So, What’s the Deal With Venezuela?

As the situation in Venezuela intensifies, familiar names enter the fray in the world’s newest international standoff.

A scenario, if you will. You’re the president of a country. Your country isn’t that big, but it has a TON of a certain natural resource (let’s say oil). Not only do you have more oil than you know what to do with, but you have more underground reserves than anyone else in the world. In fact, you have so much oil, that you and some of your friends get to decide how much the rest of the world has to pay for it.

Sounds great, right? Well, don’t forget that getting access to this oil is expensive, too. It costs money to buy and ship drilling equipment from other countries. Refining oil gets very pricey and labor costs ain’t cheap either. Normally these shouldn’t put too much of a burden on a country’s production, especially since your country has so much oil. But, you’re also behind on loan payments to your creditors (let’s say China and Russia), and decades of corruption and expensive projects mean that money is scarce. So, you cut back on oil production, causing less money to come in, which means less money to fund production, meaning even LESS money. Rinse and repeat, and when you combine that with political instability and historically low gas prices…

Crisis.

This is what’s going on in Venezuela. Even though you and I love seeing that $1.97 price-tag at the pump, the inability to sell oil on favorable terms when production is at a record low has been a disaster for Venezuela’s economy, and their autocratic president, Nicolas Maduro, is sweating bullets.

As if to add more oil to the fire (sorry, I couldn’t resist) in response to Venezuela’s economic woes, Juan Guaido, head of Venezuela’s National Assembly, declared himself acting interim-president and swore to assume executive powers. President Trump was quick to take to Twitter with his decision to support Guaido, and many of the United States’ allies have followed suit. In response, China, Russia and their allies threw their support behind Maduro.

Uh oh…

Now, some of you reading may have strong opinions one way or the other on this issue, but politics aside, there’s something we all need to recognize: Even if you hate Maduro, Russia and China are completely within their rights to support him. The Venezuelan government owes China and Russia nearly $30 billion combined, and if Guaido succeeds, his new government is likely to dismiss these debts to help pump more money into Venezuela’s economy.

So, we once again find ourselves at the brink of an international stand-off—one very close to home, I might add. In the meantime, Russia and the United States are going to keep shaking their fists at each other, and newly-imposed American sanctions on Venezuelan oil are going to make the local situation even more difficult.

Will Democracy and liberalism prevail in Venezuela? Too soon to tell. WAY too soon. Maduro’s regime could collapse tomorrow, next month, next year or never. Right now, the situation is extremely delicate, and all we can do is hope the situation doesn’t spiral out of control.