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Tensions rise in Venezuela as protests continue

A year after the death of Hugo Chávez, the movement he left behind is fighting for its survival without its comandante

What started in early February as a localised protest in the Andean university town of San Cristobal in western Venezuela has spiraled into nationwide violent civil strife, with the country split along battle lines Chávez spent more than a decade carving out. 

The protests have tapped into a deep well of grievances against the government of Nicolas Maduro, Chávez's handpicked successor. Violence in Venezuela's cities is rampant and often goes unpunished. The inflation rate is one of the world's highest. Shelves are empty because importers struggle to get the dollars they need to buy basic goods. The opposition pins the blame for these and other ills squarely on the government and they have taken to the streets in huge numbers.

But Venezuela has seen a series of massive street protests in recent years, and the crucial question is whether or not the latest standoff marks a breaking point for the Bolivarian revolution, or if these protests - like others - will simply lose momentum.

For now, it appears the government is weathering the storm. Yet the latest round of clashes between the government and opposition has been far more intense than similar incidents over the past decade. Chávez was always quick to ratchet up the rhetoric against his political opponents but rarely resorted to violence against protestors. Maduro, though, was quick to unleash a harsh crackdown against his opponents.

That is, analysts say, because his grip on power is far weaker than Chávez's. The United Socialist Party (PSUV) has started to splinter under Maduro's rule and he cuts an uninspiring figure for chavistas in the streets looking for direction during difficult economic times. "What we are seeing in Venezuela is a political vacuum left unfilled since Chávez's death," said Diego Moya-Ocampos, Latin America analyst at IHS. "It's a perfect storm that could lead to big changes in the country."

The prolonged protests will be another setback for the government's plans to increase oil production

Most of the protests have been peaceful, but some neighbourhoods in Caracas and other opposition strongholds have settled into a cycle of self-reinforcing violence between protestors and government security forces that has sustained the protest movement and hardened both sides. More than 20 have died in the violence and a number of opposition leaders have been arrested.

Many outsiders have called for dialogue to settle the dispute, but more and more protesters, spurred on by Ukraine's Maidan movement, see the standoff in zero-sum terms. Calls for Maduro to go have grown louder. But crucially those calls remain confined to opposition strongholds. As in the past, the opposition has so far failed to win over government supporters, even as many of them have begun to lose faith in the socialist project as the economy has worsened.

The running street battles in Caracas have clear echoes to 2002-2003, when opposition protests led to a military coup-etat that briefly ousted Chávez and a subsequent oil workers' strike brought the economy to its knees.

Maduro, though, has manoeuvred to try to avoid the same fate and as a result is much less vulnerable to similar actions. To bolster his support with the military, he has handed over nearly all key governmental portfolios to active or retired officers, including oversight of the economy, finance, industry, defence, interior and transport. Still, he does not enjoy the same level of military backing as Chávez did. "The weaker the government becomes, the stronger the influence on the armed forces behind the scenes," says Moya-Ocampos.

The oil industry remains under the supervision of Rafael Ramirez, a long-time party stalwart who is head of the energy ministry and state oil company PdV. In the wake of the oil strike, Chávez gutted PdV and replaced much of the management with loyalists. The strategy is at least partly to blame for the company's struggles in the oil patch over the past decade, but it has ensured PdV, the most powerful economic centre in the country, has remained a steadfast base of support for the government.

During a pro-government demonstration attended by tens of thousands of PdV workers in February, Maduro said that he had decided to rename the Orinoco oil belt, one of the world's largest oil deposits, "the Hugo Chávez oil belt".

So far the dispute has not directly affected the oil industry, and over the short term it is unlikely to do so. The unrest remains contained mostly in urban centres. Without the help of PdV, the opposition would have a difficult time disrupting the industry if it wanted to. Even as the protests have escalated, oil markets have mostly shrugged off the risk of disruption.

Long-term impact

Yet over the longer term, the prolonged protests will be another setback for the government's plans to increase oil production, vital to getting the economy on a firmer footing. Ramirez has taken on an increasingly political role in the Maduro government, and every day he is at a political rally or in a cabinet meeting is a day he is not pushing forward PdV's major oil projects.

Moreover, the financial strain at PdV, which is central to all efforts to boost output, is showing. Ramirez went to Beijing amid the protests and came back with a new $5 billion tranche of funding from the China-Venezuela Fund, part of $40bn in oil-for-loan deals signed between the two countries. PdV is also increasingly relying on its foreign partners to act as its banker. It has signed financing deals with its partners, including Repsol, Chevron, Rosneft and others, for more than $10bn.

The protests will also make it more difficult for the government to make the hard decisions necessary to get the industry back on track. For the sake of PdV's finances, Venezuela needs to cut back on oil shipments under the PetroCaribe programme, through which Venezuela sends oil at cut-rate prices to its Caribbean neighbours. The programme accounts for about a third of PdV's exports, yet it receives little to no cash upfront for PetroCaribe oil and fuel products. But those shipments are playing a vital political role right now by keeping regional allies on side while Maduro fights to keep the protests from becoming an international issue.

PdV also needs the government to raise the price of domestic gasoline, which is the cheapest in the world. PdV sells about 600,000 barrels a day of oil, around a quarter of total production, into the domestic market but it gets little cash from these sales because of the fuel subsidies. Some in the government had broached the sensitive subject of raising prices at the pump in recent months, but with support for the government so precarious it is not in a position to take unpopular but necessary steps.

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