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Maduro’s power grab incites scuffles in Caracas

Latin American dictators once sent in tanks and soldiers. This week, Venezuela’s socialist president Nicolás Maduro dispatched judges. The motivation, in part, is money. The result, however, is the same: a coup.

Opposition leaders branded Mr Maduro “a dictator” and foreign governments decried the power grab after Venezuela’s government-controlled Supreme Court effectively annulled the National Assembly on Thursday, where the opposition won a majority in 2015 amid an unparalleled economic crisis that has left the country struggling to feed itself and on the brink of default.

“This ruling represents a point of no return,” said Freddy Guevara, assembly vice-president. “This piece of rubbish . . . has kidnapped the liberty of Venezuela,” said Julio Borges, assembly president, ripping up the court ruling to wild cheers in the chamber.

On Friday morning, violent scuffles broke out outside the Supreme Court as national guardsmen wielding truncheons clashed with students. Some opposition leaders have called for mass protests. But opposition appetite for an escalation of street fighting may be low after even 1m-strong anti-government marches in the past have produced no change.

The Supreme Court justified the ruling issued late on Wednesday night saying it flowed from Congress’ refusal to approve joint ventures between state-controlled oil company PDVSA and foreign energy companies, such as Russia’s Rosneft.

“This [Supreme Court] decision is at least partially driven by financial concerns,” said Risa Grais-Targow, Latin America director at Eurasia, the risk consultancy. “The government is probably trying to eliminate the assembly’s only remaining leverage over new financing in a context where it is cash-strapped and seeking a variety of multilateral and bilateral loans that the opposition refuses to authorise.”

These include a $400m loan from Latin American development bank the CAF; a $5bn loan from China; and two proposed oil deals by Rosneft that could see Russia’s largest energy producer pay an estimated $1bn for stakes in Venezuelan heavy crude ventures Petropiar and Petromonagas.

Venezuela’s National Assembly has repeatedly stressed that any oil deals signed without its approval are illegal and would eventually be annulled.

“I doubt that any other company [other than Rosneft] would be willing to sign a deal approved by the Supreme Court,” said Francisco Monaldi, fellow in Latin America energy policy at the Baker Institute in Houston. “But Rosneft has not ruled it out.”

Rosneft, headed by Igor Sechin, a close ally of Russian president Vladimir Putin, has drawn increasingly close to Venezuela lately. In November, it loaned $1.5bn to PDVSA subsidiary Citgo, using a 49.9 per cent stake in the US-based refinery as collateral. US senator Bob Menendez this month asked the US administration to review the loan.

The government is probably trying to eliminate the assembly’s only remaining leverage over new financing in a context where it is cash-strapped and seeking a variety of multilateral and bilateral loans that the opposition refuses to authorise

Venezuela is scrabbling to seal energy joint ventures that come with upfront payments and that can quickly boost sagging oil production, which fell 10 per cent last year according to Opec. Low energy prices have left the country struggling to service its near $100bn of international debt.

Venezuela has $9bn of bond payments this year, estimates Russ Dallen of Caracas capital markets, but central bank reserves of only $10.5bn, much of them in gold. The government, desperate to avoid default as that would see creditors seize oil cargoes, has slashed imports by over 70 per cent since 2012 in order to save money to pay its debts.

Opposition leader Henrique Capriles said the opposition would meet later on Friday to discuss the next steps. Likely to be in focus is a separate Supreme Court ruling issued on Monday that strips all “illegal” Congressional deputies of immunity. As the court has now deemed the assembly to be illegal, that essentially leaves all it members vulnerable to attack.

Mr Maduro, who has called the ruling historic, said the Supreme Court had given him “special powers to defend institutionality, peace, national unity and the ability to repudiate aggressive threats against our country”.

But in a rare break with Mr Maduro, Venezuela’s attorney-general, Luisa Ortega, rebuked the Supreme Court’s decisions calling them a “rupture of the constitutional order. It’s my obligation to express my great concern.” Ms Ortega is usually considered a staunch government ally.

The Venezuelan government’s legal manoeuvrings come amid growing international pressure. Presidential elections are currently scheduled for 2018. But last year Mr Maduro suspended a constitutionally-allowed referendum that would almost certainly have seen him lose power.

On Tuesday, the 35-country Organisation of American States urged Venezuela to respect the functioning of democracy. The US, EU, Brazil, Mexico, Colombia, Chile, Panama and Guatemala criticised the Supreme Court’s moves on Thursday.

Delcy Rodríguez, Venezuela’s foreign minister, responded on Friday: “We denounce the conspiracy by rightwing governments who attack [Venezuela’s] constitutional order.”

Ecuador, which holds a hotly contested and very tight presidential election this Sunday, is one of the few regional allies Venezuela has left. Others include communist Cuba, and socialist Nicaragua and Bolivia.

“The government’s radicalisation is perfectly predictable given the economic deterioration and international pressure,” said Luis Vicente León, a leading pollster and analyst in Caracas. “This is only the beginning,” he warned.

Via FT