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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  1. $400 million–chickenfeed for a Regime that has stolen a rumored at least $300 BILLION–and, no, human lives lost really don’t mean much to them….

  2. After spending the last days fighting with absolutely every diehard chavista supporter Spaniard I’ve met online, I cant think of a better way to summarize that yes, you fucking idiot, they are all the same shit, you are literally looking at Napoleon walking on two legs, I’ve been telling you this for years…

  3. Excellent piece, misleading title. I wanted to share it, but lazy or ill-meaning FB headline readers might assume the protesters are the ones to blame.

  4. “It’s usually not possible to measure exactly how much a protest movement is worth… here we can say with mathematical precision that the massive protest movement that’s made the country ungovernable for the last 100 days is worth $400 million”
    What nonsense is this? It needs serious rephrasing!

  5. I am sure this proper place for item, its has to do children, non directly oil misadventure on Mad-ernie.

    A friend of mine, of Irish decent, just returned from (apparently mis-) guided tour of several locations across Venezuela, in cities as well rural sites. He was part of a group, charged with evaluating the living conditions of children across Venezuela. At various locations through the countryside, he was led to made aware some rhythmic pounding and clanging of seemed kitchenware. Some of the beat patterns with pot and pans, made his mind return Eire and the life he left behind
    The collective, in charge of the evaluation, has is roots founded in 1727. This compilation is quite ever since, the march under the banner “A Modest Proposal”. It was founding during Irish “Potato Famines” of early 1700’s to take of children of less fortunate class and been maintained worldwide ever since.
    At the multiple locations my friend visited, he noticed there was gradual reduction in the volume in the pot and pan clanging as the afternoons wore on. He reiterated to me, that there arose from several locations, a wondrous roasting and baking fragrances wafting throughout the ranchos, barrios and villages through the country side. He said it unlocked the unintended for gastronomical epicure in all of us. He related to me, that he was invited to multiple feast each day to partake of freshly prepared meals servings. He recalled that several of the dwelling he visited, that ate in with aromatics fragrances all about. He said that it brought back a immense set of memories.
    The groups of investors now returned, they spoke well of the needs of children were served in Venezuela. It’s partially done, but raw data isn’t ready yet.

  6. Is it possible that IPISA is actually all insider private money? I have a hard time imagining any rational foreign investors (or even the Russions, for that matter) getting involved in this mess.

  7. Roy raises a curious point. What if IPISA is just a front company financed by loot burgled from oil sales and exchange rate shenanigans? Whereby this burgled loot is “reinvested” so the burglars can themselves continue to profit off whatever future sales the oil cash cow can produce. That way the crooks can not only pillage past and present, but they also get a “vig” of future earnings – sort of like a mob being “partners” with a regular business.

    A great Caracas Chronicles investigative journalism piece would be to research what the hell IPISA actually is, and who is involved.

  8. By the way forget the collective was founder by Jonathan Swift concerning child welfare in Ireland in the 1700’s. Who have read it.

      • I know from your reply you haven’t spent much time read English history (if at all). You should Jonathan Swift “A Modest Proposal”- It’s only pages long. Maybe you and Mad-ernie become a sample.

        • I was joking around, of course I’ve read it… it was obligatory reading material where I studied, but that was over 50 years ago… so excuse me for not remembering its relevance to my Venezuela. But I will wikipedia it again to refresh my memory.

          • Please Excuse also. I live Venezuela (as engineering contractor for PDVSA – six years). I saw too stuff (crime. drugs gangs, poverty, filth, etc., etc, all around). You had to be extra-careful. I’d won’t bore you of the details. I been to several other hellholes around the world (some nice one too). I fell that we too many people (especially politicians and criminals) for the world too handle). Swift purposes a start.

      • I know from your response, your don’t English history very well. You should try Jonathan Swift “A modest Proposal”. It just 3 pages – all in English – It an English – and its available on the internet. (as indicated 6 email above). As further recommendation I suggest you and Mad-ernie provide a sample for repast.

  9. Sorry to take this somewhat OT…

    This article infuriated me with its inaccuracies and particularly its description of the current political situation. Apparently this guy is another academic who, despite mountains of evidence and suffering, can’t let go of the myths of the sham Bolivarian revolution.

    Does anyone have the time/motivation to write a Letter to the Editor in response to this article? They usually publish a good amount of them on their website. I don’t have the time to craft a good one at least for a couple days.

    Maybe this is par for the course for that publication, I don’t regularly read it.

  10. In short, is chavismo willing to murder over 100 people to steal 400 million dollars?

    That also would be a better title for the article, as it won’t lead other readers to believe that the protests were launched to “take” that amount of cash.

  11. They will steal right left and cent and guess what. Nobody can do anything about it. And guess what. Countries who are Maduros biggest critics will continue to buy so what does it matter anyways?

  12. You set up a mixed company whose private shareholders are connected to the regime , you give it a license to exploit certain oil fields , after a while those shareholders sell those shares to bona fide investors at a hefty profit …….., its been done before in the old old days at the beginning of the XX century , or you monetize those shares by mortgaging them to a international lender ……..

  13. There’s a lot more debt to cover than just PDVSA and government bonds. Here’s a gem about trying to do business in Venezuela:
    The GM plant in Valencia has been seized for auction to settle a one half of $115 million legal dispute. And workers who have been dismissed are to receive severance compensation, while GM must pay a monthly rent on the plant which a) hasn’t produced cars since 2015, and b) they no longer have a right to occupy.

    It’s going to be h-a-r-d to attract capital investment. Usually, I try to be positive. I knew people who worked for GM. Sad.

  14. GMV has been in Venezuela since 1949, and was the “school” for many employees. Since they have not assembled vehicles since 2015, the incomplete inventories of parts for Chevrolet Cruze and Orlando models, Silverado trucks and other vehicles it was assembling, cannot be used since they have gone out of production and require retooling for new models, we are talking of a lot of money – maybe $25 million, so new buyers will have a plant that requires a lot of investment to start assembling new models … plus many local suppliers that are probably out of business …


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