“Modern-day economic sanctions and blockades are comparable with medieval sieges of towns with the intention of forcing them to surrender. Twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees,” stated a report sent to the UN Human Rights Council by the UN Secretariat in August last year.
The author of the report, UN rapporteur Alfred de Zayas, who is described by the secretariat as an “[e]xpert on the promotion of a democratic and equitable international order”, studied the situation in Venezuela and documented the numerous overt and covert ways in which an economic war has been waged by the US against the people of the country. This form of warfare, in so far as it deprives the right to a healthy life of the ordinary civilian population, he argued, “can amount to crimes against humanity”.
The principle set out in Article 32 of the Charter of Economic Rights and Duties of States – that “[n]o State may use or encourage the use of economic, political or any other type of measures to coerce another State in order to obtain from it the subordination of the exercise of its sovereign rights” – has also been reaffirmed by multiple UN General Assembly resolutions.
While there is no shortage of basis in international law to deem as criminal both the overt sanctions and covert embargoes affecting Venezuela’s ability to procure the basic commodities for its population, the US and its allies have been able to continue with such practices across the world. Explaining this impunity, the report states:
“There is not only a horizontal juridical world order governed by the Charter of the United Nations and principles of sovereign equality, but also a vertical world order reflecting the hierarchy of a geopolitical system that links dominant States with the rest of the world according to military and economic power. It is the latter, geopolitical system that generates geopolitical crimes, hitherto in total impunity.”
The report added with concern that “the United States is currently training foreign lawyers in how to draft legislation to impose further sanctions on the Bolivarian Republic of Venezuela in an effort to asphyxiate Venezuelan State institutions.” With the latest round of sanctions targeting Venezuela’s state oil company, the US is now seeking to deny the state the one source of revenue is it most reliant on for all its imports.
While the US government officials continue to boast about the success of the sanctions in crippling the country, a parallel narrative is perpetuated through endless articles in the mainstream media. This maintains that the sanctions may have hurt the country’s economy, but it is fundamentally the state’s own economic policies that have caused the crisis. It serves to make space to defend the US against the charges of crimes against humanity when and if it is levelled by Venezuela in the International Criminal Court.
Debunking the narrative in defense of US imperialism
This narrative seeks to explain the shortages and the economic crisis on the decrease or insufficient increase in production vis-a- vis demand and the insufficient allocation of dollars to the private companies to facilitate imports of those commodities not produced within the country.
It then, almost inevitably, proceeds to argue that this is what “socialism” results in, quite ignoring the fact that Venezuela is a country where, as George Galloway pointed out, the concentration of means of production in private hands is as high as it was under Margaret Thatcher’s Britain, and the income tax on this sector is no higher than in Theresa May’s Britain.
Nevertheless, the fallacy of this narrative does not simply lie in the description of Venezuela’s economy as ‘socialist’, but in the very assumption that shortages, as taught in textbooks, must be either the result of the inability of production or imports to keep pace with the rising demand, or that of falling production and imports for a fixed demand.
Neither of the two scenarios explain the case of Venezuela, where throughout this period of rising shortages, domestic production as well as allocation of dollars to facilitate imports by private companies – which have monopolized the import and distribution of most commodities that are in shortage – have increased.
In fact, in those financial years when the shortages had reached its peak, both national production and allocations of dollars have also peaked, as demonstrated by the meticulous data analysis of Pasqualina Curcio, in her book “The Visible Hand of the Market: Economic Warfare in Venezuela”.
After the Bolivarian revolution brought Hugo Chavez to power in 1999, the GDP, seen as a measure of production, registered a 43% increase by 2015. The share of agriculture in the GDP – an important measure in verifying whether low rate of food production is linked to increasing shortages of food products in the supermarkets – had also risen by 27% by the end of 2014. By 2015, unemployment had fallen from 62.5% in 1999 to 6%, which has been historically the lowest in Venezuela.
