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Conflict, Investment and the Burden of Energy: Protests in Venezuela and Ukraine

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There is always a danger in economies that are heavily dependent on one commodity to become states where conflict and power vacuums arise due to the concentration of power in one industry, and that industry having control of a large part of a national economy. External pressures for countries that are oil producers are the source of many of these pressures. Keeping the oil flowing may create stability in the external markets, but it does not guarantee internal stability nor gives any long term prospects for a stable government or democracy in the producing country. An illness of riches is produced, where one source of funding creates an addiction to control, and control is supported by external customers of oil and their need for stability, often at high costs.

There is no surprise that many of the international protest movements have come from governments that have an unusual grip on power in their local countries. Venezuela is one of the best examples of how a petrol economy can reduce itself to one main industry, and use that industry to remain in power. Weeks of protests coming from the anti-Chavez camp against President Maduro of Venezuela came from the half of the country that has worked against Chavez’s social revolution. Many businesses and formerly employed individuals spent years watching their businesses being expropriated and their jobs being extinguished. Now with the bolivar in trouble, many in Venezuela are being affected from hits against the local currency. An increase in crime has arisen while petrodollars have funded government projects. Accusations by the opposition of corruption coming from inefficient political projects only polarized Venezuelan society further.

In response, the government increased funding to the half of society that supported Chavez and now support Nicolas Maduro. Pressures from these two polarized camps will not be a win-win scenario for the opposition in Venezuela, even if they gain all the rights they are protesting for against the government. In societies where there is a split, even a victory over a corrupt government can only go as far as the supporters of that government are willing to accommodate, even in a neo-democratic society. The effect of oil works to temper or escalate external pressures coming in from abroad. Maduro is taking some steps to crush any dissent as learned from the Iranian government in 2009, but the end result might look more like that of Egypt where there is no clear resolution without the actions of an overwhelming power to ensure stability, even coming from the opposition that once protested in the streets.

It is interesting to see how much the change in government in the Ukraine had energized the protesters in Venezuela. The view that change is possible was something that came from a place that had no real connection to Venezuela, but showed that popular protests can influence democracy against great odds. With Ukraine however, the external pressures coming from Russian oil and gas and European demands for Russian energy may exert so much leverage on Ukraine that democracy in Ukraine may only exist if external pressures allow them to have a democracy.

It was interesting to see how a scenario that was an absolute nightmare to occur during the Cold War happened to become a reality in modern times with leaders that seemed to have forgotten how to avoid a large conflict between two superpowers. The chips on the table in the Ukraine crisis are clearly the future benefits from oil and gas, but no one seems to know how to play poker in this scenario. For Russia, as one of the BRICS countries and a major growing mega-economy, it serves little benefit to invade any part of the old Soviet Union unless it is to quell a major terrorist threat to Moscow. The lack of response in Chechnya lead to a scenario in neighboring Georgia where Russia had entered the former Soviet republic in order to defend ethnic Russians against local discrimination by Georgian authorities against their local Russian community. There was little support for Georgia coming from the West as Georgia is seen as a buffer between Europe and Iran as it is the ideal place to install anti-ballistic missiles between the two regions.

This same rationale for entering Crimea put Russian boots in Ukraine and heightened the crisis towards one where the United States may not be able to ignore it like in Syria, or avoid it and delay actions like in Iran. The business community and urban class in Russia will have a hard time expanding their commercial activities and grow Russia’s economy if Putin continues to act like a poorly trained Soviet leader. Putin’s actions in the Olympics challenging LGBT rights and in Ukraine is to gain local support after he lost his former teflon image in urban centres in Russia. To regain this support, he may have to change his tactics. While the English language channel that supports Russian government policy has stated to work against the Russian government to a small degree, the real challenge to Putin will come from Russia’s local business leaders and urban society that will have little support for a government that may hurt Russia’s growth in the long run.

For the U.S. and EU, there was only praise for the games in Sochi on the last day of the games. Sochi was considered to have an excellent end result despite the extremely negative media concentrated against Russia during the entire session of the games. In actuality, the Vancouver games were a disaster as one athlete died on a course due to the negligence of the organization in Canada, but it still received extremely positive attention compared to Sochi. The negative focus on Russia and Putin has been used by Russian media to show an extreme bias against Russia coming from the West in whatever actions it takes, and acts as evidence of Western bias against not just Russia, but against Russians.

While this is the narrative being promoted in Russian media, it does not assist the current crisis in Ukraine to be openly aggressive against Putin or Russia as it allows Putin to justify his actions in the Ukraine to his local supporters and gain added support from Russians in the region. Steven Sackur of the BBC conducted a panel discussion this week on the policy in Ukraine and took a position of stating that open and excessive Western criticism of Russia in the Ukraine may work to escalate the current scenario past the point of diplomacy and mutual cooperation. With European energy stability at stake, along with chemical weapons in Syria and Iran’s nuclear program due to Russia’s assistance in mitigating worst case scenarios in the Middle East, the costs of Russian soldiers in Crimea could become a lot worse if clever diplomacy does not become paramount. Openly calling Vladimir Putin irrational or crazy before coming to meet with his foreign minister to create productive talks is likely not something any Cold War leader on either side would respond to very well. Applying International Law on Russia also becomes a difficulty as an application of International Law leads to an end result where the only way to enforce the law is by using military actions against Russia. Russia in effect is different than applying it in Syria or Iran as it could lead to an international war and will result in strikes taking place in Russia, Europe and even within the United States. Laws are as useful as the application of the ruling, and Russia is a big contender on the world stage.

After 75 years of Cold War, it seems diplomats have forgotten why the Cold War never went hot in Europe, it is because both sides thought before they spoke and acted and didn’t spent their time slinging personal insults through their own media organizations, biased to one point of view or the other. No one wishes to donate their children to a war their grandparents worked their whole lives to avoid. With bad diplomacy, one shot may ruin gains made between Russia and American diplomats in the Middle East, or lead to open conflict in Europe itself. So far no shots have been fired in open conflict, for the Ukraine to have any chance at real independence there must be an agreement internally and externally to quell the situation.

 

Author

Richard Basas
Richard Basas

Richard Basas, a Canadian Masters Level Law student educated in Spain, England, and Canada (U of London MA 2003 LL.M., 2007), has worked researching for CSIS and as a Reporter for the Latin America Advisor. He went on to study his MA in Latin American Political Economy in London with the University of London and LSE. Subsequently, Rich followed his career into Law focusing mostly on International Commerce and EU-Americas issues. He has worked for many commercial and legal organisations as well as within the Refugee Protection Community in Toronto, Canada, representing detained non-status indivduals residing in Canada. Rich will go on to study his PhD in International Law.

Areas of Focus:
Law; Economics and Commerce; Americas; Europe; Refugees; Immigration

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