Socialism’s triumph: Oil-rich Venezuela is out of gas

Nicolas Maduro

As the Venezuelan economy continues to circle the drain, perhaps the quintessential symbol of the extraordinary personal incompetence of President Nicolás Maduro and of the thoroughgoing failure of the socialist system he inherited from his predecessor, the late Hugo Chávez, has been the mind-boggling inability of this, one of the top oil-producing nations on earth, to meet its own people’s demand for gasoline. This shortfall has occurred despite the fact that Venezuela has actually been importing fuel – for most of which, according to reports, it has been unable to pay its bills.

Cars lined up for gas at Maturin, Venezuela, on March 23

Over the last few months, despite continual reassurances by Maduro, the supply crisis has only gotten worse. On February 21, Maduro promised “good news soon” because he had installed a “new PDVSA board” that was dedicated to fighting “corruption and unnecessary costs.” On March 22, however, thanks to maintenance issues, production challenges, shipping difficulties, and a shortage of working trucks attributed to a lack of spare parts – in other words, significant problems at pretty much every stage of the oil extraction and distribution process – the situation had deteriorated to a point at which the entire nation was experiencing a critical shortage of petrol. At gas stations across the country, dozens of cars could be seen queued up, their owners hoping in vain to be able to fill their tanks.

Eulogio del Pino

Aside from the magnificently unmasterly Maduro himself, the personification of this embarrassing dilemma is Eulogio del Pino, president of the country’s colossal oil entity, Petróleos de Venezuela (PDVSA), which is the primary engine of the nation’s economic power, such as it is. Or was. In a touch that would seem insane in the policies of any country but that these days seems par for the course for the Bolivarian Republic, just a couple of days ago came the news that Venezuela, despite its domestic oil crunch and its emergency oil-import policy, had not only continued but stepped up fuel exports to Cuba, Nicaragua, and other allies.

On March 23, a man in Maturin pushes his car after running out of gas

But, as with much else about Venezuela’s current, many-faceted nightmare, the chief culprit here seems to be Maduro himself. Apparently more interested, even now, in shoring up and enhancing his own power than in trying to rescue his nation from catastrophe, he’s dismissed relatively skilled key officials in the PDVSA and replaced them with his political and military cronies, most of whom have little or no background in the oil business – or, for that matter, in the competent management of anything. Other PDVSA executives, recognizing that Maduro’s hirings and firings are only helping to drive the state-owned company even further into the ground, have jumped ship of their own accord, presumably recognizing that at this point, under present governance, the whole massive enterprise is, quite simply, doomed.  

In the midst of all this drama, Del Pino, in what can only be read as a display of the remarkably tone-deaf insouciance that so often characterizes the mindless, mediocre agents of ineffectual and indifferent authoritarian states, visited a fuel distribution plant where, in response to a chorus of irate complaints by laborers about their working conditions and salaries, simply smiled inanely, loftily ignoring their concerns. Somehow, that distant and detached reaction seemed the perfect summing-up of the whole ridiculous tragedy.

Tony Blair’s dirty money

Tom Bower is an English investigative journalist who for more than three decades has been winning plaudits for his eye-opening books about such figures as war criminal Klaus Barbie, newspaper baron Robert Maxwell, business tycoon Richard Branson, and Labour MP Geoffrey Robinson. In 2003, he won the William Hill Sports Book of the Year Award for an exposé of corruption in English soccer.

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Tony Blair

Now (speaking of corruption) he’s published Broken Vows – Tony Blair: The Tragedy of Power, which tears back the curtain on the former British prime minister. Several excerpts from Bower’s book have been serialized in the Daily Mail, and they’re all of immense interest, probing Blair’s incompetent moves on education, health, and immigration, his missteps on Afghanistan and Iraq, his bellicose relationship with Gordon Brown, and much else. But three excerpts contained revelations about Blair the post-Downing Street wheeler-dealer – the useful stooge par excellence – that will be of special interest to readers of this website.

Bower takes us back to 2007, when Blair resigned from the top post and took up the role of Middle East envoy for the U.N., E.U., U.S., and Russia. Unfortunately, that position – however prestigious – was unpaid, and Blair, after living on a prime minister’s modest salary for a decade, was ready to be rich.

