position of the President within the Venezuelan political system in the
4th Republic.
So, to answer the question as to how and to what extent oil rents have given incentives for
soft balancing behavior by the Venezuelan petro state, it seems that oil rents have merely
facilitated the application of intensive soft balancing. The costs associated with this form of
soft balancing could be paid for by the rents proceeding from the post 2004 oil-boom.
However, the use of oil rents for this cause seems to have been possible thanks to a specific
domestic institutional structure in which traditional actors that were against soft balancing
were cut out of the decision making process.
Theoretical implications Although the reason(s) why states soft balance (apart from the alleged economic incentive in
the form of oil rents) was not an explicit part of the subject of this thesis, the topic has been
touched upon in the theoretical framework, and surfaced as well in the case study. The idea
that aggressive unilateral behavior is a ‘sine qua non’ for soft balancing behavior as such, as
most of the soft balancing proponents argue, cannot simply be confirmed by the case study.
Venezuela has been soft balancing when facing a unipolar world power governed by either
more moderate or hostile regimes. However, there seems to be a difference in the type of
soft balancing initiatives employed by Venezuela during the 1990s and the first Chávez
government on the one hand, and post-coup Chávez governments on the other hand. The
soft balancing initiatives during the 1990s were limited to ad-hoc initiatives and usually did
101
not involve large sums of money. As stated in the analysis: they seem to have been geared
towards blocking very specific US foreign policy goals.
Since the US developed a more aggressive, unilateral foreign policy, the Chávez government
has increasingly been involved in soft balancing. Since the 2004 oil boom the kind of soft
balancing initiatives have become less ad-hoc, more institutionalized an more expensive.
This, as I explained eralier, to work towards the construction of (regional) economic and
political anti-hegemonic blocks.
In assessing how aggressive or unilateral the foreign policy of the hegemon actually is, the
worldview dimension to soft balancing behavior as introduced by Andrew Hurrell helps us
out: the governments of Pérez and Caldera actively sought to maintain the special US-
Venezuelan relation which they deemed symbiotic: Venezuela as a stable oil provider for the
US, and Venezuela as an important democratic partner in the region. Chávez however has
typified the relation as one of mutual caution (during the first years in office) and since 2002
one of opposed interests. Within such a context, what constitutes ‘aggressive unilateral
foreign policy’ can be assessed differently depending on the view Hurrell discussed.
Nonetheless, the 2002 coup against Chávez which was backed by the US government at the
time radically altered Chávez vision on US-Venezuelan relations.
Implications for policymakers Having assessed the finding of the thesis for theory building, it now is time to shift to policy
making. What foreign policy lessons can be drawn from the Venezuelan case by
policymakers of the hegemon and policymakers of petro states?
The case study seems to confirm the difficult position petro state policy makers face: the
very same oil that underpins the survival of the regime also facilitates the maintenance of
military and economic supremacy of the unipolar power. Even more so when the petro
state’s most important (and irreplaceable) client is the unipolar power itself, as is the case in
Venezuela. This is not to say that policy makers have no options at all. The oil rents can be
used to try to diminish the power of the hegemon or greater the influence of the petro state
itself. The case seems to demonstrate that choosing these strategies carefully is of utmost
importance. In spite of the several billion USD that have been invest by the Chávez regime,
102
Venezuela’s military budget pales in comparison to that of the US. By no means has
Venezuela been able to better its power-position vis-à-vis the US. There is little reason to
believe other petro states might be able to close the gap (except for development of military
nuclear capabilities). Now, the soft balancing strategies that the Venezuelan government has
applied over time have produced mixed results and should be a warning to policy makers in
other petro states that soft balancing in itself does not guarantee success. Ad-hoc
cooperation, offering low-conditional developmental aid and negating access to territories
can work on the short term might block concrete foreign policy initiatives by the hegemon.
However, the case has not shown convincing evidence that these strategies will facilitate the
formation of sustainable anti-hegemonic regimes which are to realize a multipolar world
order. In all fairness, this need not surprise us as the majority of these initiatives are
relatively recent and only time can tell whether these strategies work out. However,
continuous cooperation and funding is necessary to construct these regimes and this is very
hard for policy makers in petro states as the policy continuity is threatened by the high
volatility of oil income. Given the unpopularity of foreign policy among voters, at least in oil
democracies such as Venezuela, this is a challenging task.
As access to affordable oil is one of the most important conditions for a unipolar world
power to maintain its influence over world affairs, for policy makers it is of the utmost
importance to secure this access. Now within a context of oil dependency (besides looking
for oil alternatives), oil-consuming country policy makers should ask themselves what the
most effective and efficient means to this end are: do they lie in an aggressive foreign policy,
not shunning violence to secure access to these resources? Or is a more moderate approach,
which gives petro states more room for policy maneuvers that might be against US interests,
a more sensible approach?
