Opinion: What's Happening in Venezuela Beyond the Headlines

Alongside discussions of rare earth minerals, of which Venezuela has plenty to offer, the petrodollar system and its functions are often predictably buried in the news cycle. Outside the official story—which remains blurry, given accounts that parts of the state sold Venezuelan President Nicolás Maduro out, that Maduro was kidnapped, or that he cut a deal toward a negotiated exit, all of which would explain the limited damage and pace of the operation—the recent actions by the United States can be described as a bid to use its existing hard power to preserve the global supply chain that keeps the Federal Reserve’s infinite "money glitch" intact. 

Since the 1971 Nixon Shock, which suspended the gold standard, and the 1979 Volcker Shock, which floated global exchange rates and launched the neoliberal turn away from the New Deal as we know it, oil has functioned less as a resource and more as collateral for foreign exchange. This, in turn, keeps banks operating through the fractional reserve system, a model that has increasingly shaped contemporary state spending, as treasury bonds gradually supplant taxes, with taxes themselves becoming collateral for those bonds. 

Both instruments need the USD (U.S. dollar) to continue its existence. Without it, the logic of classical political economy, known as the boom-bust cycle, takes hold. Under these conditions, the liberal order, which has been the default since 1945, would implode. 

Why so? The less oil and markets are tied to the USD, the less effective sanctions against America’s enemies become. The less effective sanctions are, the less effective America’s soft power—often exercised through psychological operations—becomes as well. Over the past decade, sanctions-busting has proliferated, with third parties, both state and non-state actors alike, reaping the benefits of acting as middlemen between surface finance and shadow finance. The latter often involves crypto, which the late libertarian millionaire John McAfee (the namesake of McAfee antivirus) may have played a role in founding, alongside other individuals or entities willing to open new frontiers outside the regulatory frameworks set by Wall Street and the City of London. 

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To recap, drawing from existing sources, Maduro is attempting to finalize his country’s official entry into Beijing’s CIPS (Cross-Border Interbank Payment System), which would counter Washington’s SWIFT (Society for Worldwide Interbank Financial Telecommunication). If this occurs fully, Washington would have to pay the official price—rather than the discounted one it once enjoyed—for Venezuela’s oil and resources. In this context, Maduro appears to be wagering between a deepening China deal and his earlier reforms that reintegrated the Venezuelan economy into the Atlantic sphere under the auspices of J.P. Morgan and Rothschild & Co. In short, he is attempting to have his cake and eat it too. 

Ergo, ideology—be it communism, capitalism, or otherwise—plays little role in this arrangement. If this situation were analogous to Iraq in 2003, the opposition would have taken over immediately. Instead, it remains sidelined, as the Trump administration has so far preferred to deal with the existing government. This brings us back to the original question: cui bono—who benefits? 

America is issuing another warning, so long as it is still able to do so before domestic decay finally overtakes it, as it did in its confrontations with Saddam Hussein in 2003, when he attempted to bypass the USD by trading oil in euros, or Muammar Gaddafi in 2011, when he proposed a gold-backed dinar. The message is clear: America can tolerate defiance, provided one does not attempt to overturn the game board entirely and run loops around it. Only America retains the right to do so, by virtue of its role as the Arsenal of Democracy during World War II. 

If one insists on provoking the Bald Eagle, nuclear weapons become leverage, serving as deterrence, insurance, and a prerequisite for serious consideration within the geostrategic order. Ever wondered why there are no open discussions about deposing Vladimir Putin, Xi Jinping, or Kim Jong Un? Exactly. 

Further reading: 

What Is the Petrodollar? by Avatrade

Is China’s Cross-Border Payments Network on the Rise? by Joe Baker

Fugitive U.S. Tech Guru: Cryptocurrency Is Next Cuban Revolution by Sarah Marsh

How Fractional Reserve Banking Works and How Banks Create Money With It by Dave Ahem