Venezuela's Finest Hour: Guaido, Trump And the West Can't Afford to Lose | Opinion

We may be approaching the finale of the power struggle between Venezuela's illegitimate Chavista regime and the country's beleaguered democratic opposition. If the opposition's champion Juan Guaido can succeed in wresting authority from Nicholas Maduro, the consequences will reverberate well beyond Caracas, into global energy markets—and exacerbate the U.S.–Russia rivalry.

The illegitimacy of the Maduro's continued rule is a moot point. In 2017, he stripped the elected parliament of power and created a parallel one to rewrite the constitution. Two weeks ago, he declared himself the winner in presidential elections boycotted by the opposition and declared illegitimate both by the opposition-controlled legislature and the majority of Latin American countries. Whatever else it is, Maduro's regime is anything but democratic.

The United States must be willing to swiftly and decisively engage every tool of statecraft to see to it that a new interim Guaido presidency is put in power and allowed to spearhead a transition to democracy, via free and fair elections.

On Wednesday, President Donald J. Trump announced that he would recognize Juan Guaido—the leader of the Venezuelan National Assembly, the country's actual parliament—as the Interim President of Venezuela. The White House deserves praise for this decision, but it must do more. Diplomacy, intelligence, and even covert operations should come next.

Admittedly, the risks of such a gamble are high. A failure could lead to violent escalation in a country already plagued by hunger, disease, and social unrest. This is especially true as Venezuela's defense Minister Padrino Lopez recently declared the military's unequivocal support of the Maduro regime—a major blow to Guaido and obstacle to U.S. support.

If Maduro's socialist regime survives and hits back, it would mean more than just a black eye for the Trump Administration and center-right powers in the hemisphere. A failure of the U.S. efforts may lead to serious energy market volatility and provoke harsh measures from Venezuela's longtime ally–Russia. Moreover, considering the weight thrown behind the policy by Trump himself, as well as by the Lima Group and Europe , failure would suggest that the West is incapable of enforcing its policy in America's own back yard – the Western hemisphere. It'll be hard to blame Moscow and Beijing if they interpret this as a strategic weakness.

America's unlikely trade partner

Despite Venezuela's deteriorating oil production and refining capacity, the OPEC member is still a significant energy player. It sits atop a gargantuan 30,000 billion barrels worth of proven crude reserves, more than any other country on earth. And the 1.2 million barrels of oil production per day churned out by the national oil company (PDVSA) are still influencing energy markets, even though this is just one-third of what it was pumping in 2008.

Surprisingly, PDVSA is also a key energy partner of the U.S., with petroleum products accounting for the lion's share of the $15 billion in annual bilateral trade.

The economic catastrophe in Venezuela means that the country's own refineries don't have the capacity to process domestic supplies into petroleum products. Ironically, the world's largest potential oil power must import diesel and gasoline from 'Yankee Imperialists'. And they do – 3.2 million barrels in October of 2018 alone.

As for Venezuela's oil exports, the heavy, tar-like crude is a vital input for America's legacy refiners, which still can't process the light sweet oil (low viscosity, low sulfur) found in domestic shale formations.

In 2018 the United States imported 500,000 barrels of Venezuelan heavy crude per day, (though this number is down 50% from a decade ago)—making up most of the $11 billion in imports. Regrettably, the failure to build the Keystone XL pipeline from Canada prevents the replacement of the Venezuelan crude with the heavy crude from the friendly Canadians, leaving American refiners States with limited replacement options.

Thus, economic sanctions against Venezuela's energy sector, albeit necessary, would not be pain free for the United States.

The Russian Response

Russia maintains significant geopolitical and economic interests in Venezuela. The Kremlin is likely to fight to protect them. While the international community has galvanized around Washington's recognition of Guaido, including Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Panama, Paraguay and Peru, Russian officials have condemned the U.S. support of Guaido as 'tantamount to a coup.'

The Russian foreign ministry's language in defense of the Maduro Regime is fierce, and charging the U.S. with inciting the country's crisis. But follow the money: in 2016-2017 Moscow issued at least $17 billion in loans and credit lines, becoming Venezuela's "lender of last resort" (while China has invested some $56 billion in the country thus far). Russian oil state champion Rosneft is the largest investor in the decaying Venezuelan national oil company PDVSA.

Following Maduro's most recent visit to Moscow in December 2018, he announced that Russia would invest over $5 billion in Venezuela's oil industry, over $1 billion in its mining industry, and send more than 661,000 tons of grain.

Beyond cold hard cash, the Moscow and Caracas also have a close diplomatic relationship, something that Russia values immensely. Venezuela was the only major country to recognize the independence of Russian-occupied South Ossetia and Abkhazia, and Caracas has been supportive on the topics of Crimea and the Russian intervention in Ukraine. Oil-soaked Venezuela is a much bigger prize for Russia than Cuba was for the USSR, as Rosneft, headed by the Putin confidante and the veteran of the Soviet power projection in Africa Igor Sechin considers Venezuela its overseas crown jewel. Sechin made support of the Chavista regime somewhat of a personal crusade and is perceived as its chief lobbyist in Moscow.

So, what could Putin do for his friend Maduro? While direct Russian military intervention in the Western hemisphere is unlikely, proxy meddling through Cuba, arms sales, and security assistance is. But the Kremlin doesn't need to dispatch a Russian fleet to the Caribbean to avail itself of an entire menu of asymmetric retaliatory options. This could manifest as a spike of military aggression in Ukraine, a massive damaging cyber-attack, or an airlift of Cuban forces to Caracas. Belarus is another under-reported option. With Moscow-Minsk relations at an all-time low, Belarus ruler Alexander Lukashenko is a target of Russian pressure. Sources in Moscow and Minsk are telling me that the ultimate goal is the annexation.

Act now, or forever lose your peace

Russian pressure notwithstanding, the U.S. should stand resolute with the people of Venezuela; the only thing it should avoid doing is sending regular troops, whose presence may vindicate Maduro's rants about foreign imperialist ploys and irreparably delegitimize the opposition. Even while Trump is in retreat around the globe, from Afghanistan to Syria, the Western hemisphere is not a place Washington can afford to cede to Russia's—or China's—allies. Moreover, the pendulum seems to be swinging away from the hard left, from Argentina to Brazil to Ecuador, Mexico's elections notwithstanding. To get this one right, the United States needs to be fast, decisive and smart. The opportunity to bring justice to the people of Venezuela may not come again for a long time.

Ariel Cohen, Ph.D., is a Senior Fellow at the Atlantic Council and Founder, International Market Analysis, a Washington, D.C.-based boutique energy and political risk advisory firm. He is also Director, Energy, Growth and Security, at the International Tax and Investment Center. James Grant contributed to this article.

The views expressed in this article are the author's own.​​​​​