Several proponents of the soft balancing theory had already warned that an aggressive
foreign policy seems counterproductive for the maintenance of hegemony in the long term:
first, because of the aforementioned mutual dependency on oil, there is little need to secure
access to oil through aggressive means. These petro states need to sell oil for their own
survival in the international system. Second, this aggressive foreign policy will – even if this
persuades oil producing nations to sell oil – give incentives for (soft) balancing behavior
103
which is ultimately funded by the unipolar power itself. Third, it takes a long time for a state
to change its reputation on the international arena when switching back to a more relaxed
foreign policy. In the case we have seen all three factors at work: in spite of US hostility
towards the Chávez regime, the US continued to be Venezuela’s most important client.
Second, as the US aggressive policy coincided with radicalization of Chávez’ (foreign) policy,
the very same dollars used to pay for the oil, started being spent on anti-hegemonic
initiatives such as the Banco del Sur and PETROCARIBE, diminishing US influence in the
region. Finally, in spite of the Obama administration’s more moderate tone and seemingly
less aggressive foreign policy, the Venezuelan government has been weary of US intentions
and will not likely abandon its counter-hegemonic strategies anytime soon. A more
moderate, multilateral strategy can reassure petro states like Venezuela that they are not
about to fall prey to the empire. This will probably limit their balancing initiatives to
acceptable levels (for the hegemon) and lessen the costs of foreign policy whenever the
unipolar power feels it needs to act. The other side of the coin is that policy makers will
perhaps have to accept less favorable terms when it comes to acquiring oil.
Methodological and theoretical remarks Despite the merits of the thesis in further exploring the alleged relation between an
overdependence on oil income and foreign policy and giving a detailed account of
Venezuelan foreign and oil policy of the past twenty years, the thesis has several
shortcomings which may have a detrimental effect on both the validity and reliability of the
analysis, findings and conclusions.
First, because only one single case study has been undertaken it is hard to generalize the
findings of the thesis. Since there is no comparison made with other petro states, on the
basis of this thesis alone we cannot draw conclusions about the behavior of all petro states –
or claim that all petro states behave like Venezuela does. Just to name one example:
Venezuela is highly dependent on oil exports to the US, while other petro states have a more
diversified clientele. So Venezuela is not only dependent on oil rents for its survival, but
more specially dependent on the hegemon for its oil income which arguably alters the
power relation Venezuela and the US have. Second, the thesis does not offer extensive
theory testing. Instead, it compares various perspectives on state behavior in the
104
international system. An attractive method because it can highlight the explanatory power
of one theory versus another. However, because the soft balancing argument and theories
on the international dimension of the natural resource are still in its infancy, it creates
challenges in actually testing the respective theories as its core concept and variables are
under debate. In the next section I will pay more attention to this problem as a suggestion
for further research. A third problem is the reliability and validity of the data. Official
government and private sector data about the same subject often differ greatly in both
defining certain concepts (what do they actually measure) and even when they agree in
concepts, the actual figures are vastly different. Both the government and private sector
actors have an interest in ‘juking the stats’.57 Even the data offered by international
organizations offer no avail as they often simply use the data provided by governments. And
then there is the problem of discontinued time series: one of the most comprehensive and
reliable collection of statistics on the Venezuelan (oil) economy, PODE, was discontinued as
of 2007. The use of actual data therefore is quite limited in the thesis and no rock-hard
conclusions have been based upon this data.
Also, it would have been helpful if several interviews with present and former Venezuelan
(oil) policy makers could have been conducted. In the first place to verify statements in the
literature and second to see what motives policy makers actually had in choosing certain
foreign policy options instead of attributing them motives that have been deducted from
reality. Lastly, as the thesis progressed it became rather clear that foreign policy options
available to the Chávez government hinted that internal decision making procedures can
influence the range of policy options a government has which has only been briefly
mentioned in the theoretical chapter. Therefore it might appear to be an afterthought, while
it is no such thing in any matter, but highly relevant – as I explained in the previous chapter.
Suggestions for further research When discussing the thesis design, I mentioned its explorative character. I see the findings
presented after the case study and discussed the challenges that surfaced during the process
of writing the thesis as valuable incentives for further research. Given the findings of the
57
Better statistics can be used as propaganda to make the current regime more popular to secure maintenance of power, while the political opposition can deliberately spread misinformation to vilify the government to improve their chances for a (extra-) political victory.
105
thesis I propose a two-track approach to better understand and predict behavior by petro
states in the international anarchic system. First, more qualitative research needs to be done
on what soft balancing actually entails. I think the umbrella term does not adequately cover
the theoretical differences that exist between ad-hoc cooperation to block certain concrete
foreign policy initiatives by a hegemon and the construction of non-military anti-hegemonic
regimes. A clarification on soft balancing does not only have academic merit. Also for policy
makers the differences in time span, costs, risks and rewards involved in the various soft
balancing efforts warrant further attention to guide policy makers in both petro states and
the hegemon.
