Venezuela is reeling under political turmoil fuelled by an economic crisis due to falling oil prices, and President Nicolas Maduro’s attempts to restrain the Opposition.

Origin of economic crisis:

  • In Venezuela, socialist governments have been in power since 1999, taking over the country at a time when it had huge inequality. The socialist policies which aimed to help the poor backfired. Take price controls, for example. They were introduced by President Chávez to make basic goods more affordable to the poor by capping the price of flour, cooking oil and toiletries.
  • But this meant that the few Venezuelan businesses producing these items no longer found it profitable to make them. The foreign currency controls brought in by President Chávez in 2003 led to flourishing black market in dollars.
  • Since then, Venezuelans wanting to exchange bolivars for dollars have had to apply to a government-run currency agency. Only those deemed to have valid reasons to buy dollars, for example to import goods, have been allowed to change their bolivars at a fixed rate set by the government. With many Venezuelans unable to freely buy dollars, they turned to the black market.

Origin of political crisis:

  • Nicolás Maduro was first elected in 2013 after the death of his socialist mentor and predecessor in office, Hugo Chávez. At the time, he won by a thin margin of 1.6 percentage points. During his first term in office, the economy went into freefall and many Venezuelans blame him and his socialist government for the country’s decline.
  • Mr Maduro was re-elected to a second six-year term in highly controversial elections in May 2018, which most opposition parties boycotted. Many opposition candidates had been barred from running while others had been jailed or had fled the country for fear of being imprisoned and the opposition parties argued that the poll would be neither free nor fair.
  • Mr Maduro’s re-election was not recognised by Venezuela’s opposition-controlled National Assembly. After being re-elected, Mr Maduro announced he would serve out his remaining first term and only then be sworn in for a second term. The National Assembly argues that because the election was not fair, Mr Maduro is a “usurper” and the presidency is vacant.This is a line that is being pushed in particular by the new president of the National Assembly, Juan Guaidó.
  • Citing articles 233 and 333 of Venezuela’s constitution, the legislature says that in such cases, the head of the National Assembly takes over as acting president. That is why Mr Guaidó declared himself acting president. Since then, he has been organising mass protests and calling on the military to switch allegiance.

National Assembly:

  • Mr Guaido is the president of the National Assembly. This legislative body was largely rendered powerless by the creation of the National Constituent Assembly in 2017, which is exclusively made up of government loyalists. The opposition-controlled National Assembly has continued to meet, but its decisions have been ignored by President Maduro in favour of those made by the National Constituent Assembly.

Who is supporting whom?

  • Maduro is supported by Russia, China, Iran, Syria and Turkey. While Guaido is supported by the US and its allies. But Russia and China among others have stood by President Maduro.
  • Within Venezuela, those opposed to the government celebrated Mr Guaido’s move, while government officials said they would defend the president from “imperialist threats”.

What are the other problems faced by Venezuela?

  • Hyper-inflation due to rapid depreciation of the local currency
  • High level of speculation and hoarding in the market
  • Severe food shortages
  • Fall in oil production
  • Shortage of medicines and equipments in hospitals
  • Increase in crime and poverty
  • Venezuela’s conditions have led to a mass exodus of refugees. Colombia, Ecuador, Peru and Brazil have all received thousands of migrants from Venezuela in recent years.

How this crisis affects India?

  • The US imposed sanctions on Venezuela, in a bid to force President Nicolas Maduro to cede power to the opposition leader Juan Guaido, who declared himself interim president. This move, which essentially translates to an oil ban, is expected to complicate the global oil supply mix and perhaps even push up oil prices.
  • Given that India is the world’s third largest oil importer. It imports over 80% of our oil requirements. Such a hike will inflate the import bill and disrupt the country’s fiscal position, which is already raising red flags on account of the pre-election sops being announced.
  • Venezuela was India’s fourth biggest crude supplier after Iraq, Saudi Arabia and Iran in the current fiscal, accounting for about 12% of India’s total oil imports. So sanctions against the South American nation, coming in addition with US sanctions on Iran oil, means that oil flows from the two OPEC nations are now restricted.
  • Rise in crude oil prices will commensurate in an increase in petrol and diesel in the depending on how the oil markets react in the reduction in supply.Fuel prices in India change every fortnight tracking changes in crude oil prices in the international market.

What is India’s stand?

  • Venezuela is a key supplier of crude oil to India and has also joined the International Solar Alliance. India has invested in oil assets of Venezuela.
    Despite the US sanctions India has been purchasing oil from Venezuela for which Venezuela has already agreed to accept payment in Indian currency. This gives an advantage to India of getting cheaper oil to satisfy its huge domestic demand and also without using its foreign exchange reserve. On the other hand, it allows Venezuela to purchase medicine, food supplies and other necessary goods from India at the time of its crisis.
  • However, after the US secretary Mike Pompeo statement urging India not to become the “Economic Lifeline” of Maduro, the ministry of petroleum and natural gas issued a statement to various oil companies in the country, including Reliance Industries Ltd, ONGC, to halt purchase from Venezuela.
  • India till now has maintained its position of non-interference and sovereignty. However, the recent decision of not purchasing oil from Venezuela will tilt the balance in favour of the US and its allies.
  • India till now refused to be part of any efforts to recognise self-declared president of Venezuela and asserted that it is for the people of that country to find political solution obliquely rejecting outside interference in a country’s internal affairs.

Why India has decided to halt oil purchase from Venezuela?

  • The decision may have come due to the recent situation between India and Pakistan where the two nuclear nation’s Air Force engaged with each other after India carried out a pre-emptive non-military strike to destroy the terror bases in Pakistan. Masood Azhar, leader of Jaish e Mohammed was listed as global terrorist at UNSC with the help of US, UK and France.
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