Cast your mind back to last year; August to be precise. Or don’t and, instead, click here to catch up on what you missed!
That particular weekly edition centred around the fortunes of Venezuela and the absolute economic carnage inflicted upon its population by its socialist leadership. At that particular point in time, to attempt to combat the hyperinflation that the economy was suffering, the Venezuelan government felt it was a good idea to launch its own crypto-currency, backed by the nation’s significant oil reserves.
Would this reverse the economic damage? Would this improve the widespread poverty under which the majority of the population suffer?
Well, no. Economically nothing has changed. However, it has resulted in being a catalyst for political change.
This week, President Trump, along with the leaders of several Latin American countries have recognised Juan Guaidó as Venezuela’s interim president. Mr Guaidó who is the leader of Venezuela’s opposition party, railed against the government’s cryptocurrency plan, stating that the idea was effectively mortgaging the nation’s oil reserves in order to prop up the failing socialist economic plans of President Nicolas Maduro.
And as such, Venezuela is once again plunged into civil unrest, with Maduro officially breaking relations with the US and ordering their diplomats to leave the country within the next 72 hours. Naturally Guaido told the diplomats to stay. As a direct reaction to this, the US are now moving to cut President Maduro’s funds and to funnel these to Mr Guaido. Russia has stepped in, condemning the foreign powers backing the opposition leader, saying the move violated international law and was a “direct path to bloodshed”.
The question now is whether or not this could escalate and if so, could the crisis take on a military dimension?
Despite his rhetoric, President Trump is remarkably risk-averse in terms of military deployments. After all, this is the president who is pulling US troops out of Syria and reportedly wants to slash US forces in Afghanistan by half. It is unlikely that he will want to send the marines into Venezuela in current circumstances.
However, if the country descended into total chaos, there might be calls from some quarters for intervention. That would require significant international support – especially from within Latin America – and probably backing from the UN Security Council, too.
It is hard to see this being forthcoming, given Russia’s support for President Maduro and China’s traditional opposition to what it sees as meddling in individual countries’ affairs. At the moment, there is only one military that matters and that is in Venezuela itself. In past upsurges of protest, the armed forces have stood by President Maduro.
Mr Maduro has kept them on his side by regularly raising their wages and rewarding them for their loyalty. He has also put senior military officials in key posts in the government. But with Venezuela’s economy further deteriorating, the lower ranks are reportedly getting increasingly dissatisfied with the government, which they blame for the shortages of medicines and food, and the frequent power and water cuts.
A video widely shared on social media after an aborted rebellion by a small group of National Guardsmen on January 14, shows one of them complaining about the fact his mother cannot get cancer drugs. Footage uploaded to social media after Wednesday’s protests also appeared to show a group of National Guardsmen blocking a road but walking away as protesters approached, to the applause of those marching.
In terms of the market, oil rose 1%, boosted by the threat of US sanctions in Venezuela. OPEC has not reacted to this and no meetings are planned by the group. As per my article back in August, there will be little direct effect to UK investors due to the lack of investment opportunities within the country. However, from a geopolitical perspective, the suggestion of any form of US military intervention could send investors to traditional safe-haven assets such as sovereign bonds, gold and cash.
Again, we will watch and see what develops.
And finally, as per every single week, a playlist. I hope you all have a wonderful weekend and I shall see you all next week…!