Second, having a better idea of what soft balancing actually is, one can better compare
behavior of petro states vis-à-vis the hegemon over time in comparative perspective,
enabling academics to draw more general conclusions about the relation between oil rents,
soft balancing behavior and petro state – hegemon relations. This way, researchers can
control for outlier cases - an ever present risk when single case studies are undertaken. This
seems especially relevant as during the process of writing this theses the institutional
configuration seems to have changed the relative influence of various actors in foreign (oil)
policy formulation, thus changing the range of policy options available to the executive in
the Venezuelan case.
106
Cited Works
1st Summit of the Americas. (1994, December 11). Declaration of Principles. Retrieved from
FTAA - ALCA.
Adelman, M. A. (1995). The Genie out of the Bottle: World Oil Since 1970. Cambridge: MIT
Press.
Alconada Mon, H. (2008, January 12). Antonini estuvo en la Casa de Gobierno. La Nación .
Alquist, R., & Arbatli, E. (2010, Spring). Crude Oil Futures: A Crystal Ball? Retrieved July 22,
2010, from Bank of Canada: http://www.bankofcanada.ca/en/review/spring10/alquist.pdf
Associated Press. (2009, April 18). Chavez to Obama: ‘I want to be your friend’. Retrieved July
24, 2010, from MSNBC: http://www.msnbc.msn.com/id/30271562/
Associated Press. (2010, March 4). Clinton Urges Recognition of Honduras Government.
Retrieved June 15, 2010, from ABCNews:
http://abcnews.go.com/International/wirestory?id=10012222&page=1
Auty, R. (2001). Introduction and Overview. In R. Auty, Resource Abudance and Economic
Development (pp. 3-16). Oxford: Oxford University Press.
Aveledo, R. G. (2007). La 4ta República: La Virtud y El Pecado. Caracas: Libros Marcados.
Banco Mercantil. (2009). The Economy in Figures: Venezuela 2008. Caracas: Banco Mercantil.
Bank Information Center. (2008). Bank of the South: Lending Policies. Retrieved May 1, 2010,
from Bank Information Center: http://www.bicusa.org/en/Institution.Lending.21.aspx
Baribeau, S. (2005, December 9). Venezuela to Enter MERCOSUR as Full Member. Retrieved
January 20, 2010, from VenezuelAnalysis.com:
http://www.venezuelanalysis.com/news/1521
Barrett, P., Chávez, D., & Rodríguez-Garavito, C. (2008). The New Latin American Left: Utopia
Reborn. London: Pluto Press.
Beblawi, H. (1987). The Rentier State in the Arab World. In H. Beblawi, & G. Luciani, The
Rentier State (pp. 49-62). London: Croom Helm.
Beblawi, H. (1987). The Rentier State in the Arab World. In H. Beblawi, & L. Giacomo, The
Rentier State (pp. 49-62). London: Croom Helm.
Blair, B., Yali, C., & Hagt, E. (2006). The Oil Weapon: Myth of China’s Vulnerability. China
Security , 32-63.
107
Bloomfield, R. J. (1994). Making the Western Hemisphere Safe for Democracy? The OAS
Defense-of-Democracy Regime. The Washington Quarterly (17 (2)), 157-169.
Bossi, F. (2009, April 29). 10 Points to understand the ALBA. Retrieved May 3, 2010, from
Portal ALBA:
http://www.alternativabolivariana.org/modules.php?name=Content&pa=showpage&pid=19
80
Bouzas, R., & Soltz, H. (2000). Institutions and Regional Integration: The Case of Mercosur.
London: Brookings Institution.
Brooks, S. G., & Wohlfort, W. C. (2005). Hard Times for Soft Balancing. International Security
(30 (1)), 72-108.
Buxton, J. (2009). Venezuela: the political evolution of Bolivarianism. In G. Lievesley, & S.
Ludlam, Reclaiming Latin America: Experiments in Radical Social Democracy (pp. 57-74).
London: Zed Books.
CAF. (n.d.). CAF. Retrieved May 2, 2010, from Estructura de Capital:
http://www.caf.com/view/index.asp?pageMS=34161&ms=17
Catholic New Times. (2004, June 6). Venezuela fires the "School of the Americas". Retrieved
June 21, 2010, from BNET:
http://findarticles.com/p/articles/mi_m0MKY/is_10_28/ai_n13467190/
CGD Task Force. (2009). Helping Reforms Deliver Growth in Latin America: A Framework for
Analysis. In L. Rojas-Suarez (ed), Growing Pains in Latin America: An Economc Growth
Framework as Applied to Brazil, Colombia, Costa Rica, Mexico and Peru (pp. 38-67).
