by Ivan Danilov
Ivan Danilov is a famous Russian economist and influential blogger.
featured image © REUTERS / Manaure Quintero
Translated by Scott
The crisis in Venezuela has once again brought into question why the Russian state, as well as state-owned companies, invest money and issue loans to some countries. Many journalists and experts have already rushed with pleasure to calculate alleged financial losses of the Russian side, forgetting both that Caracas has not yet fallen and pro-American usurper has not won yet, and that Russia is not the USSR and is not engaged in charity.
It is particularly instructive to compare two strains of American propaganda: one aimed at the Russian audience through the American NGOs and the media-lured “leaders of public opinion,” and the other — aimed at the Venezuelan audience through lured Venezuelan politicians. The message “the money of the Russian budget and Rosneft went to useless support of the Venezuelan regime and will never be returned” targets the Russian audience, and the message “Russia robbed Venezuela with the help of bonded loans and contracts, taking control of a significant part of Venezuelan oil” targets the Venezuelan audience. It is easy to see that according to the laws of logic in one case the American propaganda should lie, because it is impossible to be a stupid benefactor and ruthless moneylender at the same time. However, in reality, the situation is even more interesting: American propaganda lies in both cases: Russia and Russian state-owned companies are not “geopolitical Shylock,” and they are not “geopolitical mother Teresa,” either. Moscow really helped and will continue to help Caracas, while always sensibly combining idealism with pragmatism.
Let’s start with the fact that Russia is not the main creditor of the Venezuelan economy and not even the second most important. If we take the Western (the most unflattering for Russia) estimates from the Bloomberg business information agency, it turns out that the leader in investments and loans is China with 70 billion dollars, but the honorable second place belongs to very influential and very respectable banks and investment funds, mainly from the US and the UK. According to the most conservative estimates quoted in the Reuters material, they lent to the governments of Chavez and Maduro, as well as the Venezuelan state oil company PDVSA to the amount of about $50 billion.
Among Venezuela’s creditors there are such giants of the financial world as the American investment conglomerate BlackRock (the largest investment fund in the world, assets under management — 6,789 trillion dollars) and the most influential American Bank Goldman Sachs, which is known for its extraordinary opportunities of political lobbying in the US and the European Union. By the way, the Venezuelan opposition has repeatedly said that it will not pay the debts of the “anti-people regime” (especially the opposition does not want to pay the Goldman Sachs Bank, which literally saved Maduro in 2017). So, paradoxically, several very large and influential American financial companies are rooting for Maduro , because they are unlikely to want to run into a “write-off in the name of democracy” for at least $50 billion.
For comparison, the highest estimate of the total amount of loans and investments made by Russian structures in Venezuela is $17 billion, and this amount does not take into account some important aspects. First, Venezuela has long been paying off Russian and Chinese creditors with oil and shares in Venezuela’s oil fields — and this has been generating serious revenues for Venezuelan creditors for many years.
Secondly, Russian loans (it is worth noting that a similar scheme is used by the US, China, the UK and EU countries around the world) are often tied to the supply of Russian goods and services — that is, the money has already turned into salaries, for example, for domestic gunsmiths. So, to speak about losses of $17 billion is at least inaccurate and more than premature.
Unfortunately, in the Russian information field there are often sounding statements that the Venezuelan government is not to blame for anything, that economic difficulties are a myth or that economic difficulties (primarily hyperinflation) are 100% the result of American sanctions. That’s not so. No American sanctions can explain the fact that the Venezuelan gold reserve has been in London for many years at the disposal of the Bank of England, which, according to the latest information, refuses to return it at all, and in the current crisis situation, this gold may well become the budget of the pro-American junta.
No sanctions can explain the fact that the key Venezuelan assets, bringing the country’s main foreign exchange revenue (for example, an oil refinery and a network of Citgo gas stations), are located in the USA and in all the years of confrontation with America, the official Caracas did not bother to sell them and buy something similar in any other — friendly to Venezuela — country.
