Shadow Government

A Ukrainian Solution for Venezuela

There are many differences between the popular uprisings in Ukraine and those in Venezuela, but similarities exist. In each, a government that once won an election squandered its legitimacy through a combination of widespread abuse, corruption, and incompetence. Now that an encouraging solution has been ostensibly found in Kiev, one way in which that result was reached may hold the key for a similar end to the crisis in Caracas.

According to U.S. Deputy National Security Advisor Tony Blinken (interviewed on Feb. 21 by Jake Tapper of CNN), in the days prior to the Ukraine breakthrough the United States finally joined the European Union in announcing sanctions. The U.S. undertook to "revoke the visas of officials and oligarchs" supportive of the corrupt, authoritarian President Viktor Yanukovych and seize their financial holdings in the U.S. and Europe. This is how the Wall Street Journal reported it:  "After the worst clashes on Thursday, the U.S. and E.U., after weeks of dithering, imposed sanctions. Cracks in the regime opened wide enough to make Friday's deal possible." 

Why the U.S. took so long to use this low-cost yet immensely effective tool is a mystery.  Anyone who has had the privilege of serving as a U.S. ambassador knows that granting or denying U.S. visas is one of the most powerful -- and sensitive -- instruments an embassy has.  If an embassy wants to make a friend quickly, or lose one even faster, just grant or deny entry to the U.S. to a self-important local official or tycoon.

The same threat that apparently helped steer the Ukraine crisis toward a happy ending (at least for most Ukrainians, the U.S. and the West, if not for Vladimir Putin) can be applied to Venezuela. In response to the violent repression of peaceful demonstrations by the Socialist government of Nicolas Maduro, the U.S. should quietly notify Venezuela's generals and oligarchs that if the violence against unarmed civilians continues, or if the government refuses to negotiate with the opposition and release all political detainees, they and their families will have their U.S. visas revoked and their overseas financial holdings frozen.

It will come as a surprise to many Americans that on many Friday afternoons Florida airports see a rush of jets arriving from "revolutionary" Venezuela, carrying the families, friends, and business associates of that country's political, military and economic elite -- and in many cases, the potentates themselves: the military officers and civilian ministers of government. 

The "oligarchs" are the individuals that enable the authoritarian regimes to remain in power.  In many cases they are the regime's officials themselves. They are motivated entirely by self-interest and use populist ideology and rhetoric as a cover for their thievery. It is immoral enough that they are destroying entire countries such as Ukraine or Venezuela, but if we allow them to enjoy the fruits of their illicit business in our country, then we are complicit in their corruption.

Early in Chavez's "Bolivarian" revolution, ordinary Venezuelans began calling this privileged class "Boligarchs" a contraction of "Bolivarian Oligarchs," those who became unimaginably rich through graft or trafficking in government contracts that they received without competition and for which they paid illegal bribes to the grantors.

The Boligarchs prefer South Florida's beaches, hotels, restaurants and especially high-end shopping districts to those of their own land. The reasons are clear: The U.S. is safe, not like the cities of Venezuela that the revolution has made treacherous through the demolition of the rule of law. And in U.S. stores they can find all the products that are no longer available in Venezuela, such as bread, milk, and chicken, or those that they like to take back to Venezuela, such as gold-plated mobile phones. Moreover, in the U.S. there is less of a chance they will be recognized as the "new class" of exploiters who has looted their nation, and are therefore less likely to be insulted by passers-by.

The irony of spending their weekends and vacations in the U.S., the "empire" that their government constantly insults escapes these Boligarchs. Even if conscious of the paradox, however, they are so used to the good life in Venezuela that they figure theirs is a universal privilege they have earned as a result of holding exalted positions, and not of whether they reached them through bribery, duplicity, monopoly power, or the unexplained disappearance or a rival. 

Many of them have acquired luxurious properties in the US: lavish mansions, enormous yachts and fleets of airplanes. They have also invested in legitimate businesses to launder their ill-gotten money, just as other organized crimes families did before them. 

