Venezuela

An oil-for-food program in Iraq was mired in corruption. Can it work for Venezuela?

It’s a simple but controversial idea: allow the Venezuelan government to export oil to the United States on the condition that the revenue is used exclusively for much-needed food and medicine.

Talk of an oil-for-food program for Venezuela has been bouncing around academic circles since Washington began ratcheting up sanctions on the country in 2017 — and quit buying virtually all Venezuelan crude in January.

Now Francisco Rodríguez, a well-known Venezuelan economist and political adviser, is launching Oil For Venezuela, a U.S.-based nonprofit that is lobbying for the scheme. It will be an uphill battle, not only requiring the cooperation of bitter foes in Venezuela but the approval of the Trump administration, which has been turning the screws on the nation’s economy as it tries to oust leader Nicolás Maduro.

Part of the Venezuelan paradox is that even though it boasts of having the world’s largest oil reserves, its people are going hungry.

The United Nations Food and Agriculture program now says the number of undernourished Venezuelans has more than doubled in the last decade, from 2.8 million people in 2004-06, to 6.8 million people in 2016-18. By that measure, more than 20 percent of Venezuelans aren’t getting enough to eat.

The hunger crisis has been one of the main reasons that more than 4.3 million people have fled the country in recent years.

And yet Maduro seems no closer to stepping down. And Juan Guaidó, the head of the National Assembly and the man Washington and more than 50 other nations recognize as Venezuela’s legitimate leader, seems no closer to assuming real power.

“What’s frustrating is that there is a lot of thinking in the policy world about what will happen the day after Maduro leaves office,” Rodríguez said in a telephone interview from New York.

The U.S. Agency for International Development and other global bodies have talked about the aid ready to flow in once Maduro is ousted. But it’s unclear when that day will come.

“At the very least, that day may be a lot further away than has been expected, and in the meantime, there are very serious problems that need to be dealt with,” Rodríguez said. “We have to find solutions that are not conditional on the resolution of the country’s political crisis.”

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A well-run oil-for-aid program could make a significant difference in Venezuela, a country that imports almost everything and is reliant on its oil revenue.

In January, Washington took aim at the country’s economic heart, essentially barring all U.S. companies, with a few exceptions, from buying Venezuelan oil.

The move is accelerating the crash in crude production and exports that began years earlier. In August, Venezuela was producing just 712,000 barrels of oil per day — down from 1.2 million per day a year ago, according to OPEC figures.

Rodríguez said that January’s oil sanctions affected some 400,000 barrels of oil per day — worth about $8 billion a year, roughly the same size as Venezuela’s total imports for 2019.

Venezuela’s food and medicine imports this year will be about $1.1 billion — down from $2.3 billion last year, Rodríguez said.

So if even a fraction of those 400,000 barrels were incorporated into a food-for-oil program “that would be enough to import food and medicine into Venezuela and it could make a huge difference to Venezuela living standards,” he said.

The obstacles are massive. Both Maduro and his rival Guaidó control key levers of the economy, so both men would have to sign off on the deal for it work. While Maduro controls oil production, the Guaidó government controls key U.S. bank accounts tied to the state-run PDVSA oil company and has the recognition of a broad swath of the international financial community.

Hardliners within the Trump administration would also have to sign off.

“You have to get Guaidó and Maduro to agree, and then there is the United States — so there are three parties involved,” Rodríguez said. “But if you get Guaidó and Maduro, I can’t see the United States saying no.”

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Rodríguez is well known in Venezuelan circles for heading Torino Capital, an economic think-tank. In 2018 he worked as an adviser to presidential candidate Henri Falcón, who fell afoul of the broader opposition when he ignored calls to boycott the election and ran against Maduro.

Rodríguez said he left Torino Capital a month ago to focus on this new initiative.

Oil-for-food programs have a troubled history. In 1995 the United Nations began allowing Iraqi strongman Saddam Hussein to sell oil in exchange for food, medicine and humanitarian aid under the premise that international sanctions were hurting everyday Iraqis.

But a 2005 report found that Hussein had exploited the program, earning some $1.7 billion in kickbacks and $1.9 billion in illegal oil smuggling. And in 2007, the U.N. official in charge of the program, Benon Sevan, was indicted in the United States for taking $160,000 in bribes under the deal and went on the lam.

“The program — the oil-for-food scandal — got a lot of bad press and it’s understandable. A top U.N. official ended up being a fugitive from justice,” Rodríguez said. “So there are good reasons to try to avoid that.”

But that program also helped ease suffering of the Iraqi population, and it provided a blueprint — complete with pitfalls — that a Venezuelan scheme should avoid.

In particular, Rodríguez said, that Maduro and his allies shouldn’t be allowed to dictate who gets the oil contracts. Also, they shouldn’t be allowed to move the food, medicine or aid through the government’s subsidized food network, known as the CLAP.

“That has to be a big no-no,” Rodríguez said. Maduro “cannot use this for political patronage or to blackmail the people of Venezuela.”

Instead, Rodríguez imagines an independent board — made up of Maduro, Guaidó and U.N. appointees — selling the goods at a reasonable price in Venezuela and using the proceeds to fund a cash-transfer program for the poorest.

Rodríguez acknowledges this is a politically fraught proposition that would require an unprecedented level of cooperation between bitter foes. But he says the world has to do something while the political situation in Venezuela resolves itself.

As Maduro and Guaidó struggle for control, “we don’t know who’s going to win this,” Rodríguez said.

“But we can design something that will have the support of Guaidó and Maduro,” he said. “We have to find something that civil society and ordinary Venezuelans think is a good idea.”

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