No sanctions can explain an absolutely insane policy of monetary stimulation of the economy, which has led to the fact that inflation in Venezuela has long been measured in tens or hundreds of thousands of percent per annum, undermining the economy and the standard of living of the population so that even toilet paper becomes a luxury product. It is time for Caracas (as well as some Russian economists) to realize that it is impossible to solve economic and social problems by “printing and distributing money.” According to the Central Bank of Venezuela for October 2018, which refers to Trading Economics, inflation in Venezuela was more than 1 300 000% — a level when the national currency turns into a wrapper, which can only be use to heat up a house during the next power outage. The fact that Venezuelans massively support Maduro despite the fact that prices increase by at least a few tens of percent every day for several years — a real miracle. Again, hyperinflation cannot be attributed to sanctions or falling oil prices. It is enough to look at the country on which American sanctions, American intervention and civil war hit much harder — Syria. According to the CIA, at the peak of the war in 2016, the Assad administration managed to keep inflation at only 43.9%, and in 2017 it was brought down to 25.5%-that is, inflation is falling, and the economy is gradually returning to normal.
This example clearly shows the difference in financial discipline, and this comparison is clearly not in favor of Caracas.
We are now witnessing a rather acute political crisis, but for Venezuela such crises are, unfortunately, almost routine. Suffice is to recall actively supported by the US riots in 2014 and 2017, during which the legitimate government in Caracas also kept literally in the balance. If the administration of Maduro this time, too, will be able to keep the situation, it may even bring positive results at least in terms of changing the economic policy of the Venezuelan leadership, which just a few months ago (although Venezuela has been in a difficult economic crisis for many years) asked the Russian leadership to develop a plan for the normalization of the Venezuelan economy. If the legitimate government retains power and if the Russian plan is adopted for implementation, Venezuela will have a good chance to get out of the crisis and dramatically reduce its risks in the future. This will be good for Venezuela itself and for all its economic partners.
Can we write an epitaph for Socialism yet?
Running an economy of a nation based solely on some ideology is preposterous.
Having the massive mineral, oil and gas wealth in the ground that Venezuela had required, not more ideologues, but practical men and women who could manage the revenues and maintain the output of the natural resources.
Most of all, a government has to safeguard against corruption.
Venezuela could have become a near-paradise of educated, skilled, healthy citizens simply by being prudent.
Instead, vainglorious ideology overwhelmed the leadership. That ideology led to nationalization of the means of production and distribution. All businesses suffered under the lead boot of ideology. And the economy ground to a halt. Meanwhile the oil fields and associated infrastructure was not maintained. The golden goose was starved.
Ideology kills. It maims. It suffocates.
Combining it with corruption generally leads to disaster for all.
Venezuela became an easy target for the Hegemon to begin a regime change operation.
The odds are great against Maduro’s government.
He waited too long to change things. The Chinese wanted to run the economy for him two years ago. Now he recently asked the Russians for advise. But for two months, he hasn’t taken their advice.
Ideology, corruption and stupidity are often the brew of disaster. Maduro’s Venezuela has all three working against it.
Top 5 Dumbest Arguments Defending Trump’s Venezuela Interventionism
“1. “Socialism is bad!”
This one is easily the most common and most stupid of all the arguments I’ve been receiving. I’m not familiar enough with pro-Trump punditry to be able to describe how the MAGA crowd got it into their heads that attacking Venezuela has something to do with fighting socialism, but it’s clear from my interactions over the last couple of days that that is the dominant narrative they’ve got swirling around in their collective consciousness. Most of my arguments on this issue have either begun as or very quickly spun into an attempt to turn the debate about US interventionism in yet another South American nation into a debate about socialism vs capitalism.
Which is of course absurd. The campaign to topple Venezuela’s government has nothing to do with socialism, it’s about oil and regional hegemony. The US has long treated South America as its personal supply cabinet and destroyed anyone who tried to challenge that, and the fact that Venezuela has the most confirmed oil reserves of any nation on the planet makes it all the more central in this agenda. Yes, the fact that large sectors of its economy are centrally planned means there are fewer hooks for the corporatocracy to find purchase to manipulate it with, but that just helps explain why the US is targeting it with more aggressive measures, it doesn’t excuse the aggressive targeting. Venezuela does not belong to the United States, and attempting to control what happens with its resources, its economy and its government is an obscene violation of its national sovereignty.