In the period between 2003 and 2013, when the shortage rate increased by 38%, the average total GDP (measured by holding 1997 prices as constant) saw a 75% increase, and the share of agricultural products in it rose by 25%. Further, in the periods of the 2006-07 and 2011-2013, when the shortage rates registered the most rapid of increases, the GDP growth as well that of the agricultural component of it saw a sharp rise.
Compared to 2004, when the shortage rate was 7% – which is the country’s historic low – the GDP had risen by 34% by 2015, with the agricultural production amounting to 14% of this increase. In this same period, however, shortage rates increased from 7% to over 30%, clearly demonstrating that Venezuela’s shortages do not correspond to the domestic production levels.
Given Venezuela’s high dependency on imports, a rise in shortage rate at a time of increasing GDP and sharp decline in unemployment rate must indicate, according to textbook economics, a rapid decline in imports.
Virtually all the foreign currency reserves that the country has is derived from export of oil. The state, having nationalized the oil sector, therefore commands all the reserves. However, the import and distribution of goods is monopolized by a small number of multinational and national corporations, owned by a class which is the avowed enemy of the Bolivarian revolution.
According to the predominant narrative, it is the failure of the state to wisely allocate sufficient dollars to these corporations that has rendered the country incapable of meeting the important requirement. However, data shows otherwise. Between 2003 to 2013, when shortage rate rose by 38%, foreign currency allocation to the private sector had increased from about $5.7 billion to almost $30.9 billion.
Measured in dollars in constant 1997 prices, imports in this period increased by almost 389%. However, when measured in terms of weight of the imported goods instead of its dollar value at constant prices, the increase in imports between 2003 and 2011 amounts only 57%.
This difference of 332% between the two measurements cannot be explained by the loss of weight over of some industrial machines or electronic, photographic and medical instruments over decades, because this category of imports have been limited between 30-35% of Venezuela’s total imports as shown by trade data from 2005 to 2011.
The rest of the commodities listed in the data cannot have lost weight, which indicates a substantial amount dollars allocated to the private sector for imports has been diverted, which has manifested in the form of 238% increase in deposits of foreign currency abroad by the private sector between 2003 and 2011.
“The fact that the increase in dollar-denominated imports is proportionally much higher than that of imports expressed in kilograms.. coupled with the increase in the foreign exchange allocations to the private sector on the one hand, and the increase of shortage rates on the other hand, matches the upwards behaviour of the private sector currency and deposits abroad,” Curcio wrote.
“Additionally, to the fact that a portion of the foreign exchange delivered to the private sector is kept in deposits abroad, thus failing to comply with the purpose of such allocations, that is, the import of goods and services, the government has repeatedly denounced the hoarding of goods by private suppliers of food,” she added.
Apart from repeated seizures of thousands of tonnes of hoarded goods includings medicines, other evidence exists to indicate that the factor of hoarding is not exaggerated out of proportion. For example, in the run up to the parliamentary election in 2015, severe shortage of black beans in market shelves is believed to have dealt a defeat to the United Socialist Party of Venezuela. However, soon after the election, black beans made its way back to the market shelves in no time.
Similar was the experience of Chileans in the early 1970s, when in order to topple the government led by the democratically elected leftist-leader Salvador Allende, the then president Richard Nixon had issued the instruction to make the country’s economy “scream”.
The Chilean model of coup’ d’etat through covert economic warfare
Like Venezuelans, Chileans in this period had to stand in long queues to buy basic products which were perceived to be short in supply. However, only days after the coup that killed Allende and replaced him with a US-backed dictator, the shelves in supermarkets were loaded.
As in the case of economic warfare against Chile, there was, to start with, no officially announced economic blockade of Venezuela. However, as US state documents declassified later acknowledge, “the Nixon administration did engage in an invisible economic blockade against Allende, intervening at the World Bank, IDB, and Export-Import bank to curtail or terminate credits and loans to Chile before Allende had been in office for a month.”
