A Pivotal Moment in Venezuela

In the largest blow to the late Hugo Chavez's Socialist Party since its founding in 1999, it was announced yesterday that Venezuelan voters had handed the country's opposition party a supermajority in the National Assembly. The Democratic Unity coalition will now have the power to name the president of the Legislature, approve or reject the government's budget, and even hold a referendum on the president's leadership, after 16 years of political imprisonments, a hostile Socialist majority, and overall oppression.

The victory is a striking bellwether indicative of the various crises Venezuela currently sees itself in: an economy on the verge of collapse, an impending shortage of food, and a devastatingly failed healthcare system. Former President Chavez's handpicked successor, Nicolas Maduro, has managed to hold on to power since he took office in 2013, but has overseen a country with an increasingly grim forecast virtually since then. With more than 70% of the electorate turning out to vote - a record in recent years - it is clear that the people of Venezuela are fed up and ready for a change.

President Nicolas Maduro with supporters. Courtesy of Yahoo

The question now is whether or not the Democratic Unity will be able to facilitate the change that Venezuelans so desperately need--and the reason they voted with such decisiveness. Venezuela's economy has been in a virtual free fall for months, primarily due to plummeting oil prices. Crude oil - by far Venezuela's most important commodity - has dropped 65% in the past 18 months, sending shudders around the globe but none more apparent than in the South American country. According to the IMF, due to this decrease, Venezuela's economy is expected to contract 10% and 6% in 2015 and 2016 respectively, with inflation over 100% for 2015.

Venezuela's healthcare crisis is arguably more acute. Thousands of citizens do not have access to even the most basic medical supplies and medicines, and in March 2015, the Venezuelan advocacy group Doctors for Health found in a national survey that 44% of operating rooms were not operational and an astounding 94% of labs didn't have the equipment or supplies necessary to be operational. They also found that 60% of basic medical supplies were either partially or wholly unavailable. According to Human Rights Watch, because Venezuela does not have a developed pharmaceutical industry, it relies on imports for most of its medicines, and has in the past several years planned poorly and mismanaged storage of medical supplies and medicines.

The healthcare crisis is only compounded by an increasing lack of food in the country. An August poll found that 30% of Venezuelans were eating just two meals a day, and that 70% had stopped buying basic food products because they were too expensive or unavailable. Like the healthcare crisis, Venezuela's food shortage has triggered protests - some turning violent - throughout the past year, with little in the way of a substantive response from the government.

Waiting on line for food. Courtesy of the Wall Street Journal

However, the Assembly does not have much influence over the economic policy of the country, and therefore, in addressing these crises. That power will remain in the hands of President Maduro, despite talk of new laws passed to spur economic growth, provide pensions for elderly currently without them, and the removal of finance cabinet ministers. President Maduro will be tasked with improving the economy, cutting oil production to stabilize the price, and incentivizing foreign direct investment and small business growth. He will be responsible for heeding both the cries from his citizens but also the recommendations from NGOs and advocacy groups, working to increase pharmaceutical imports while expanding the industry domestically, and resolving the food crisis immediately.

Above all, though, in order to truly reverse the economic malaise, the President and the Assembly will have to work together. The likelihood of that today appears scarce. President Maduro has vowed to fight the opposition with whatever it takes; likewise, the opposition won their election on the message that President Maduro and his party were broken beyond repair. Both must put their differences aside now and govern in a manner that is effective and restores the public's trust. Venezuela is in dire straits; there is no time for political posturing. A successful collaboration between the two will almost guarantee a step in the right direction for the country--something its citizens voted for, and something they are counting on.

Is Russia's Economy Doomed?

It's been one heck of a year for Vladimir Putin, who did the unthinkable in remaining one strategic step ahead of President Obama and the U.S. throughout some of the year's most newsworthy events: the annexation of Crimea, continued efforts to subdue the Syrian government, Iranian nuclear talks. For a while, it seemed as though President Putin held all of the cards, and that the U.S. was walking on thin ice by flaring up tensions with increased sanctions and other diplomatic tools. Unfortunately for Russia, it appears that President Putin has finally run out of leverage - Western sanctions are finally taking their toll. It was an economic collapse in the late 1980s, brought on by decades of Communism wreaking havoc on the Soviet Union's financial system, that finally brought the Union to its knees. Will history now repeat itself? And what will the implications be for the U.S., and the global economy as a whole?