Trying to turn a clean-cut debate about US interventionism into a debate about socialism is like if your family found out that your sister had just been raped, and you all started bickering about the pros and cons of feminism instead of focusing on the crime that had just happened to your loved one. It wouldn’t matter what kind of economic system Venezuela had; trying to overthrow its government is not okay. The narrative that this has something to do with championing capitalism is just a hook used to get Trump’s base on board with another unconscionable foreign entanglement.”
Her article is excellent throughout and I recomend using the link to her site to read the rest.
Regarding the dittoheads going ga ga over socialism, it is one of their main indoctrinations. It is also netanyahoo’s obsession. And that freak, and the fascism/nazism he represents is essentially what most pindo right wing pundits and media promote.
Do a search on the terms: “netanyahu leftists”, and you will see what I mean. Basically, the same indoctrinated toss gay edgar hoover and the dulles dullards and the rest of the 19th century holdovers spouted in defense fascist/nazi oligarchy. Fascism/nazism are in fact a remodel of 19th century capitalist oligarchy that ran the usa, europe and their colonies.
Venezuela’s problems don’t stem from being socialist, they have not attained that level, yet. They stem from capitalists controlling far too much of their economy, hostile, foreign aligned capitalists.
That is really the economic problem every country faces when they attempt to remain independent, or attain some decent modicum of independence, yet still operate inside the zpc/nwo sphere.
Look at Cuba for a “failure” of socialism, they are doing famn good. Got rid of the kleptos, and have kept them out, despite decades of economic and covert war from the zpc/nwo.
There are basically 2 main ways to confront the zionazi/nazi oligarchy, in my opinion. 1. work the system and slowly change it from within. Essentially, the tack Russia/China are working.
This works for countries who are powerful enough to defeat the zpc/nwo full spectrum dominance routine, like Russia and China, who are actually working as a well coordinated team, btw. It doesn’t work so well for weaker and more exposed counties. There are too many ways the zionazi-nazi-gays can sabotage their efforts. Even without actually invading.
Cuba took the other option, not much different from the early USSR, of clearing out the capitalists, removing their power altogether, and rebuilding from the ground up. Basically, because if they wanted to remain independent, and institute the social reforms they wanted, they really had no choice. Either cut out the cancer completely, or die from a recurring outbreak.
The point here is Cuba had no real choice, Russia and China, because of their strength, do.
Which brings me to another aspect. Russia and China have devised ways to defeat the zpc/nwo aggressive moves without war. The zpc/nwo needs war, or rather the degenerative societal state that allows it. Even craves it.
Both the Russian/Chinese and Cuban approaches are pragmatic counters to the zpc/nwo aggression, applied as required. I think the problems Venezuela is facing is the people doing the necessary changes, dedicated Chavez and Maduro government workers and supporters, did not have the power to go full independent, like Cuba was forced to do, without going into a state of civil war, with all that uncertainty and bloodshed, and were working to affect the needed changes without going to such a destructive stage.
Anyway, Johnston’s point about socialism not being the issue here is central, what sort of government Venezuela has is only an issue as to it remaining independent of the zionazi-nazi-gay oligarchy. First and foremost, it is their independence that chafes.
You, of course, are right. Oil is the name of the game. Venezuela has it, and the US wants it. They would like to grab most, if not all of it. Who, in his right state of mind, hands over the wealth of ones country to another country ? The raw materials of a country belong to that country, controlled by the government, so that all the people in the country can have benefits from it. If not, you will get what you have in the US and Europe, an elite, loyal to their money and not to their country. To them the ordinary people mean nothing.
Let’s also remind ourselves of the great achievements of the Venezuelan government.
In 2017 –
“The Venezuelan President Nicolas Maduro has announced that the government is on track to build 3 million homes by 2019 through its social program, the Great Venezuela Housing Mission.