Very, very rich. 

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Bernard Arnault

He mentioned this desire to his former chief of staff, Jonathan Powell. Powell then spoke with a headhunter, Martin Armstrong. He, in turn, had a meeting with the CEO of J.P. Morgan, Jamie Dimon, who, meeting with Blair, offered him $100,000 to sit on the bank’s board. But Blair was insulted. $100,000? For an ex-PM? Hewanted more. Lots more. Forty times more. Specifically, he wanted “at least £3 million a year, a five-year contract as an adviser and a percentage of every contract he initiated.”

He got it. For whatever reason, Morgan agreed to give him pretty much everything he wanted. And that was just the start. He also got a £180,000-a-year stint as climate-change advisor to a Swiss insurance firm. Plus another “advisory” gig on the payroll of Bernard Arnault, the richest man in France. And yet another job “representing” – whatever that means – “a wealth fund based in Abu Dhabi.”

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Tarek El Aissami

While busying lining up these income-generating activities, Blair did something else: he set up (and hey, which one of us hasn’t, at one time or another?) a complex maze of limited-partnership shell companies through which to collect and channel cash from these and other paymasters – and to hide from authorities the true dimensions of the wealth he was now beginning to accumulate. This network of phony firms was, and is, no different from those set up by various crooks in places like Venezuela and Argentina whose hijinks we’ve recounted on this site over the past few months.

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Wilmer Ruperti

We’re talking about people like Tarek El Aissami, the thuggish governor of the Venezuelan state of Aragua, who, it will be remembered, lifts massive amounts of money from his state’s treasury and launders it through a vast network of shell companies, the chart of which, as we’ve noted, “looks more complex than the organization of the U.S. government itself.” And then there’s shipping magnate Wilmer Ruperti, who, in order to fool a Russian ship-rental enterprise into thinking it was chartering oil tankers to PDVSA, the Venezuelan national petroleum firm, set up a web of shell companies, to one of which he gave a name similar to PDVSA. Leasing a fleet of tankers from the Russian outfit, Ruperti then rented them to PDVSA at a profit. (And what does your dad do for a living?)

These are the kind of lowlife scum whose shabby stratagems Tony Blair, the former prime minister of the United Kingdom, has plainly studied up and imitated. Following their example, he’s lined his pockets magnificently.

But as we’ll see tomorrow, his similarity to these useful stooges goes beyond the mere setting-up of fake front companies. Tune in. 

Mr. Wrist Watch, and other chavista absurdities

Yesterday we became reacquainted with longtime chavista Rafael Ramírez, currently Venezuela’s ambassador to the United Nations and the subject of a multifaceted corruption probe by U.S. authorities who are looking into his activities as ten-year head of the PDVSA, Venezuela’s state-owned oil entity. 

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Rafael Ramírez

The Wall Street Journal, in an extensive October article, served up some of the goods on him. Back when he was in charge of PDVSA, according to one insider, Ramírez “ran the company like a family business.” The Journal served up an anecdote: the directors of a Spanish construction company arrived at the presidential suite of a Caracas hotel to talk with Ramírez, with whom they’d agreed to discuss their possible involvement in a $1.5 billion government project. Instead of meeting Ramírez, however, they were received by Ramírez’s cousin, Diego Salazar, who told them that they’d “have to pay at least $150 million in kickbacks to be in the running” for the contract. If they weren’t prepared to pony up that sum pronto, said Salazar, they were welcome to return immediately to the airport and fly back to Spain.

(They said no, by the way.)

Salazar, too, as it happens, is now under U.S. investigation. We’ve met him before on this site, and have noted that – thanks to his well-placed cousin – he “went in a trice from being a lowly insurance salesman to being one of the richest men in the country, owning a private plane, a private orchestra of some 100 musicians, ‘almost all the apartments’ in a Caracas luxury complex, and much else.” The Wall Street Journal‘s October report added some more colorful details:

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Diego Salazar

People close to Mr. Salazar say he enjoyed a life of private jets and sumptuous meals in the company of beauty pageant contestants. He was known to lead his own private orchestra, singing romantic ballads in concerts attended by friends and employees, these people say.