Washington: Brookings Institution Press.
Chalabi, F. J. (1997-1998). OPEC: An Obituary. Foreign Policy , pp. 126-140.
Chávez, H. R. (2010, June). BBC Hard Talk. (S. Sackur, Interviewer)
CIA. (2009). Country Comparison GDP (Purchasing Power Parity). Retrieved May 3, 2010,
from CIA Factbook: https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2001rank.html
Clinton, H. (2009, July 7). Secretary of State. (L. Castillo, Interviewer)
CNE. (2004). Boletín Electoral Referendum 15 de Agosto de 2004. Caracas: Consejo Electoral
Nacional.
CNE. (2006). Elección Presidencial - 3 de Diciembre de 2006. Caracas: Consejo Nacional
Electoral.
108
CNE. (2000). Elecciones 30 de Julio de 2000 - Presidente de la Nación. Caracas: Consejo
Nacional Electoral.
CNE. (2000). Elecciones 30 de Julio de 2000 Votos Diputados Listas a la Asamblea Nacional.
Caracas: Consejo Nacional Electoral.
CNE. (1998). Elecciones 6 de Diciembre 1998. Caracas: Consejo Nacional Electoral.
CNE. (1999). Referendo Aprobatorio Constitución Nacional Diciembre 1999. Caracas: Consejo
Nacional Electoral.
Collier, P., & Hoeffler, A. (2000). Greed and Grievance in Civil War. Washington D.C.: World
Bank.
Constitución de la República Bolivariana de Venezuela. (1999).
Corrales, J. (Forthcoming). Foreign Policy of Venezuela.
Corrales, J. (2003). Market Reforms. In J. I. Domínguez, & S. Michael, Constructing
democratic governance in Latin America (pp. 74-100). Baltimore: The Johns Hopkins
University Press.
Corrales, J. (2009). Using Social Power to Balance Soft Power: Venezuela's Foreign Policy. The
Washington Quarterly , 32 (4), 97-114.
Crow, J. A. (1980). Epic of Latin America. Berkely: University of California Press.
Cuban News Agency. (2009, December 17). ALBA’s Voice Heard in Summit on Climate
Change in Copenhagen. Retrieved June 23, 2010, from Cuban News Agency:
http://www.cubanews.ain.cu/2009/1217copenhagen.htm
Doyle, M., & Sambanis, N. (2000). International Peacebuilding: A theoretical and Quantative
Analysis. American Political Science Review (94(4)), 779-801.
Dunne, T., & Schmidt, B. C. (2008). Realism. In J. Baylis, S. Smith, & P. Owens, The
Globalization of World Politics: An Introduction to International Relations (4th edition ed.,
pp. 90-106). New York: Oxford University Press.
Economides, M. J., Martínez, A., & Puky, S. (2007, January 17). The History of PDVSA and
Venezuela. Energy Tribune .
EFE. (2009, July 8). Venezuela Corta el suministro de petróleo a Honduras. ABC .
EIA. (2010, April 1). Argentina Energy Profile. Retrieved May 18, 2010, from US Energy
Information Administration:
http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=AR
109
EIA. (2010, February 1). Country Analasys Briefs - Venezuela. Retrieved June 26, 2010, from
US Energy Information Administration:
http://www.eia.doe.gov/emeu/cabs/Venezuela/Oil.html
EIA. (2009). World Crude Oil Production 1960 - 2008. Retrieved June 1, 2010, from Energy
Information Agency: http://www.eia.doe.gov/aer/txt/ptb1105.html
El Universal. (2009, December 16). Paraguay mantendrá negativa para ingreso de Venezuela
al Mercosur. El Universal .
Ellner, S. (1996). Political Party Factionalism and Democracy in Venezuela. Latin American
Perspectives (23 (3)), 87-109.
Ellner, S. (2008). Rethinking Venezuelan Politics: Class, Conflict, and the Chávez Phenomenon.
Boulder: Lynne Rienner.
Embassy of the Bolivarian Republic of Venezuela. (2008). Fact Sheet Venezuela's Military
Spending. Ministerio del Poder Popular para Relaciones Exteriores.
EU Council. (2006). EU-MERCOSUR Ministerial Meeting Joint Communiqué. Vienna.
Faria, H. J. (2008). Hugo Chávez against the Backdrop of Venezuelan Economic and Political
History. The Independent (12 (4)), 519-535.
Fischer-Hoffman, C. (2005, November 11). Fighting the FTAA and Bush in Argentina.
Retrieved June 16, 2010, from VenezuelAnalysis: http://venezuelanalysis.com/analysis/1461
Friedman-Rudovsky, J. (2008, September 11). Bolivia to Expel US Ambassador. TIME
Magazine .