President Maduro Celebrates 1.6 Millionth Home Built for the Poor
Before the end of July, Maduro said, 1.7 million homes will have been built through the program, which was created in 2011 by the leader of the Bolivarian Revolution, Hugo Chavez.
1,663,897 families currently live in homes built under the initiative.”
“All the houses we are delivering, from the 1.7 million to the three million will be delivered directly through the state, without managers or intermediaries,”
There have also been massive government initiatives in the fields of health care and literacy.
Funnily enough I can’t think of a single good thing the neoliberal regimes ever do for their working people only the many many ways in which they abuse them.
BTW – regarding Russian support. Isn’t Russia negotiating to build a military base on the Venezuelan island of Orchila?
Thank you for driving a very sharp stake into the heart of that very foolish argument.
About the disaster that Cuba is, while living in Mexico I have visited Cuba and from what I saw I can tell you that the average Cuban lives much better that the average Mexican. No doubt about it. (Of course the elite in Mexico lives much better than the elite in Cuba; they actually also live better than the elite in much of the planet.)
If you don’t believe me check the wikpedia about Cuba and Mexico and look at the “GDP (PPP) per capita”.
Cuba: US$ 22,237
(and this is an AVERAGE: this GDP is much-much-much more uniformly distributed in Cuba than in Mexico !)
So socialism is not necessarily that bad, can even be pretty good.
Having a stupid monetary politics is another thing and here the Venezuelan government deserves a Nobel Prize !
(like Obama got a Peace Nobel Prize).
And yes, most of the economy in Venezuela is in the hands of the opposition.
I always get tired of reading an economist’s drivel about so-many-billions-of-loans, since I’ve learned how money is actually brought into existence OUT OF THIN AIR and then lent at interest.
I also get tired of people bleating about one-or-another “bad” ideology only to put forward their own ideology, therefore confirming that they aren’t really against an ideology, but against ideology that clashes with their own.
If I was Maduro, I’d simply go full commie: abolish money, nationalize everything, feed the people, sit back and laugh at the world-wide chaos. It would be soooo funny to watch how the world Capitalism deals with that one.
Venezuela can’t feed the people, I read somewhere that they had assumed that high oil prices would last forever so they could just import food to supply to their people at low prices. Now with the oil price decline plus the sanctions the food situation there is dire.
Added to that is currency warfare being conducted against Venezuela by its neighbours at Washington’s behest, with fake currency flooding the country. Whatever Venezuela purchases from its neighbours might not actually be reaching Venezuela.
Taken together with all the other economic disasters Venezuela has committed, such as leaving its gold in London, etc, etc, it means that Venezuela does not have resistance economy, a war economy as some commentators prefer saying.
Rome’s collapse had some aspects similar to what is happening to the American Empire now. For Rome there was the Battle of Teutoburg Forest, where 3 Roman legions were wiped out, then there was Hadrian’s wall, where a wall was built to keep the Barbarians out. Trump’s wall seems about to be in progress, needed to protect the US welfare system from the hordes of Hispanics, but no-one seems to want to take care of a few US armies or fleets (the last along with the accompanying aircraft carriers), to cement the decline of the US.
Venezuela, whatever its stupidly self-inflicted injuries, seems prepared to fight. So Russia should support Venezuela by giving Venezuela some anti-aircraft systems and anti-ship systems. Some Spetsnaz chaps should be taught Latino and sent in to blend with the Venezuelan army to cause problems for any invading force, all plausibly deniable like. Venezuela’s mountainous topology is conducive for guerilla warfare. The resistance just needs to be kept up for a few years, say two at a minimum. Who knows, maybe Venezuela might be able to sink a US aircraft carrier in that time.
No-one thought the Syrian Arabs could resist for so long in Syria against all that was thrown against them, Arabs are supposed to scream and shout a lot initially and then just capitulate. Maybe the Venezuelans are also made of the sterner type of stuff. The Yemenis also have no food, and look how much grief they are giving Saudi Arabia, Israel and the US, so Venezuela might be able to do the same.
