It’s usually not possible to measure exactly how much money a government thinks is a fair trade for putting up with a massive, unmanageable protest movement. But they call Venezuela la tierra de lo posible, and for a reason. We can say with mathematical precision that the government was willing to put up with the massive protest movement that’s made the country ungovernable for the last 100 days in return for $400 million.

That’s $4,000,000 per protest day, give or take.

Yesterday, the Constitutional Chamber of the Supreme Tribunal of Justice handed down a decision authorizing the Maduro government to create a new oil-sector Mixed Enterprise, to be known as Petrosur, S.A. The whole thing was sewn up without the approval of the National Assembly, on the basis of the March 2017 court decision that first set off the epic shitstorm of protest we’re still living with today.

According to the decision, the government will get a $400 million bond payment from the new partners – a little-known vehicle known as IPISA – for the right to use the nation’s oil reserves.

How it all started

It’s funny to think of now, but the current protest movement started in reaction to an incandescent Supreme Tribunal decision precisely regarding the question of who gets to authorize oil sector joint ventures: the same decision Decision 156 was the one the tribunal referred to yesterday in approving Petrosur.

According to the decision, the government will get a $400 million bond payment from the new partners.

In the March 2017 decision, the Constitutional Chamber established that the government did not need National Assembly approval to create new or modify existing mixed enterprise joint ventures (empresas mixtas) under the Hydrocarbons Framework Law (Ley Orgánica de Hidrocarburos).

There was the tiny detail that article 33 of the Hydrocarbons Framework Law expressly establishes that the executive does require National Assembly approval for the creation of joint ventures, but the Constitutional Chamber isn’t usually minded to let little things like that stand in its way.

Doubling down on the dubious legal theory of contempt (desacato) that it had already used to annul and strip all powers from the National Assembly, the Chamber said that, henceforth, it itself would approve the creation or modification of joint ventures in a plain contradiction to any sane and logical reading of the law.

In what was rumoured to be a pasante subpagado gaffe, Decision 156 also established that from the date of the decision on, the Constitutional Chamber would assume all of the constitutional powers vested to the National Assembly until its contempt ceased, effectively dissolving the National Assembly in a couple of throwaway sentences.

A huge national and international uproar followed, galvanizing and unifying the until then splintered and passive opposition. Decision 156 also motivated the first act of defiance by the now-rogue chavista Prosecutor General Luisa Ortega Díaz who called it a “rupture of the constitutional order”. Several foreign governments and international organizations also condemned the decision.

The Chamber said that, henceforth, it itself would approve the creation or modification of joint ventures.

In order to mollify the reactions to the decision, the Chamber issued a bizarre “clarification” (aclaratoria) where it effectively annulled the part of the decision that established that the Chamber would take over all the constitutional powers of the Assembly.

This was unprecedented and ragingly illegal, as the principle of judicial certainty forbids a court from modifying a final decision just a few days after its rendering. Nevertheless, the aclaratoria placated some of the international backlash to the decision, although the protests unleashed by the blunder continue until this day.

Back to Petrosur

What people forgot is that the aclaratoria did not annul the part of the decision that allowed for oil sector JVs to be created without National Assembly approval.

But the cash-strapped desperate Maduro gang had not forgotten about this. Not at all. Having already paid a staggering political price for the March 2017 decision, it decided it might as well get some use out of the damn thing too.

Here are the details I could gather from the decision about the new JV:

  • The Venezuelan government, through the Corporación Venezolana de Petróleo, will have a 60% share in the Company.
  • The remaining 40% will be held by IPISA.
  • The Venezuelan government and IPISA had entered into a memorandum of understanding for the creation of the JV.
  • The JV will be assigned the production of the Junin Sur Field of the Orinoco Oil Belt in Monagas in the area denominated Junin 10.

Several questions arise. Back in May, rumor had it that Decision 156 was tailor-made to create a JV with Russian oil company Rosneft: how did IPISA end up in the game?

And who is IPISA anyway?

What people forgot is that the aclaratoria did not annul the part of the decision that allowed for oil sector JVs to be created without National Assembly approval.

There is virtually no online information from IPISA apart from the fact that it is apparently connected to former Repsol Chairman Alfonso Cortina. How a company with zero track record and zero experience raises $400 million to gamble on what must be the single most legally exposed, politically risky venture in the energy world today is… anybody’s guess.

If the National Assembly went after Goldman Sachs for a controversial deal that was, nevertheless, likely legal, it should go mega-ballistic on this clearly illegal venture with a maletín-based entity that’s suffused with the distinctive aroma of a traditionally Venezuelan guiso.

The only thing that’s become clearer in the last 24 hours is exactly how much Nicolás Maduro thinks is a fair price to compensate for three months of chaos and 94+ deaths. The blunder that did the impossible and stirred awake a lethargic and forlorn opposition created a crack within chavismo, and forced the international community to acknowledge the murderous autocracy that rules Venezuela for what it thinks it’s worth: 400 million bucks to that miserable SoB. Don’t you forget it.

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