He loves to flaunt his money in people’s faces,” says the former top Venezuelan government official who knows Messrs. Salazar and Ramírez.

In the car-clogged streets of Caracas where traffic often slows to a crawl, Mr. Salazar drives a Ferrari—followed by an SUV full of bodyguards. He is so obsessed with expensive watches, friends say, that he sometimes hands out new Rolexes to people who attend his parties after first ceremonially grinding their old watches into scrap in a mortar and pestle he keeps handy.

In transcripts of conversations taped by Spanish police, Mr. Salazar’s acquaintances refer to him as “el Señor de los Relojes,” or “Mr. Wrist Watch.”

bancaAbout that U.S. probe: among the institutions that figure in it is Banca Privada d’ Andorra (BPA), a bank in the tiny principality of Andorra, which was used by Ramírez, Salazar, and other corrupt chavistas to launder over $4 billion in dirty money, about half of it from PDVSA. The findings of the U.S. investigators led to the bank’s seizure by Spanish and Andorran authorities; Spain, too, is now looking into the hijinks of Messrs. Ramírez and Salazar. Documents reportedly show that “Salazar received hundreds of millions of dollars in his accounts in Andorra from firms, many of them shell companies in Panama, Belize and the British Virgin Islands,” and that he “gave Venezuelan police an $80,000 bribe to ignore suspicious transactions.”

It will be fascinating to see how this all plays out now that the Venezuelan parliament is finally in the hands of the democratic opposition.

Faces of chavista corruption

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Leopoldo López in his prison cell

In late December, answering questions sent to him by the newspaper El Nacional, the popular, articulate Venezuelan opposition leader Leopoldo López – who’s been in prison since February 2014 for the crime of being, well, a popular, articulate opposition leader – said that the next priority, after the seating of the pro-market, anti-chavista parliament that was elected on November 6, has to be the ousting of the country’s dictatorial honcho Nicolás Maduro.

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López at an anti-government protest before his imprisonment

Maduro’s term doesn’t end until 2019, but López, who was sentenced to a 14-year term and who’s expected to be released by the new parliament (which went into session yesterday) over a promised presidential veto, insisted that some legal way must be found to remove Maduro from office, so that Venezuelan citizens could regain control of their national institutions. “Today,” said López, “the unconstitutionally appointed Supreme Court continues to be hijacked.The Attorney General protects the powerful and in Venezuela the victims who dare to complain are the ones who end up imprisoned.”

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Alejandro Andrade

It will be interesting to see whether the opposition actually does try to unseat Maduro when it gains control of the legislature. In any case, the president’s opponents already have announced a lengthy agenda, which addresses many of the issues – and useful stooges – we’ve discussed previously on this site. Among their proposals: improvements in legislation that would make possible the repatriation of taxpayer funds stolen by corrupt politicians and their cronies. The corrupt politicians include three pre-Chávez presidents, Luis Herrera Campins, Carlos Andrés Pérez, and Jaime Ramón Lusinchi. Among the chavista crooks they hope to target is Alejandro Andrade, aptly described as “the most emblematic figure of corruption” because of his “accumulation and ostentatious display of a five-billion-dollar fortune.” As we explained last May, Andrade got rich the old-fashioned way: back when he and Chavez were kids, Chávez inadvertently blinded him in one eye during a game of “chapitas”; later, when Chávez became the great caudillo, he installed Andrade in a series of jobs – ultimately head of the national treasury – that enabled him to steal epic amounts of cash by means of a variety of ingenious schemes.

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Rafael Ramírez

And let’s not forget Rafael Ramírez, the Chávez crony (and, in the words of the Wall Street Journal, “soft-spoken son of a Marxist guerrilla”) who last year served briefly as Venezuela’s Foreign Minister. Before that he spent ten years (2004-2014) running the government-owned oil firm, PDVSA, where he commanded his underlings “to vote for Chávez or else” and tweaked the nation’s already corrupt oil racket in such a way as to make it, in the words of one obsever, “rotten to the core.” As we’ve noted, he “ultimately achieved the impossible: bankrupting the state oil firm of one of the world’s leading oil powers.”

