Pressure Mounts in Venezuela

The Venezuelan dictatorship is trying to use a nationwide power outage against its political opposition by claiming sabotage. Another explanation may be the colossal failure, over many years, to invest in the country’s decrepit hydroelectric plants. The unsolved mystery is why it didn’t happen sooner.

The blackout and the chaos that has ensued is a metaphor for the catastrophe known as Venezuela. Every aspect of the nation’s infrastructure, physical and institutional, has broken down.

The power outage also supports the hypothesis that Mr. Maduro is vulnerable and might be toppled with the right amount of financial pressure.

The Trump administration announced in January that it would divert American payments for Venezuelan oil to an escrow account for interim President Juan Guaidó. Mr. Maduro has responded by looking for new markets that will pay cash to the state-owned oil monopoly-known by its Spanish initials, PdVSA. Inventories have been building, which has hurt the regime but not enough to dislodge Mr. Maduro.

Venezuela’s Cuban bosses don’t care about the suffering of the Venezuelan people and are desperate to hang on to their South American satellite. The question is whether some part of Venezuela’s military high command can be convinced by this financial strangulation that its interests are better served supporting the democracy that Mr. Guaidó represents.

Now the U.S. says it will turn up the heat. The State Department announced last week that another 77 Venezuelans will have their U.S. visas revoked. But the Trump administration understands that without a shift in military loyalty, Mr. Maduro’s Cuban handlers can keep him from resigning.

To that end, national security adviser John Bolton warned Tuesday the U.S. is “looking at new sanctions, new measures to tighten our grip on Maduro’s financial wherewithal, to deny his regime the money that they need to stay in power.”

Kevin Book, managing director at ClearView Energy Partners in Washington, says this could be a reference to “secondary sanctions,” which would block third parties from transacting with PdVSA-similar to sanctions on Iranian oil.

One big problem for Mr. Maduro could be access to diluent, a petroleum product that PdVSA needs to mix with its Orinoco heavy crude for it to flow in pipelines and reach refineries and export markets. Because of the new U.S. policy, which bans petroleum exports to Venezuela, the regime has lost access to American diluent. But the regime has been able to replace it with shipments from India and Russia, albeit with higher transaction costs.

Secondary sanctions, Mr. Book said, could choke off Venezuela’s new supplies of diluent. Venezuela is also bracing for gasoline shortages as exports from its Citgo refineries in the U.S. are also banned.

S&P Global Platts noted last week that its survey data show “Venezuela’s oil production has fallen 910,000 b/d [barrels a day] in two years.” It also reported that S&P Global Platts Analytics “forecasts that US sanctions will cause Venezuelan crude output, which averaged about 1.2 million b/d in January, to fall to 825,000 b/d in the fourth quarter of this year and then to fall to an average of 750,000 b/d in 2020.”

Because chavismo destroyed domestic production, Venezuela has to import most necessities. This requires the hard currency generated by oil exports. The U.S. has offered to counteract the suffering of the Venezuelan people with humanitarian aid, but Mr. Maduro won’t have it.

He’s taking his cues from Havana, as Univision producer María Martínez Guzmán noted after she was briefly detained in Caracas by the dictatorship last month along with anchor Jorge Ramos and others from the Spanish-language television network. “All Cuban accents,” she emphatically told reporters after her release. “The inner circle of Maduro are Cubans.”

Among Cuba’s achievements in Venezuela is the infiltration of the military. For years it’s been rewarded for sticking with the Havana script. But without the money to pay Venezuela’s generals-who number well over 1,000-Cuba will have to rely on terror. That has its limits.

Notice that the Venezuelan military hasn’t turned on Mr. Maduro but it hasn’t moved against protesters either. Mr. Maduro knows he can’t trust them, which is why he taps Cuban-trained paramilitary, the National Guard and special forces to do his dirty work against civilians.

In the weeks ahead Cuban propagandists will say that the U.S. is starving the Venezuelan people. But a Guaidó failure to restore democracy would trigger another wave of Venezuelan migrants numbering in the millions that will spread hardship in South America far beyond Venezuela. It will also be a boon for criminal organizations like Colombia’s ELN and FARC, terrorists who use Venezuela as a safe haven. Last week’s blackout would look orderly by comparison.