Small Wars Journal

Venezuela’s Missions: Mechanisms of Corruption

Tue, 07/14/2020 - 4:17pm

Venezuela’s Missions: Mechanisms of Corruption

Magdalena Defort

This assessment seeks to answer questions about how social programs run by Venezuela’s Chavista regime became a perfect mechanism for building a widespread international corruption network to benefit the president and his cronies. It examines the pivotal role played by foreign powers—i.e., Iran, and Turkey—in these clandestine illegal operations.

Maracaibo House

Typical colonial house from downtown Maracaibo. House painted with propaganda and woman in clothing supporting Hugo Chávez. 23 March 2013. Source: https://commons.wikimedia.org/wiki/File:Typical_colonial_house_from_downtown_Maracaibo.jpg (Public Domain, CC0 1.0)

Introduction

El Comandante, Hugo Chávez Frías announced the ‘Bolivarian’ program, a part of the Bolivarian Alliance, as a socialist, national-patriotic way to fight poverty, social inequality, and corruption.  The Bolivarian program was initiated after he officially took power in 2000. According to his supporters, this platform would be a model for other countries to fight a modern slavery promoted by US globalization and capitalism. The social programs, known as misiones (missions), embodied in Chavista ideology were characterized by flamboyant style in its quest to alleviate poverty and social inequality.

Between 2005 and 2015, the Chávez regime implemented a series of misiones to lift the poorest segment of society from starvation. In theory and in practice, the missions significantly improved the status quo of non–elites. Misión Barrio Adentro (‘Mission into the Neighborhood’) was intended to bring the health system, mostly supported by Cuban medical personnel, to remote rural areas to establish first-care centers. The next one, ‘Robinson Mission,’ was meant to teach illiterate adults writing, reading, and basic arithmetic. Both programs seemed to be ‘without cost.’ However, this and other missions were designed to build a Chavista ideological base of supporters and, more importantly, build up a web of relations to move social funds throughout its network. As a result, the social ‘aid’ was essentially a strategy to cover up illicit operations—i.e., money laundering, mining of strategic minerals, and, most important, the penetration of foreign powers into the country.  See Figure 1 concerning the Venezuelan misiones and the networks of illicit profiting that have been established:

Venezuela"s Missions

Figure 1. Venezuela’s Missions/Social Programs Scheme (Illicit Profiting)

Source: Author Information (El Centro Rendering) 

The Chavista political curriculum (‘Chavismo’) consted of a series of social programs to combat starvation, and fight extreme poverty, and illiteracy in Venezuela. It was launched by El Comandante, Chávez, and continued by Nicolás Maduro. Since its outset, the mission program was accused of misspending the funds allocated directly to communal councils to carry out the public works.[1] Although all of the social programs served the political objectives of gaining a base of supporters while freely managing Venezuela’s resources, the later episodes of the initiative revolved around using these resources to sustain the population.  That is it used natural resources—i.e., oil and gold—to provide food for the people.  The regime claimed this was necessary since US power deprived them of this basic security. In reality it was a cover for mass resource extraction that impoverished the people. Hence, the real objective of this ‘exchange’ was to move Venezuela’s resources to its extra-hemispheric allies through the establishment of a wide-scale corruption scheme.

Two missions: the ‘Oil-for-Food’ and ‘Gold-for-Food’ were instrumental and reached an unprecedented multilayer system of corruption integrating domestic and international levels. Historically, a similar ‘Oil-for-Food’ program was established in 1996, under Saddam Hussein’s regime, to lift the Iraqi people from starvation. Although the United Nations (UN) imposed special rules to buy the basic goods for oil, the head of the UN Oil-for-Food Program, Benon Sevan, was accused of involvement in a then unprecedented scheme where Hussein’s inner circle benefited from ‘oil vouchers’ worth millions of dollars to reward individuals and to help companies to evade sanctions.[2] Despite Hussein’s financial operation being monitored by UN, he had freedom to choose partners for the exchange the oil for food. Hussein skimmed billions from the program by controlling these decisions.[3]

Mission 1: ‘Oil for Food’  

Venezuela’s ‘Oil-for-Food’ strategy to evade US sanctions and continue to conduct its trade in shipping oil, in exchange to import food and medical supplies was launched in 2016. The Local Committees for Supply and Production (Comité Local de Abastecimiento y Producción – CLAP) were in charge of providing subsidized food rations to poor Venezuelans. Politically, CLAP’s function was to combat the alleged ‘economic war’ waged by the government’s enemies in the private sector.  As a result of a lack of trust, Chavistas excluded business interests from running the committees, especially because large sums of money were involved.[4]

CLAP contracted with ‘shell’ companies and they in turn sub-contracted with others to cover-up a sophisticated wide-scale corruption scheme to pursue their secret goals. CLAP was a platform for social control designed to reward Maduro’s supporters and punish opposition. Currently, its stated objective is not only to alleviate hunger but also to fight the COVID-19 pandemic. For this strategy, the regime needed a new venue to pursue its illicit operations and contracted with companies to facilitate the illicit flow of large sums of money.