Gaceta Oficial N. 370076. (2000, November 13). Ley que autoriza al Presidente de la
República para dictar Decretos con Fuerza de Ley en las materias que se delegan. Gaceta
Oficial de la República Bolivariana de Venezuela . Caracas, Venezuela.
Gaceta Oficial N. 37323. (2001, November 13). Gaceta Oficial de La República Bolivariana de
Venezuela. N. 37323 . Caracas, Venezuela.
Gaceta Oficial N. 38081. (2004, December 7). Gaceta Oficial de la República Bolivariana de
Venezuela. Ley Aprobatoria del Protócolo de Kyoto de la Convención Marco de las Naciones
Unidas sobre el Cambio Climático . Caracas, Venezuela.
Gaceta Oficial N. 38443. (2006, May 24). Gaceta Oficial de la República Bolivariana de
Venezuela . Caracas, Venezuela.
Gaceta Oficial N. 38910. (2008, April 15). Gaceta Oficial de la República Bolivariana de
Venezuela . Caracas, Venezuela.
110
Gaceta Oficial N. 39173. (2009, May 7). Gaceta Oficial de la República Bolivariana de
Venezuela. N. 39173 . Caracas, Venezuela.
Gobierno Bolivariano de Venezuela. (2007). Líneas Generales del Plan de Desarollo
Económico y Social de la Nación (2007-2013). Caracas: Ministerio del Poder Popular para la
Comunicación y la Información.
Golinger, E. (2009, May 18). USAID's Silent Invasion in Bolivia. Retrieved May 11, 2010, from
Upside Down World: http://upsidedownworld.org/main/bolivia-archives-31/1865-usaids-
silent-invasion-in-bolivia?format=pdf
Haftendorn, H. (2000). Water and International Conflict. Third World Quarterly (21(1)), 51-
68.
He, K., & Feng, H. (2006). If Not Soft Balancing, Then What? Reconsidering Soft Balancing and
U.S. Policy towards China. American Political Science Association Meeting, (pp. 1-38).
Philadelphia.
Hill, C. (2003). The Changing Politics of Foreign Policy. New York: Palgrave Macmillan.
Hurrell, A. (2006). Hegemony, liberalism and global order: what space for would-be great
powers? International Affairs (82 (1)), 1-19.
IISS. (2010). The Military Balance 2010. London: The International Institute for Strategic
Studies.
IMF. (2010, May 31). Argentina: Transactions with the Fund from May 01, 1984 to May 31,
2010. Retrieved June 18, 2010, from IMF:
http://www.imf.org/external/np/fin/tad/extrans1.aspx?memberKey1=30&endDate=2010-
05-31
IMF. (2003). External Debt Statistics: Guide for Compilers and Users. Washington D.C.: IMF.
IMF. (2010, May 31). Venezuela: Transactions with the Fund from May 01, 1984 to May 31,
2010. Retrieved June 18, 2010, from IMF:
http://www.imf.org/external/np/fin/tad/extrans1.aspx?memberKey1=1050&endDate=2010
-06-18&finposition_flag=YES
INE. (2010). Cuadro Comercio Exterior. Retrieved May 18, 2010, from Instituto Nacional de
Estadística:
http://www.ine.gov.ve/comercio/CuadroComercioImport.asp?Codigo=Importacion_Paises
Institutio Nacional de Estadística. (2010). Resumen de Índicadores Sociales: 1998 - Enero
2010. Caracas: Ministerio del Poder Popular de Planificación y Finanzas.
111
Ishmael, O. (2005, July 26). The PetroCaribe Agreement: it's more about financing rather
than cheap oil. . Guyana Journal .
Jacks, D. S., Fraser, S., O'Rourke, K. H., & Williamson, J. G. (2009). Commodity Price Volatility
and World Market Integration since 1700 (February 2009 Draft). 1-36.
James, I. (2010, June 7). Cuba trains Venezuela in military, communications. Washington
Times .
Karl, T. L. (1997). The Paradox of Plenty: Oil booms and petro-states. Berkeley: University of
California Press.
Karl, T. L. (1999). The Perils of the Petro-State: Reflections on the Paradox of Plenty. Journal
of International Affairs (53 (1)), 31-48.
Katz, M. N. (2006). The Putin-Chávez Partnership. Problems of Post-Communism , 53 (4), 3-9.
Kaufmann, R. K., Dees, S., Karadeloglou, P., & Sánchez, M. (2004). Does OPEC Matter? An
Econometric Analysis of Oil Prices. The Energy Journal (25 (4)), 67-90.
Kelly, J., & Romero, C. A. (2002). The United States and Venezuela: Rethinking a Relationship.
New York: Routledge.
Kelly, J., & Romero, C. A. (2005). Venezuela y Estados Unidos. Coincidencias y Conflictos.
Caracas: Instituto de Estudios Superiores de Administración.