Of course, as mentioned by other commentators, Russia can support Venezuela by upping the ante a little bit more in the Middle East, Ukraine and Afghanistan, China can do the same with Taiwan, etc, etc, Iraq is entirely too quiet. The Yemenis are made of the right stuff, they really could do with Russian support. It needs to be ensured that Russian and US forces do not make heavy contact with each other to avoid WW3, otherwise all options are on the table.
“Some Spetsnaz chaps should be taught Latino and sent in to blend with the Venezuelan army to cause problems for any invading force, all plausibly deniable like.”
No need to have them. The Cubans alone can take care of the Brazilians, Colombians or whoever tries to do something stupid. Ask the South Africans (and their Israeli friends) what the Cubans did to them in Africa.
“Venezuela could have become a near-paradise of educated, skilled, healthy citizens simply by being prudent”. What do you mean by this ? Would you care to elaborate ?
In the pre-Chavez years you did not have socialism, but liberal style economics, where Venezuela was permitted to keep 1 % of it’s oil revunues, the remaining 99 % going to foreign oil companies. And the result ? Poverty and illiteracy, overturned by Chavez. Yes, the country has financial problems now, due to US imposed sanctions.
Socialism is not a bad model for a country which has wealth, like Venezuela, as then the whole country benefits from such a system. And yes, socialism may not work in a country devoid of natural wealth.
Russia is not a communist state any more, having introduced private enterprise. However, it has kept certain socialist characteristics, like Government ownership of chief raw materials, like oil, and rightly so. Some liberal characters in Russia had the audacity to demand that the oil industry be privatized. Indeed. As far as I can see, Russia has, basically, copied the Austrian model, applying the 50:50 principle, where small and medium sized enterprizes have been permitted, the Government keeping control of chief entities, like corporations. This is probably the best solution for many countries, if not all.
But maybe it can work in a country without natural resources.
Again comparing Cuba to Mexico:
Mexico has ENORMOUS natural resources, but its governments have been US lackeys for decades.
Cuba has almost no natural resource, mostly the Caribbean see and its hurricanes.
And see my comment above.
Mexico lies completely under the United States since 1957.
Someone should tell Larch about manifest destiny, the Monroe doctrine, golman sucks, the world bank and the oas.
How about capitalism instead? You know, the one of speculation, asset stripping, overcharging, regime change and warmongering, and the cherry on the top: derivatives, totalling in the hundreds of $trillions, and at its heart, cares absolutely nothing for humans, including yourself.
Drivel! EIGHTY percent of vz’s economy is controlled by capitalists, and you bring this Drek here?
The CAPitalists have Created shortages by hoarding ‘basic’ supplies in warehouses and distibution centers to drive Up opposition with hardship on the people.
Yes, I agree vz could be a comfortable place to live-IF they can Actually regulate, or Eliminate the capitalists.
Show me ONE country that has been Allowed to implement (scary)Socialism withOut being [email protected] with by oligarchal Scum.
Bottom line is you Can’t.
Ivan Danilov makes the fair point that not all Venezuela’s woes are caused by US interference.
Every decent person wants to see the country stabilise and get on it’s feet and Russia can be trusted to offer assistance without seeking to loot and destroy the country.
The link at the bottom of the article connects to an article in Russian.
However I wonder if this is what the author is referring to –
“Russia developed a plan to rescue Venezuela’s economy
Saturday, January 12, 2019 4:00:00 PM
Russian authorities developed a plan to pull its strategic partner Venezuela out of the deep crisis. Venezuela’s economy is in collapse and inflation reached about 1,300,000% last year, Russian publication the Bell reported, citing sources in Russian government.
There are four main points in the proposed package of measures.
First, Russian economists offer to introduce a basic income for Venezuelan households. They claim a basic income is a more effective measure to combat poverty than fuel subsidies that the government intended to introduce beginning January 1, 2019. “Real money can be spent both on fuel and the household necessities,” said an interlocutor familiar with the proposals.
Second, Russian officials propose to stop funding the budget deficit with new currency. In August last year, Maduro removed five zeroes from the currency and reissued it as the “sovereign bolivar,” but without any actions to reduce the budget deficit, the currency soon lost 95% of its value against the dollar.
