U.S. Sanctions on Venezuela Are Finally Working

Jun. 3, 2019
by Bob Adelmann

Just before Juan Guaido, Nicolas Maduro's opposition in Venezuela, called for his people to gather in front of Maduro's presidential palace - "the largest march in the history of Venezuela" - this writer reminded readers that a similar gathering abruptly ended another dictatorship in Romania in 1989. This writer then suggested that perhaps lightning might strike twice, ending Maduro's oppressive regime in a similar manner.

Sad to say, it didn't happen. In some quarters it was suggested that Guaido's failure strengthened Maduro's dictatorship simply by surviving the threat.

Behind-the-scenes talks between Maduro's people and Guaido's in Norway failed to come to any sort of agreement, as well, further confirming that Maduro was likely to remain in place for the foreseeable future.

Suddenly one of Russia's military suppliers to Venezuela decided to pull out, giving the Maduro regime a body blow from which it may not recover. According to the Wall Street Journal, Maduro has been unable to pay Rostec's bills, and the company is quietly pulling out its 1,000 technicians.

That contractor has been providing vast military armaments and other materiel to Maduro's regime, including Kalashnikov rifles, helicopters, tanks, and aerial defense systems. It has also, until recently, had about 1,000 technicians in place to train Venezuelan military personnel how to maintain that high-tech equipment. Now, said the Journal, that number has been reduced to just a few dozen.

U.S. sanctions, particularly on Maduro's Central Bank of Venezuela, have made it all but impossible for the bank to sell off what remains of the country's gold reserves to raise the cash to pay Rostec's bills.

Wrote the Journal's investigative reporter Thomas Grove: "A person close to the Russian government said Rostec weighed the political benefits of supporting Maduro against the regime's growing economic liabilities, forcing the company to make a strategic decision on [its] ties with Caracas." That person added: "They [Rostec] believe that the fight [to keep the Maduro regime functioning] is being lost…. Since the Venezuelans aren't paying, why should Rostec stay there and foot the bill on its own?"


If you enjoy the information on MIAtoday.com, you're sure to enjoy the McAlvany Intelligence Advisor, as well. You can test drive it by signing up for the McAlvany Intel Memo. You'll receive key excerpts from MIA each week, and best of all you can do so for FREE. Just sign up here.


Rostec is also facing its own financial problems thanks to those same U.S. sanctions. Those sanctions have impacted its pending deals with other countries as well as agreements with Maduro. Longstanding plans to build a Kalashnikov production facility in Venezuela have been canceled along with other plans as the company makes its exit. Kuwait has delayed its agreement to purchase T-90 tanks from Rostec, while Indonesia has backed off on a deal to purchase Russian Su-35 fighters from the contractor. The Philippines announced that it was canceling plans to purchase a "package" of Russian arms and materiel from Rostec.

Rosneft, the Russian-controlled energy company, has made enormous investments in partnership with Maduro's oil company PdVSA, which are much more difficult to walk away from. But as Venezuela's oil production continues to dwindle away to a mere trickle, Rosneft is no doubt having second thoughts about continuing to fund its one-way street with Maduro.

Existential questions are building for the Marxist dictator. If he can't pay Rostec, how can he pay his military? Without Rostec's technicians, how long will his military's high-tech equipment remain operable? If he can't pay Rostec, how can he continue to pay for foodstuffs being arranged by his friend Alex Saab Moran, a Columbian drug lord in charge of Maduro's emergency food program CLAP?

In a dictatorship, loyalty is maintained through fear and greed. As Bueno de Mesquita, a political science professor at New York University and author of The Dictator's Handbook, expressed it:

As long as the senior members of the military are getting paid, Maduro is going to stay. It is really a question of whether the flow of money can continue in a reliable way to the senior civil servants, to the military generals, and to the judges. If the answer is yes, then the leaders may continue with Maduro.

On the other hand, if the answer is no, then the corrupt regime that has bankrupted Venezuela and sent its people back to the dark ages is entering its final stage of existence. Without oxygen, the organism dies. Without cash, Maduro can neither fund his military nor its suppression of his opposition.

---------------------------

Sources:

McAlvany Intelligence Advisor: Could Lightning Strike Twice in Ending Maduro's Marxist tyranny in Venezuela?

The Wall Street Journal: In a Blow to Maduro, Russia Withdraws Key Defense Support to Venezuela

The New York Times: Venezuelan Government and Opposition End Talks With No Deal

Background on Rostec

Background on Rosneft

Background on de Mesquita

Add new comment

Plain text

CHECK OUT THE ENTIRE MCALVANY NETWORK

McAlvany Weekly Commentary provides investors with valuable monetary, economic, geo-political and financial information that cannot be found on Wall Street. Your host David McAlvany presents a solid strategy of wealth preservation for your financial and retirement assets while living in an unstable economy.

Through its client focused, customized approach, MWM is committed to providing independent, well-researched, objective advice, and investment professionalism. At MWM, our client commitment is to preserve capital, manage risk, and grow your assets in an ever-changing global environment.

At International Collectors Associates (ICA), we specialize in the sale of bullion, semi-rare U.S. and European gold coins and secure offshore storage in Switzerland for your precious metals. Our highly trained and experienced advisors strive to help you in customizing solid strategies of wealth preservation for your financial and retirement assets.

McAlvany Financial Group

The McAlvany Financial Group has a contrarian, in-depth approach to its analysis, allowing the company to avoid decisions based on emotion, and thus combine maximum risk mitigation with consistent real growth for its clients’ investments. Integrity, attentiveness, and longevity have characterized the company’s client relationships since 1972.