King, A. (2010, July 9). Warming Up the Bronx: Citgo Venezuela Heating & Social
Development Program. Retrieved July 22, 2010, from VenezuelAnalysis:
http://venezuelanalysis.com/analysis/5484
Klare, M. T. (2001). Resource Wars: The New Landscape of Global Conflict. New York: Henry
Holt & Company.
Klonsky, J., & Hanson, S. (2009, August 20). Mercosur: South America's Fractious Trade Bloc.
Retrieved January 21, 2010, from Council on Foreign Relations:
http://www.cfr.org/publication/12762/mercosur.html
Kohl, W. (2002). OPEC behavior, 1998–2001. The Quarterly Review of Economics and Finance
(42), 209-233.
Korosec, K. (2009, September 8). Russia Exploits OPEC Cuts, Tops Saudi Arabia in Oil Exports.
Retrieved May 17, 2010, from BNET: http://industry.bnet.com/energy/10001997/russia-
exploits-opec-cuts-tops-saudi-arabia-in-oil-exports/
Levitsky, S. (2001). Organization and Labor-Based Party Adaptation: The Transformation of
Argentine Peronism in Comparative Perspective. World Politics (54 (1)), 27-56.
112
Licklider. (1988). The Power of Oil: The Arab Oil Weapon and the Netherlands, the United
Kingdom, Canada, Japan and the United States. International Studies Quarterly (32 (2)), 205-
226.
Lieber, K. A., & Alexander, G. (2005). Waiting for Balancing: Why the world is not pushing
Back. International Security (30 (1)), 109-139.
Lievesley, G., & Ludlam, S. (2009). Introduction: a pink tide? In G. Lievesley, & S. Ludlam,
Reclaiming Latin America: Experiments in Radical Social Democracy (pp. 1-20). London: Zed
Books.
Livingstone, G. (2009). America's Backyard: The US and Latin America from the Monroe
Doctrine to the War on Terror. London: Zed Books.
Lombardi, J. V. (1982). Venezuela: The Search for Order, the Dream of Progress. New York:
Oxford University Press.
Luciani, G. (1987). Allocation vs. Production States: A Theoretical Framework. In G. Luciani, &
H. Bablawi, The Rentier State (pp. 63-82).
Ludlam, S. (2009). Cuban Socialism: recovery and change. In G. Lievesley, & S. Ludlam,
Reclaiming Latin America: Experiments in Radical Social Democracy (pp. 123-139). London:
Zed Books.
Lupia, A., & McCubbins, M. D. (1998). Political Credibility and Economic Reform: A Report for
the World Bank.
Mahdavy, H. (1970). The Pattern and Problems of Economic Development in Rentier States:
The Case of Iran. In M. A. Cook, Studies in the Economic History of the Middle East. Oxford:
Oxford University Press.
Ministerio de Finanzas. (2005, October 7). Radio Nacional de Venezuela. Retrieved June 26,
2010, from Ministerio del Poder Popular para la Comunicación y la Información:
http://www.rnv.gov.ve/noticias/?act=ST&f=4&t=24524
Ministerio del Poder Popular para La Comunicación y la Información. (2007). Líneas
Generales del Plan de Desarollo Económico y Social de la Nación 2007-2013. Caracas:
Gobierno de la República Bolivariana de Venezuela.
Ministerio del Poder Popular para la Comunicación y la Información. (2006, January 1). Plan
“Siembra Petrolera”: Visión de Petróleo y Gas hasta el 2030. Retrieved April 16, 2010, from
Gobierno Bolivariano de Venezuela: Ministerio del Poder Popular para la Comunicación y la
Información:
http://www.minci.gob.ve/noticias/1/4057/plan_%E2%80%9Csiembra_petrolera%E2%80%9
Dvision.html
113
Molchanov, P. (2003, April). A statistical analysis of OPEC quota violations. Durham, North
Carolina, United States.
Mommer, B. (1996). Integrating the Oil: A Structural Analysis of Petroleum in the Venezuelan
Economy. Latin American Perspectives , 132-158.
Monaldi, F., & Penfold, M. (2006). The Rise and Decline of Democractic Governance in
Venezuela. In R. Hausmann, & R. F, Venezuela: Anatomy of a Collapse (pp. 1-32).
Forthcoming.
Naim, M. (2005). Epílogo: La internacionalización de Hugo Chávez. In J. Kelly, & C. A. Romero,
Venezuela y Estados Unidos: Coincidencias y Conflictos (pp. 200-212). Caracas: Instituto de
Estudios Superiores de Administración.
National Archives and Records Administration. (2006). Bureau of Political-Military Affairs:
Revocation of Defense Export Licenses to Venezuela. Federal Register (71 (159)), 47554.
Non-Aligned Movement. (2010, June 11). Key Objectives of the Non-Aligned Movement.