Consumers buying up electronics. Courtesy of NYT

As global oil prices have continued to slide, so has Russian currency. In fact, Russia was poised to shut off natural gas supplies to Ukraine through the entire winter earlier this year, as retaliation for Western sanctions. Such a move would have likely thrust Europe back into a recession, as the European Union struggled to find natural gas supplies from elsewhere. However, that plan did not pan out as Putin had initially intended - during the last few days of October, Russia signed a deal with the Ukraine and the E.U. that effectively resumed natural gas supplies flowing to Ukraine in exchange for an agreed-upon payment (much of which was coming from the E.U). Obviously there were numerous benefits - for both sides - to this deal. However, the deal is indicative of a Russian economy that was already uneasy at the prospect of missing out on a major energy export deal for so many months.

30-day look at value of ruble vs. Brent crude. Copyright Bloomberg LP

Up until yesterday, the ruble had slid approximately 11 percent against the U.S. dollar so far this year. The Brent crude oil index was at a multi-year low, trading at less than $80 per barrel. And then, overnight, things got much worse for Russia. After Russia's Central Bank minted more than 600 billion new rubles in part of a bond-selling deal with Russia's state-owned oil giant, Rosneft, the effect that new currency had on global markets was devastating. With the ruble in free-fall and oil nearing a 5 1/2 year low, Russian finance ministers convened overnight and raised interest rates a whopping 6.5 percent, from the benchmark 10.5 percent to 17 percent in an effort to stanch the flow of capital. Unfortunately, this was not enough, and it appears that Russians don't see 17 percent interest as incentive enough to hold on to their currency. News outlets have reported a run on electronic and other high-end consumer stores, as citizens take advantage of the record-weak currency. Oil continue to trades low, and now Russia is stuck with commodities it can only export for cheap, a rapidly depreciating currency, and now, high interest rates that will make it harder to borrow. Earlier today the ruble's depreciation doubled, from its 11 percent on the year against the dollar to 22 percent. While reserves and general finances are better in Russia today than they were decades ago when they underwent their last economic downturn, it's safe to say Russia is on the brink of a catastrophic currency crisis.

Falling oil prices may be great for consumers in the short-term, but they are indicative of a downturn in the global economy, which is never a good thing. The instability that can result from the OPEC countries struggling to maintain their exports is something to be afraid of. And while relations have been icy in recent months between the United States and Russia, there are significant economic ties between the two nations that could prove to be costly for U.S. interests should Russia's economy collapse. Russia's currency needs to stabilize, and fast, before the damage spreads outside of their borders.

It’s Just Africa: Oil, Guns, and Sectarian Violence in South Sudan

The United Nations confirmed that this past Tuesday, a U.N. peacekeeping helicopter on a routine cargo flight had been shot down as it flew over the oil-producing Unity State in South Sudan. UTair, the Russian airline that owns the aircraft, speculated that the helicopter was shot down with a surface to air missile. Of the four crew members who had been on board, one (the co-pilot) is alive and being treated for minor injuries by Médecins sans Frontières, but the other three (commander, flight engineer, and flight attendant) had been killed. UTair, which has been working with the UN since 1991, stated that it would temporarily halt flights over this area.

The UN Mission in South Sudan (UNMISS) confirmed that the Mi-8 helicopter, which was contracted to the UN Mission and had been flying from Wau in the southwest region of Sudan to Bentiu in the north, had crashed about 6 miles south of Bentiu. A spokesperson for the governor of Northern Bahr el-Ghazal State claimed that the South Sudanese rebel commander had warned the UN last week not to fly over his territory. At peace talks in Addis Ababa, Ethiopia, the rebel delegation issued a statement denying the South Sudanese government accusations. The rebel statement stated that “the area in which the (aircraft) was reportedly shot down is government-held territory, if indeed the aircraft was shot down.”

The Future of Global Energy

We've often heard the familiar warnings that the world's natural resources dwindle year after year, inching humanity closer to a point of no return. Damage to earth's forests, oceans and atmosphere, however, may not be enough to persuade policymakers to take bold steps toward cleaner, alternative energy sources and carbon emission reductions goals. Such steps shape global energy markets and trends, as does energy diversification, supply and demand. Unpredictable events, such as the Fukushima nuclear disaster, can also mold the energy markets of the future. Thus, it is critical to examine the various moving parts involved in world energy markets in order to accurately assess the future of these markets.

