Mar 22, 2023
Power Struggle and Missing Billions Roil Venezuelan Ruling Elite
(Bloomberg) -- A power struggle and a trail of unpaid oil sales led Venezuela’s ruling elite to purge one of their own inner circle this week as the government tries to recover billions in missing energy revenues.
Energy Minister Tareck El Aissami’s resignation Monday comes after months of close oversight by Vice President Delcy Rodriguez, the regime’s most powerful official after President Nicolas Maduro.
Rodriguez’s office was tasked with tracking unpaid oil cargoes, according to people with knowledge of the matter, who asked not to be named because the discussions are confidential. Rodriguez took charge after an internal audit revealed a financial black hole at the state oil company, the government’s most important source of funding.
The missing payments mostly date from between 2020 and 2022, when Venezuela sought out new intermediaries to help get around US sanctions and trade, ship and sell its oil, the people said.
That triggered a widening corruption investigation, in which at least 19 people have been detained including judges, elected officials, and the head of the nation’s crypto regulator.
El Aissami was a longtime ally of Maduro, and for years was the most powerful person in Venezuela’s oil sector.
The US government accused him of overseeing tons of cocaine shipments from Venezuelan air bases and ports, and offered a $10 million reward for information leading to his capture.
“The level of graft considered to be acceptable may have changed given just how much the economy has contracted in recent years, and how the 2024 elections mean that Maduro needs cash to prime the economy and secure votes,” wrote Nicholas Watson, a political risk analyst at consultancy Teneo Holdings, in a research note.
The accelerating purge comes amid a power struggle between senior government officials such as Rodriguez who favor liberalizing the economy, and hardliners who favor a stricter socialist model.
In recent years, the government slashed spending, ended hyperinflation, and allowed the free circulation of dollars, all of which helped the economy emerge from one of the deepest slumps in world history, and return to modest levels of growth. But some of the measures have faced a backlash from radicals in the ruling party and the military, who consider them a betrayal of the legacy of former president Hugo Chavez.
Rodriguez, who is also finance minister, was keeping increasingly close tabs on the trading and finances of state oil company PDVSA, said people close to the matter. Her involvement saw the appointment of a technocrat from the petrochemical sector, Pedro Tellechea, as head of PDVSA in January of this year.
To try and shore up the ailing state-oil producer’s finances, Tellechea halted ongoing contracts just days after coming into office in January.
Rodriguez has since become the de facto approver of all of PDVSA’s new ventures, co-signing all new contracts alongside Tellechea, the people said.
This newfound control and oversight over PDVSA’s finances caused strain between Rodriguez and El Aissami.
In a meeting last week, Rodriguez informed El Aissami of the start of a probe that would investigate allegations of corruption inside PDVSA, people aware of the encounter said.
El Aissami, press officials for PDVSA, the Oil Ministry and the vice presidency did not reply to request for comment.
In a late announcement on Tuesday, Maduro said Tellechea had been named oil minister and would also stay on as head of PDVSA amid a “transformation process” in the oil industry.
It’s unclear if El Aissami remains as vice president for the economy, where he has held wide-reaching powers, including the ability to determine ministries’ budgets and the takeover of private businesses.
Also caught in the upheaval was the head of the nation’s cryptocurrency oversight agency, Joselit Ramírez, who managed cryptocurrency payments into state agencies, including any incoming oil industry funds paid through crypto.
--With assistance from Nicolle Yapur and Ezra Fieser.
©2023 Bloomberg L.P.