Venezuela's Expensive Friendships

Jan 2, 2016 | 14:03 GMT

Venezuela's President Nicolas Maduro (C) addresses supporters in Caracas on Dec. 15.



Venezuela is in the early stages of a political transition. With the loss of the National Assembly to the opposition coalition, President Nicolas Maduro is running out of options for retaining firm control over the country. Meanwhile, Venezuela's financial situation is becoming ever more dire. The newly empowered Democratic Unity Roundtable coalition (MUD) may re-evaluate some foreign policy decisions that have become economically burdensome, including the country's discounted energy shipments to Cuba and its oil-for-loans deal with China. Of course, these agreements exist as a product of close diplomatic relationships with the relevant countries, and political imperatives may be strong enough to keep them in place for the short term. But the threat of financial default will loom large for Venezuela in 2016; if Caracas finds itself in a debt restructuring process, its bargains with Cuba and China may no longer be worth the cost.

When Venezuela's government forged an energy discount deal with Cuba 15 years ago, its government was eager to solidify ties with a leftist ally. In the ensuing decade it also inked oil-for-loans deals with China that helped avert default. But energy prices have fallen, Caracas is running out of funds, and everyone knows that Chinese financing is not a long-term solution. At some point Venezuela is in for a financial reckoning. The question is, just how much of its post-Chavez foreign policy will survive the debt restructuring process?...

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