Third, Russian economists proposed that Venezuela implement tax reforms, following the example of Russia, moving to indirect taxation instead of direct taxes.
The fourth measure proposed by Russia involves an increase in oil production and maximum export diversification.
It is not known if the Venezuelan government is ready to implement the recommendations of Russian officials, the news outlet reports. However, they got the important things they needed from Russia after the meeting with Maduro in early December. As a result of the talks, Maduro stated, Russia is investing over $5 billion into Venezuela’s oil industry and over $1 billion into the mining industry. Russia will also supply 600,000 tons of grain to the country.”
Removed. See Scott’s comment below. Mod
According to a RT report, the US sponsored coup attempt has failed so this may give President Maduro the opportunity to implement the suggestions Russia has offered. One thing is clear – things can’t go on as before.
The Bell, funded by the Omidyar Network, the same that funded the Kiev Maidan news, and Ukrainian uawire.org that posts on its front page statements of the press service of the Ukraine Security Service or SBU, are NOT reliable sources of information on Russian government.
Please, do not post these sources here.
Its not about budget deficit but about a budget abyss¡¡¡ with most government economic analist supporters saying that deficit is not a caus of the inflation.
Maduro has clearly shown that he does not know about economics, and it seems there is not a professional of the topic in any of the cabinet related posts.
Unfortunate for all venezuelans, like me, who thought that he should had quit this january but got lost in the trance because the vanity of this guy and of his party is too damn great. Chavez made a real large mistake with this one.
There are already plus 20 dead people and the riots are coming from the most popular districts. It doesnt even matter if there are street outlaws and cowards, malandros, runing free around them. They labeled them as entirely planned and just revolt in it, with like a boast of sugar. It becomes very frustate to live this everyday, managed by idiots and seeing another ones, who are much worst and greater, try to take the public power, and it includes trump on this part, another real idiot.
The colombians, brazilians and guyanese? must been savoring and tasting for what is to come. Looting and extracting territory.
I hope that Putin gets involved to stop the wig bufoon and his neocons from take all assets here. A la cuban missile crisis.
Although the situation remains tense, as deliberately fueled so by the hegemon and it’s vassals, it is hard to see the US getting sufficient popular internal or external support for this coup. Now that the Venezuelan military, for now, has rejected Guaido and vowed to defend Venezuela’s sovereignty, Maduro needs to move quickly to shore up support from the countries that have also rejected the US coup. Whilst Maduro has support from his own people (about 64% currently), his military, and permanent members of the UNSC, any attempt by the hegemon to force the issue will be catastrophic … and mostly so, eventually, for the US. I also think Trump has been trapped by Bolton & Pompeo, where a disastrous failure of foreign policy with regard to Venezuela (which the anti-Trump forces will no doubt seize upon) will likely end any chances of Trump gaining a 2nd term as president.
Blockchain technology documenting every step of the payment from source to final destination is verifiable and proven in many industries already
There is not too much hope that Maduro Government will survive.
And Venezuela sovereignty as well.
Maduro is not Chavez.
i would be more optimistic that Russia/Putin could actually affect Maduro enough to make the needed changes …(Russian private security personal are now protecting him)…if they had a better track record….in Syria refuting Israels lawlessness.
The fact that Venezuela has a second Congress with a building filled with people NOT elected and working normally says it all about the country government.
You cant make an omelette without breaking some eggs.
This failed coup attempt, the 5 or 6 attempt, gives to the government the opportunity to break some eggs.
I do hope they do it!
Like I e said here before, forget about Brazil or any South American country intervening in Venezuela affairs. It won’t happen!
But there is a real risk about Guiana. This is not a South American country…
And just like Kuwait with Iraq, they are stealing some oil making some sideway holes.
That’s where the danger is!
One of Venezuela’s big problems is that Maduro is a moron. I mean, literally illiterate; makes Trump sound like an intellectual. With someone like Assad, maybe Venezuela could make it; with Maduro, maybe not.