Retrieved July 15, 2010, from Non Aligned: http://www.nonaligned.org/2010/06/11/key-
objectives-of-the-non-aligned-movement/
Novoa Monreal, E. (1979). La Nacionalización del Petróleo en Venezuela: Sus aspectos
Jurídicos. México, D.F.: Universidad Nacional Autónoma de México.
Nueva Mayoria. (2008). Adelanto del Balance Militar de América del Sur 2008. Buenos Aires:
Nueva Mayoria.
OAS. (2010). Who We Are. Retrieved May 31, 2010, from Organization of American States:
http://www.oas.org/en/about/who_we_are.asp
Obiko Pearson, N., & James, I. (2007, August 28). Venezuela Offers Billions to Countries in
Latin America. Retrieved May 18, 2010, from VenezuelAnalysis.com:
http://venezuelanalysis.com/news/2571
OPEC. (2008). Annual Statistics Bulletin. Vienna: Organisation of Oil Exporting Countries.
OPEC. (1961, January). OPEC Statute. Retrieved May 14, 2010, from Organization of
Petroleum Exporting Coutnries:
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/OS.pdf
Panizza, F. (2009). Contemporary Latin America: Development and Democracy beyond the
Washington Consensus. London: Zed Books.
Pape, R. A. (2005). Soft Balancing against the United States. International Security , 7-45.
Paul, T. V. (2005). Soft Balancing in the Age of US Primacy. International Security , 46-71.
114
Paust, J. J., & Blaustein, A. P. (1974). The Arab Oil Weapon - A Threat to International Peace.
The American Journal of International Law (68 (3)), 410-439.
PDVSA. (2006). La Apertura Petrolera: Reprivatización del negocio. Retrieved April 18, 2010,
from PDVSA.com:
http://www.pdvsa.com/index.php?tpl=interface.sp/design/readmenuhist.tpl.html&newsid_
obj_id=111&newsid_temas=13
PDVSA. (2005). Oil Concessions: Sovereignty Concessions. Retrieved April 12, 2010, from
Petróloes de Venezuela, SA:
http://www.pdvsa.com/index.php?tpl=interface.en/design/readmenuhist.tpl.html&newsid_
obj_id=1942&newsid_temas=13
Pérez, C. A. (1990). OAS Opportunities. Foreign Policy , pp. 52-55.
Peters, S. (2005). Coercive Western Energy Security Strategies: Resource Wars as a New
Threat to Global Security. In P. Le Billon, Resource Wars: Resource Dependence, Governance
and Violence (pp. 187-213). London: Frank Cass.
PETROCARIBE. (2005). Acuerdo de Cooperación Energética PETROCARIBE. Puerto La Cruz:
Petrocaribe.
PETROCARIBE. (2005). Estatutos PETROCARIBE. Caracas.
Philip, G. (1999). When Oil Prices were Low: Petroleos de Venezuela and Economic Policy-
making in Venezuela since 1989. Bulletin of Latin American Research (18 (3)), 361-375.
Philips, T. (2008, September 30). The Bolivian Crisis, the OAS and UNASUR. Retrieved May 11,
2010, from Americas Program: http://americas.irc-online.org/am/5567
Quixote Center. (2007, August 27). Venezuela provides 4 times the assistance of the US in
Latin America. Retrieved 07 15, 2010, from Quixote Center: http://quixote.org/venezuela-
provides-4-times-assistance-us-latin-america
Radio Netherlands Worldwide. (2010, July 31). Colombia denies war launch as Chávez
dispatches troops. Retrieved July 31, 2010, from Radio Netherlands Worldwide:
http://www.rnw.nl/africa/bulletin/venezuela-sends-troops-colombian-border-chavez
Randall, L. (1987). The Political Economy of Venezuelan Oil. New York: Praeger.
Rodríguez, F. (2008, March/April). An Empty Revolution. Foreign Affairs .
Ross, M. (2004). How Do Natural Resources Influence Civil War? Evidence from 13 Cases.
International Organisation (58(1)), 35-68.
Ross, M. (2003). How does Mineral Wealth affect the Poor. Unpublished Paper , 1-34.
115
Rosser, A. (2006). Working Paper 268: The Political Economy of the Resource Curse: A
Literature Survey. Brighton: Institute of Development Studies.
Sachs, J. D., & Warner, A. M. (2001). The Curse of Natural Resources. European Economic
Review (45 (4-6)), 827-838.
Sánchez, A. (2009, May 13). Separating Fact from Fiction: An Analysis of Venezuela’s Military
Power. Retrieved May 1, 2010, from Council of Hemispheric Affairs:
http://www.coha.org/separating-fact-from-fiction-an-analysis-of-venezuela%E2%80%99s-
military-power/
Santos, M. Á. (2009, May 5). Venezuela: Perspectivas Económicas. (R. Lehmann, Interviewer)
Caracas.