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Ramírez at the UN

Where is he now? Since December 2014 he’s been Venezuela’s man at the UN. In October he reacted with outraged to news of “a series of wide-ranging investigations” by American authorities into his tenure at PDVSA, the idea being to try to find out whether he and various amigos “used PDVSA to loot billions of dollars through kickbacks and other schemes” and “whether PDVSA and its foreign accounts were used for other illegal purposes, including black-market currency schemes and laundering drug money.” It’s an open secret that corruption is hardly a strong enough word to describe what Ramírez was up to at PDVSA, but Ramírez dutifully pulled off the outraged-innocent act, calling the U.S. probe “slander…a mass of lies and manipulation” and (of course) “part of a campaign…against our country, our government and our revolution.”

Rogues’ gallery

Last time around we offered an overview of that species known as the bolifunctionario – the small-time, big-ticket racketeers with whom Hugo Chávez and his successor, Nicolás Maduro, have surrounded themselves, and who have become billionaires at the expense of Venezuelan voters. Now, let’s look at a few of these hooligans individually.

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Alejandro Andrade

Alejandro Andrade is an old pal of Chávez for whom an injury in a game of “chapitas” (a variation on baseball) turned into riches. In the game, Chávez threw a soda or beer cap which Andrade was supposed to hit with a broomstick; instead, the cap struck Andrade in the eye, half-blinding him for life. Chávez paid Andrade back by putting him in charge, in turn, of various public funds and, eventually, the National Treasury; while in these jobs, according to investigations by the FBI, DEA, SEC, and State Department, Andrade stole billions of dollars, which he spent on (among other things) a Florida mansion, a South Carolina farm, a Lear jet, some 150 thoroughbred horses, and a majority stake in a major TV channel.

To read through the list of Andrade’s ploys is to admire his ingenuity and versatility. For example, while head of the country’s Social Development Bank (a.k.a. Bandes), he made at least $66 million in kickbacks by selling Venezuelan bonds to a New York broker and buying them back at inflated prices. Andrade also put together a system that managed to provide funds for the ruling PSUV party while also enriching him and his confederates in the scheme. He’s so good at sponging up cash, indeed, that Chávez, just before his death, paid him the ultimate compliment – he wrote a letter placing his daughters’ future economic security in Andrade’s hands.

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Alejandro Betancourt, Pedro Trebbau López

Pedro Trebbau López and Alejandro Betancourt are the quintessential bolichicos – co-founders of Derwick Associates, a company that materialized out of thin air in 2007 and almost immediately began winning government contracts to build power plants, an activity in which neither Trebbau nor Betancourt had any expertise whatsoever. The firm is accused of having overbilled the government by some $3 billion and of paying at least $50 million in bribes, and together or separately its two principals own a Falcon plane, a Bell helicopter, a home in Miami, an office on Park Avenue, and a farm in Spain.

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Diosdado Cabello

Chávez crony Diosdado Cabello is President of the National Assembly, which he runs like a thug – silencing, intimidating, and even, on one occasion, ordering the beating of opposition legislators right there in the chamber. Known unaffectionately as “The Godfather,” he owns a slew of banks and insurance firms and also supposedly has his hand in some shady companies that run the Caracas ports. At last count, he was the defendant in at least 17 corruption cases, one of which accuses him of having received at least $50 million in bribes from Derwick Associates.

Also worth a mention is Cabello’s brother José David Cabello, who has served as head of the international airport in Caracas, Minister of Infrastructure, and President of the National Customs and Tax Administration (Seniat), without having a background in any of these fields.

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Rafael Ramírez

Rafael Ramírez held several high-level energy posts before serving briefly last year as Foreign Minister; he’s now UN ambassador. While head of the state oil firm, PDVSA, he ordered employees “to vote for Chávez or else.” With three cronies, he rearranged the processing of Venezuela’s oil income to make it utterly lacking in transparency, resulting in a system that one industry source called “rotten to the core” and that ultimately achieved the impossible: bankrupting the state oil firm of one of the world’s leading oil powers.

