By Sony Atumah

In logic, a paradox is an apparently contradictory conclusion that is derived from what seems to be valid premise. Many paradoxes are based on false premises or arguments underlying the logical systems involved. Most petro states have many paradoxes based on incomplete presumptions. A petro state is one whose government’s income is deeply reliant on the export of oil and natural gas. Their economic and political powers are highly concentrated in an elite minority, and political institutions are weak and unaccountable, and corruption is widespread. Economists believe that petro states are afflicted by the Dutch Disease. In an afflicted country, a resource boom attracts large inflows of foreign capital, which leads to an appreciation of the local currency and a boost for imports that are now comparatively cheaper. It sucks labour and capital away from other sectors of the economy, such as agriculture and manufacturing, which economists say are more important for growth and competitiveness. As these labour-intensive export industries flag, unemployment could raise and the country could develop an unhealthy dependence on the export of natural resources. In extreme cases, a petro state forgoes local oil production and instead derives most of its oil wealth through high taxes on foreign drillers. Petro state economies are then left highly vulnerable to unpredictable swings in global energy prices and capital flight.

Venezuela as a petro state has got tales of upheavals characteristics of resource rich states. Venezuela petro statehood started in 1922 when oil was discovered in commercial quantity. With the largest oil reserves globally, analysts say decades of poor governance have driven what was once one of Latin America’s most prosperous countries to political and socioeconomic ruin. Venezuela’s oil production has been pockmarked in crisis in recent years after a long period of alleged mismanagement that prevented the national oil company Petroleos de Venezuela, PDVSA from maintaining output, creating a vicious cycle of falling supplies and revenue. This founding member of OPEC depends on oil exports to the United States to import basic necessities including food and medicaments now in extreme short supply. The crude oil price slump of July 2014 has battered the oil rich communist nation’s economy into an economic and political spiral. The deepest recession ever experienced in the nation of 31 million people has a runaway hyperinflation with economy that shrunk beyond comprehension.

https://newlive.vanguardngr.com/2019/01/oil-prices-dip-on-worries-fuel-demand-to-stall-as-global-growth-slows/

A study by the opposition-controlled National Assembly put the annual inflation rate at an unbelievable figure in the 12 months to November 2018. Venezuela’s President Nicolás Maduro’s anti-capitalist rhetoric stance courted the wrath of the United States. Maduro is being brought to judgment for constituting a 545 member special assembly on July 30, 2017 that rewrote the country’s constitution to solidify the socialist system installed by the late President Hugo Chavez in his 14 years rule.  There were international pressures on Maduro to dismantle the legislative body. After being re-elected to a second term in May 2018, Maduro announced he would serve out his remaining first term and only then be sworn in for a second term on 10 January 2019.

On January 23, the opposition leader of Venezuela’s National Assembly, Juan Guaido, named himself interim president amid street protests. President Donald Trump recognized Guaido as the nation’s leader and his administration has been marshaling international support for the opposition figure since then. Last Monday, the Trump administration imposed sanctions against Venezuela’s state-owned oil company seeking to cripple the government of embattled Maduro by cutting off its main source of cash. PDVSA’s Citgo refineries in the U.S. will be allowed to continue to operate, but revenue must be placed in an escrow account in the United States.

In 2017, President Donald Trump pushed back on economic sanctions including a ban on oil imports he earlier slapped on Venezuela. Venezuela is the third largest supplier of crude to the U.S. An import ban meant high gasoline cost and job loss in America than it would affect the Maduro administration. But for the cries of the Gulf coast refiners, Trump was not to back down on sanctions. American Fuels and Petrochemicals Manufacturers wrote Trump that there was no guarantee that other key sources of U.S heavy crude would provide enough supplies to replace Venezuelan crude. Venezuela’s state-run oil company, PDVSA, owns Citgo and operates sophisticated refineries in Lake Charles,  Lemont and Corpus Christi with a combined refining capacity of 800,000 barrels per day, bpd. Citgo operates 48 terminals, nine pipelines and three lubes blending and packing plants, with a storage capacity of over 22 million barrels, one of the largest energy networks in America. As Maduro became cash strapped in December 2016, he used PDVSA to obtain a loan from Rosneft (Russian state owned oil company), using 49 percent stake in Citgo as collateral. This was the crux of the matter. Venezuela’s PDVSA default in their major payment meant Russia’s takeover of a major American infrastructure thus jeopardizing energy security and interests. Both Russia and China receive large oil shipments from Venezuela as payments of debt held by the global powers. They do not pay for the oil in cash.