In case of Venezuela, the crucial international actors that have been used to achieve this end are the credit rating agencies which publish what is known as the “country-risk” index. The higher the points given in this index for a country, the higher is the rating agency’s assessment of the risk of default by it. With zero regarded as risk-free, every 100 points increases the interest rate at which the country can borrow internationally by one percent over. Three US -based rating agencies – Moody’s Investors, Standard & Poor’s, and Fitch Ratings – dominate 95% of the market for credit rating.
Venezuela has never defaulted on a loan. According to a report by Latin American Geopolitical Strategic Center (CELAG) released on February 8 this year:
“..between 2014 and 2017, Venezuela lost 68,653 million dollars for payment of foreign debt. However, despite the fact that the country did not default on its payments, it was rated with the worst ratings by risk rating agencies such as Moody’s or Standard & Poors. Country risk (the rate a country pays above the risk free rate) is over 2,000 points since 2015, with peaks of up to 5,000 and even 6,000 recently. The reasons given by these rating agencies when evaluating countries are opaque and tend to score well those countries that favor free market policies and punish the contrary. This is how the Venezuelan debt, in spite of continuing to pay steadily, was rated as having a high probability of default with a rating lower than that of countries at war, such as Syria.”
This has unwarrantedly increased the interest rate Venezuela is paying on its international loans by arbitrarily adding to it a premium supposed to cover for a non-existent – or at least a non-demonstrable – risk of default. As a result of this form of warfare, “between 2013 and 2017, the Venezuelan public sector instead of receiving foreign currency, had to disburse more than 3,300 million dollars in net terms per year.”
“In summary”, the report adds, “if we add the average annual value of currencies that no longer came from the blockade (19,200 million), plus what the country had to pay [on] average each year (3,300 million), we can conclude that the economy and society [in this period] suffered a suffocation of $22.5 billion in annual revenues, as a result of a deliberate international strategy of financial isolation.”
After having thus waged a covert war against the Venezuelan economy, the US, in August 2017, officially announced the executive order 13808, bringing the war out in the open, making no more attempts to conceal its actions which can, on the basis of multiple international laws, be characterized as crimes against humanity.
Apart from unilaterally prohibiting the Venezuelan government from acquiring new shares, this order restricts the government from accessing new loans, if the period given for repayment of its principal amount is more than 30 days. The state-owned oil company is also prohibited from acquiring new loans when the maturity period is greater than 90 days.
Further, the companies operating in US are also prohibited from paying dividends to the Venezuelan government, which has made investments in the former. The particular, target of this measure is the CITGO refinery, a majority of which is owned by Venezuelan state-owned oil company, the PDVSA.
This has restricted the government’s ability “to finance imports. The abrupt fall in imports, which had values around 60 billion dollars per year between 2011 and 2013, plummeted to values estimated at 12 billion in 2017,” the CELAG’s report states.
After listing out in his report a number of resolutions and studies by the UN bodies recognizing these measures as a violation of international law, UN rapporteur Alfred de Zayas notes:
“Multilateral sanctions, even those imposed by the Security Council.. can also cause suffering and death [of civilians].. In the 1990s, two United Nations Assistant Secretary-Generals.. quit their Humanitarian Coordinator functions in Iraq to protest against sanctions, which had caused more than a million deaths among Iraqis, particularly children,75 and which they qualified as a form of genocide.”
He then goes on elaborate how the sanctions imposed by Obama and then by Trump administration consists of a violation of the human rights they are obliged to uphold by the treaties they are a party to, before pointing out that these kind of “sanctions can amount to crimes against humanity under Article 7 of the Rome Statute of the International Criminal Court.”
Paragraph 2(b) of the Article 7 mentions “intentional infliction of conditions of life, interalia the deprivation of access to food and medicine, calculated to bring about the destruction of part of a population,” as one among the acts of Crimes against Humanity.
“An investigation by that Court”, he says, “would be appropriate”, adding, however, that “the geopolitical submissiveness of the Court may prevent this.”