Then there’s Ramírez’s cousin Diego Salazar, who – thanks to a multimillion-dollar insurance policy Ramírez took out on PDVSA – went in a trice from being a lowly insurance salesman to being one of the richest men in the country, owning a private plane, a private orchestra of some 100 musicians, “almost all the apartments” in a Caracas luxury complex, and much else. He’s been investigated by the U.S. Senate for corruption – but it would take more than that to cramp his style.

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Tarek El Aissami

We’ve already mentioned Tarek El Aissami, governor of the state of Aragua and head of the ruling PSUV party. The American Enterprise Institute has called him “thuggish,” but this seems like a polite understatement. It may sound like a joke, but Aissami’s dad actually ran the Venezuelan branch of Saddam Hussein’s Baath Party, and Aissami himself – who was a college friend of Chávez’s brother – came to be known as Chávez’s personal link to Hezbollah, Hamas, and Islamic Jihad.

Aissami has funneled cash to these groups, and when he was head of the agency that produces national ID cards, he provided Venezuelan cover identities to some of their members. As if that weren’t impressive enough, he also recruited young PSUV members to train in Lebanon for guerrilla war against the U.S.

But aiding and abetting terrorism is just a sideline for Aissami, whose main activity, it seems, has been sponging up taxpayer money and laundering it through his “multilayered and vast network of shell companies,” the chart of which looks more complex than the organization of the U.S. government itself.

(Bonus factoid: Aissami’s brother Firaz is involved with drug trafficking and has over $21 million in a Swiss bank.)

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Wilmer Ruperti

Shipping magnate Wilmer Ruperti, who thanks to “illegal deals with corrupt thugs” became “the go-to guy for nearly all PDVSA-shipping needs,” provides a fine example of the cartoonish extent to which Venezuelan self-enrichment schemes can go: in order to fool a Russian firm into thinking it was chartering oil tankers to PDVSA, Ruperti set up “an elaborate network of shell companies,” giving one of them a name very close to that of PDVSA, and leased tankers from the Russian firm, then rented them to PDVSA at a hefty profit. Alas for him, U.S. and U.K. authorities got wind of his dodge and took him to court; in the U.K. case, he had to pay $59 million in damages. But he’s not suffering: he owns a bulletproof BMW, a jet, a veritable palace in Caracas, and a Miami Beach mansion that, on paper, is owned by (of all people) Gloria Estefan’s husband.

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Victor Vargas

Victor Vargas, who runs several banks and companies around the world, has long been known as the “Chávez Banker.” Translation: he’s said to have “made a backroom deal with Chávez’s government to handle some of the revolution’s murkier financial transactions.” As we’ve noted, Vargas may or may not own Cadena Capriles, Venezuela’s largest media conglomerate, which was purchased through a proxy on the island of Curaçao; if he does own it, moreover, he’s probably a front for the government, which has an interest in controlling as much of the nation’s media as possible. Vargas owns a major polo team, a stable of 60 ponies, a private fleet of jets, two yachts, a helicopter, homes in Europe, a huge estate in Venezuela, and mansions in Santo Domingo and Palm Beach.

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Luisa Ortega Díaz

Luisa Ortega Díaz is Venezuela’s General Prosecutor, a position she’s used to undermine media rights and to imprison journalists and politicians (notably opposition leader Leopoldo López). In 2009 she proposed a Media Crimes Law to curb “the irrational use of power by the media” and “regulate freedom of expression.” While ignoring the embezzlement by officials of truckloads of cars, motorcycles, computers, cameras, and other government-owned items, she’s used forged evidence to prosecute opposition legislators; and while threatening to “severely punish” so-called “hoarders” of basic foodstuffs – a widespread and thoroughly understandable phenomenon in Venezuela, where things are so screwed-up that you can’t be sure you’ll be able to buy bread, butter, or milk any time in the next few weeks – she’s been photographed shopping at high-end boutiques on the Rue Saint-Honoré in Paris.

All this, note well, is just a small sampling of the sleazy operators who make up the Maduro regime.

[NOTE: Corrected on December 22, 2015, to reflect the fact that Rafael Ramírez, at the time this post went up, was UN ambassador, not Minister of Finance.]