When a criminal cartel takes hold of a state like Venezuela, it poses a difficult challenge for the international community.
The main focus of Maduro’s regime is personal enrichment for its leading members – mainly through crime. Outright drug smuggling is a huge source of revenue for the regime. The cabal of ministers and generals who control it are known as the ‘Cartel of the Suns’, and there is much evidence pointing to top regime leaders’ involvement in the narcotics trade.
Diosdado Cabello, head of the puppet legislature known as the National Constituent Assembly and Tareck El-Aissami, the Minister of Industries, have been sanctioned for their drug trafficking activities. This has been confirmed in leaked Venezuelan intelligence files. Members of Maduro’s own family are currently in prison in the US for cocaine smuggling.
Venezuela is the main source of drugs smuggled into the US and Europe. The quantity of drug flights from Venezuela has been expanding rapidly in recent years, growing from around one flight a week in 2017 to daily flights in 2018, mainly using around 50 runways in the north-western state of Zulia. The value of the cocaine that reaches American streets from Venezuela is around $39 billion. The Maduro regime receives billions for its part in these operations
Another way the regime is siphoning off money into its own pockets is through misuse of a subsidized food programme, known by its Spanish initials ‘CLAP’. CLAP is run by the Venezuelan military through a network of companies owned or controlled by Alex Saab. Saab was appointed to this role by Maduro himself. The US has just announced that it is preparing sanctions and criminal charges against those involved in the programme. Saab himself was indicted this month in Colombia on money-laundering and fraud charges. Prosecutors now say he is also being investigated for laundering money for Colombian drug cartels.
How has this programme been used for corruption? Venezuelan officials sign overpriced, no-bid contracts with suppliers abroad, who send low quality food to Venezuela. Some of it is diverted to the black market. The regime then pays suppliers through a state-owned bank, with overpayments distributed to various bank accounts and into other investments controlled by the conspirators, who have amassed vast quantities of real estate, yachts and airplanes.
Illegal mining in co-operation with Colombian guerrilla groups is another critical means for regime members to cash in. Causing huge environmental destruction, gold is illegally extracted from the Amazonian basin by armed groups colluding with the Venezuelan military. Much of this is laundered through Suriname, a small country ruled by Desi Bouterse, a convicted cocaine trafficker who gained office with financial support from Chavez. The illegal gold is badged as coming from a facility in Suriname called KSMH, a fictional site whose entire purpose is to act as a cover for Venezuela’s strip-mined gold.
Although the Venezuelan oil industry has largely been destroyed by Chavista policies, stealing from the state oil company PDVSA through kickbacks, currency manipulation and other means still continues. Just last year in the US, 12 individuals were convicted of stealing $1.2 billion from PDVSA. Chavistas often cooperate with ‘ideological allies’ in other states in order to facilitate such corruption. One of the original cross-border theft schemes was that of falsified oil sales, started in Chavez’s time. For example, PDVSA owns 60 percent of Alba Petroleos in El Salvador. This subsidiary received virtually no oil from PDVSA between 2010 and 2017 but recorded an income of $1.2 billion over that period. The 51% owned Nicaraguan subsidiary Albanisa did get some oil from PDVSA, but still received funds far in excess of their value, constituting a theft of $4-6 billion.
Both subsidiaries, in cahoots with local Chavista-aligned politicians, then set up and lent money to dozens of front companies – from food production to airlines – which didn’t actually produce anything. Their entire operation consisted of moving money to various havens in Belize, the Cayman Islands and Russia. The debt was then declared unrecoverable.
Recognising that the Maduro regime is actually a criminal cartel has serious policy consequences. Firstly, coming to an agreement with their leaders in which they go scot-free is unlikely to be fruitful, since they will always fear being tracked down and arrested. Better to convince their underlings to switch sides. Secondly, a robust approach to dealing with the criminals makes more sense. For example, the closure of Venezuelan airspace to stop drug flights is an approach that would cut off another source of regime funds. When it is recognised that we are dealing with a criminal regime, what needs to be done should become clearer.