Revocation of U.S. visas is a clean, quick remedy to the conundrum of what to do about the new authoritarians in Latin America (and elsewhere). The executive authority rests in section 212 of the Immigration and Nationalities Act: in Presidential Proclamation 7750, also known as the "anti-kleptocracy resolution";  in the Patriot Act, and in other laws. It has been used before numerous times, but not sufficiently in recent years.

The U.S. Departments of State, Treasury, Homeland Security, and many agencies such as CIA, DEA, FBI, SEC, IRS, and others have names and data on these individuals.  All it will take to implement this policy beyond Ukraine is political will.

Otto J. Reich is a former U.S. ambassador to Venezuela, assistant secretary of state and senior staff member of the National Security Council.


Shadow Government

Ukraine: Buy, Rent, or Walk Away?

For one who has long proclaimed the centrality of economics to foreign policy, the turmoil in Ukraine offers some unexpectedly strong support. A revolution was sparked by the rejection of a trade agreement, after all. Now, in the aftermath, we've moved on to the regularly scheduled balance-of-payments crisis. Yet, the problems in Ukraine actually present an extraordinarily difficult mix of economics and politics.

Acting-President Oleksandr Turchynov was reported to have warned this week that the country is close to default and "heading into the abyss" and that it needs $35 billion over the next two years. This is not purely the result of the recent turmoil, though such things do tend to be costly; Ukraine was already in need. The spark to the unrest came when ousted President Viktor Yanukovych opted for $15 billion in Russian money -- funds that would come with far fewer strings attached than those offered through a European deal.

The issue is now pressing, since Ukraine is estimated to owe $13 billion in foreign debt service this year; failure to pay would mean default. That could have nasty repercussions not just for Ukrainians but for other indebted and teetering countries. Given those concerns and the geopolitical import of recent developments in the country, why not just pass a hat and give Ukraine the money?

Reason No. 1: $35 billion is a lot of money. To put it in perspective, this is roughly the level of the entire U.S. State Department's "foreign operations" annual budget, covering the U.S. Agency for International Development, bilateral economic assistance, international security assistance, contributions to international financial institutions, and agencies such as the Peace Corps and Millennium Challenge Corporation. This is not the kind of money you find lying around in a jar.

Reason No. 2: Is this a loan or a gift? A loan would certainly be less costly and more traditional, but the distinction has everything to do with the probability of repayment. The International Monetary Fund has had trouble before with getting Ukraine to pay money back. Usually loans of this magnitude come with conditions that are meant to increase the probability of repayment. Even in normal circumstances, recipient countries can find these conditions unpopular and onerous (e.g., dramatically raising the price of gas for heating and cooking). What are the odds that the present leadership could enforce such a plan?

Reason No. 3: To whom would the money go? Ukraine's government is provisional and contested. If the money is a loan, who is signing for it? What happens if the country splits, with the Russophile part going its own way? Who would then be responsible for repayment?

Reason No. 4: What does one get for the money? Western powers might find an investment worthwhile if it bought lasting peace and stability and brought Ukraine into Europe's orbit. But what if it only rented peace and stability? If, in two years, Ukraine does not reform and finds its pockets empty again, it could be just as susceptible to Russian enticements as it was under Yanukovych.

If this all seems a bit too risky for the United States or the European Union to take on, one might think that there is always the IMF. But the IMF is only supposed to do this when it sees a good chance of repayment. It has not been completely pure in following that principle; the IMF's participation in the Greek bailout was only made possible by implausible assumptions about Greece's ability to repay. That deviation from standard practice subsequently raised concern among the IMF's membership: How is it that countries from Asia, Africa, or Latin America must go through excruciating IMF programs to receive funds, but European countries are given a pass? Repeating the same approach with Ukraine would put the IMF's managing director (Christine Lagarde, a European), in a very awkward position.

When a population on Europe's periphery has risen up and demanded closer ties and economic linkages, it seems unthinkable that the countries of the West could walk away. Engagement, though, will mean the expensive disentangling of a daunting thicket of economic and political problems. Seeing off the Yanukovych presidency was just the beginning.