Schiff, J., & Clements, B. J. (1996). IMF Working Paper World Wide Military Spending 1990-
1995. Washington: International Monetary Fund.
Segura, R., & Bellamy, C. (2009). Conflict Prevention in Bolivia and Ecuador: the Role of the
International Community. New York: Center on International Cooperation.
SIPRI. (2010, June 2). SIPRI Yearbook 2010 - Military Expenditure. Retrieved June 21, 2010,
from Stockholm International Peace Research Institute:
http://www.sipri.org/media/pressreleases/100602yearbooklaunch
Solano, G. (2009, September 19). As U.S. Closes Military Post, Ecuador Hails Restoration of
'Sovereignty'. Retrieved April 8, 2010, from The Washington Post:
http://www.washingtonpost.com/wp-
dyn/content/article/2009/09/18/AR2009091803407.html
SOUTHCOM. (2009, July 16). Fact Sheet: Forward Operating Locations. Retrieved May 11,
2010, from United States Southern Command:
http://www.southcom.mil/AppsSC/factfiles.php?id=63
Stern, R. (2006). Oil Market Power and United States National Security. Proceedings of the
National Academy of Sciences of the United States of America (103 (5)), 1650-1655.
Stockholm International Peace Research Institute. (2009). SIPRI Yearbook Summary Booklet
2009: Armaments, Disarmament and International Security. Oxford University Press.
The Australian. (2009, April 7). China and Russia block Security Council sanctions over North
Korean launch. Retrieved March 10, 2010, from The Australian:
http://www.theaustralian.com.au/news/china-and-russia-block-un-sanctions/story-
e6frg6t6-1225696957931
Tran, M. (2007, May 1). Venezuela Quits IMF and World Bank. Retrieved June 18, 2010, from
The Guardian: http://www.guardian.co.uk/business/2007/may/01/venezuela.imf
116
Trinkunas, H. A. (2002). The Crisis in Venezuelan Civil-Military Relations: From Punto Fijo to
the Fifth Republic. Latin American Research Review (37 (1)), 41-76.
Trinkunas, H. (2009). Venezuelan Strategic Culture. Miami: Florida International University.
Tugwell, F. (1975). The Politics of Oil in Venezuela. Stanford University Press.
UNASUR. (2008). Declaración de la Moneda. Santiago de Chile: Ministerio de Relaciones
Exteriores de Chile.
UNASUR. (2009). Proyecto de Decisión. San Carlos de Bariloche.
US Department of State. (2009, August 18). U.S.- Colombia Defense Cooperation Agreement.
Retrieved May 10, 2010, from US Department of State:
http://www.state.gov/r/pa/prs/ps/2009/aug/128021.htm
US Navy. (2008, April 4). Navy Reestablishes U.S. 4th Fleet. Retrieved July 26, 2010, from US
Navy: http://www.navy.mil/search/display.asp?story_id=36606
USGAO. (2009). Drug Control: US Counternarcotics Cooperation with Venezuela has declined.
Washington DC: Government Accountability Office.
USGAO. (2006). Energy Security: Issues Related to Potential Reductions in Venezuelan Oil
Production. Washington DC: United States Government Accountability Office.
Venezuela Information Office. (2009). The GAO Report on U.S.-Venezuela Drug Cooperation:
Revisiting the Bush Policy of Politicization. Washington DC: Venezuela Information Office.
Vivas-Eugui, D. (2003). Regional and Bilateral agreements and a TRIPS-plus world: the Free
Trade Area of the Americas. Geneva: International Centre for Trade and Sustainable
Development.
Waltz, K. (1979). Theory of International Politics. Reading: Addison-Wesley.
Wilpert, G. (2003, August 30). The Economics, Culture, and Politics of Oil in Venezuela.
Retrieved April 11, 2010, from Venezuelanalysis.com:
http://venezuelanalysis.com/analysis/74#
World Bank. (2010, May 31). Country Lending Summaries - Venezuela. Retrieved June 18,
2010, from The World Bank:
http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,countrycode:VE~menuPK:64820
000~pagePK:64392398~piPK:64392037~subTitle:Lending+Summary~theSitePK:40941~eop_d
ate:31-May-2010,00.html
117
World Bank. (2009). Venezuela Country Brief. Retrieved June 18, 2010, from The World Bank:
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/VENEZUELAEXTN/0,,cont
entMDK:20214769~pagePK:141137~piPK:141127~theSitePK:331767,00.html#wbsupport
World Bank. (2010). World Bank Data Catalog. Retrieved April 26, 2010, from World Bank:
http://data.worldbank.org/data-catalog
Yates, D. A. (1996). The Rentier State in Africa: Oil Rent Dependency and Neo-colonialism in
the Republic of Gabon. Africa Research & Publications.
top related