A few characteristics of global energy markets give some context for what we should expect in the future. The rise and fall of energy prices have ripple effects across other energy and energy-related industries. OECD countries, including  the United States, are demanding less and less oil, while burgeoning economies in East Asia see an increase in demand for petroleum that drives an expected overall increase in global demand for oil in the coming decades. Countries such as China and Germany are heavily subsidizing solar power, and new technologies in wind and solar could enable more efficient harnessing of these energy sources. And finally, much of the predictions for the future of global energy markets depend on two critical points: bringing Iraq's vast oil reserves online and the potential of unconventional oil and gas extraction (by fracking, for example), especially in the United States.

Jumping the Resource Gap: The Coming Conflicts over Scarcity and What the World Can do to avoid them

When you think about the world’s most dangerous and pressing conflicts, most people picture Arab-Israeli tensions, civil wars in Africa, or even America’s interventions in foreign states. What few people intuitively think of as the world’s central conflict-causing issue in years to come, however, is the growing resource scarcity of key industrial items that has already led to great power jockeying. In his 2012 book The Race for What’s Left, Michael L. Klare details why almost every single resource the global economy depends upon is running out, and how countries are trying to grab up the rest before it’s too late. These resource- and landgrabs are not likely to lead to a friendlier global arena, to say the least, and may spell disaster if great powers come to blows.

The most obvious example is oil: you would be hard-pressed to find a single American, especially one with a car, who isn’t aware of the fact that oil is a scarce resource. Rising gas prices and oil wars and diplomacy have marked US foreign policy since WWII. The end of “easy” oil, primarily in the form of deposits in the Middle East, has led to increased exploration of riskier sources. From the tar pits of Alberta to the deep offshore wells off of North and South America (as well as every other continent), oil exploration has taken a front row seat in the quest for more resources. Russia, Norway, Greenland (administered by Denmark) and others have begun setting the stage for conflict over arctic territories believed to hold vast oil resources. This has raised concerns about the implications of invasive oil wells in the delicate arctic environment, already beleaguered by climate change and global warming.

Environmental concerns also abound on the issue of deepwater drilling. The Deepwater Horizon oil explosion was almost certainly a result of hasty exploration that overlooked safety measures, and that disaster is not likely to be the last in the hazardous practice of deepwater drilling. Still, when the choice is to put entire coastlines at risk or have no more access to the black gold, governments and corporations the world over are not likely to be more concerned with the communities than the oil. Oil extraction from the tar sands of northern Canada would be no less environmentally hazardous. Fraccing for natural gas has already been exposed as dangerous to the areas in which it takes place.

Hydrocarbons are not the only area in which countries are likely to compete for resources. Common minerals such as copper and aluminum, as well as rare earth metals essential for electronics production are running out. Formerly rich deposits of common elements like copper have dwindled as world demand has skyrocketed. Rare earth metals have already caused waves in international politics: China, a key holder of REMs, has restricted and even banned exports of the metals to foreign countries both as a practical move and a political one. Without elements like lithium, for example, there is no way to produce advanced technologies like lightweight lithium batteries. That REMs and other minerals are concentrated in the hands of just a few countries makes the likelihood of conflict go up due to the political motivation behind any decrease in exports.

Besides the shrinking of deposits of gas, oil, and minerals, the final area of crucial resource scarcity is less obvious because it comes not in the form of a deposit, but the very earth you stand upon. Land scarcity, especially arable land scarcity is a growing problem to which many countries are already seeking solutions. Saudi Arabia and other Gulf states have made huge efforts to buy up agricultural land in Africa and South Asia. China, although seemingly more than large enough to support its population, also has its eye on the pie as its growing citizenry outpaces the viable agricultural land. The issue of landgrabs is problematic for a few reasons: first, what are the implications of foreign powers owning a large share of another country’s land? Second, what about the moral implications of a country growing food in a place like Africa where food scarcity, famine, and malnutrition are continuous threats? Third, will third party agriculturalists really take as good of care of the land as natives of the country?

All of these areas of resource scarcity paint a fairly frightening picture: if countries do not find an alternative to current consumption patterns, then war between them over resources is inevitable in the future. As Klare argues, the only viable solution is then to find alternative sources of energy and minerals and come to a consensus about resource distribution, use and laws. Unfortunately, given the state of international consensus on any issue, let alone one that threatens both the national security and the economy of every nation on earth, the alternative solution is not likely to even be sought until it may be too late.

 The Race for What's Left by Michael. T. Klare formed the basis for this article.