Two Mexican firms, Libre Abordo and Schlager Business Group, served as the shell trade companies for exchanging oil for food and to buy oil and send boxes of food. Libre Abordo sells cleaning supplies, hospital equipment, and agricultural products. Schlager Business Group works supporting businesses. According to US Treasury, Libre Abordo resold over 30 million barrels of Venezuelan crude oil. Neither of the companies had prior experience in the oil sector.[5]

The intermediaries between the Mexican contractors and Venezuela’s government were Álex Nain Saab Moránand his associate Alvaro Enrique Pulido Vargas (Pulido). In 2009, both created Fondo Global de Construción(Global Construction Fund) to bid on the Chavista regime’s housing contracts. According to US Department of Treasury, in 2011 the Government of Venezuela awarded a housing contract to Saab and Pulido’s company to build 25,000 homes in Venezuela; the contract paid Saab and Pulido three to four times the actual cost of building each low-income home, which were intended for Venezuela’s more vulnerable populations.[6]

According to the US Department of Treasury, Libre Abordo is currently designated  for operating in the oil sector of the Venezuelan economy, and it has materially assisted, sponsored, or provided financial, material, or technological support, goods, and/or services in support of Petróleos de Venezuela–PdVSA (Venezuela Petroleum).[7] Thus, this Mexican company’s scheme is another layer that skims larger spending by inflated prices for transactions made through Venezuela’s cash flow.                                        

Mission 2: ‘Gold-for-Food’  

The illicit gold trade, ‘Gold-for-Food’ is another mission with similar objectives as the ‘Oil-for-Food’ scheme.  It’s objective is to cover up the highly sophisticated corruption network involving multiple countries and companies that seeks to hide the illicit flows of money and goods.[8] Turkey was instrumental to this scheme. Although this extra-hemispheric, Middle Eastern nation intended to establish trade with Latin America for years, Chávez always opposed any deal with Turkey because it refused to support Bashar al-Assad’s regime. However, in 2016, Turkish Airline flights between Istanbul and Caracas were finally inaugurated,[9] and according to Aykan Erdemir, Turkey became a permissible jurisdiction for participation in the networked for illicit finances and sanctions evasion.

The Turkish president’s solidarity with sanctioned countries such as Venezuela and Iran is part of an overall pivot toward authoritarian and kleptocratic regimes and a challenge to the US-led liberal international order. Unless Washington goes after the remaining elements of the Maduro regime’s network in Turkey, Erdoğan will see this inaction as a license for further transgressions involving not only Venezuela but also other rogue regimes as well.[10] Interestingly, Tereck El Aissami, minister of Venezuela Petroleum since April 2020, previously held prestigious government posts in Chávez and Maduro’s governments.  El Aissami who was sanctioned as drug kingpin by the US in 2017 with links to Lebanese Hezbollah, concluded an agreement on gold with Turkey’s president.    

According to Kurdistan24, a vast bribery and corruption mechanism that benefit government officials of the two countries may play an important role.[11] In 2016, Minerven, the only official conglomerate state mining company, was in charge of legally selling the gold bought from the exploration of jungles, savannah, and hills where mining was previously illegal because of its control by armed groups.[12] Maduro created a joint-venture Minerven–Marilyns Project Yatrim AS, Venezuela–Turkish mining companies. According to Bloomberg, Venezuela shipped at least $900 million in gold.[13] The gold was converted into cash which in turn paid for food.

Álex Saab: Super-Facilitator

Iran is another one of Venezuela’s extra-hemispheric partners involved in illicit oil schemes. In May 2020, Iran sent Venezuela several tankers of fuel oil that the US government believed to be purchased with gold and by shell companies controlled by Álex Saab. Iran’s interest in Venezuela ostensibly began when US Treasury imposed the first sanctions on Iran’s nuclear program re-launched by the president Mahmoud Ahmadinejad in 2005. At that time, Chávez started building a friendship with anti-US oil partner, Iran. Since that time, Venezuela and Iran, which are among the most sanctioned countries, needed each another to pursue illicit businesses and evade sanctions.

According to Middle East Eye, since April 2020, Iran sent five tankers with about 1.5 million barrels of oil to Venezuela.[14] Iran delivered additive to help refine gasoline. According to some experts, Venezuela will pay for oil with gold as the only alternative this country has. Gold became only one option for this oil rich country because of low crude prices on the market and difficulties in its extraction: obsolete technology and lack of conservation were important factor to switch crude oil for gold. After unprecedented events in June 12, 2020, related to the capture of front men of the whole scheme Álex Saab.  Saab was on his return from Iran as a negotiator of the next ‘exchange:’ the purchase of an aircraft to create an air corridor between Venezuela and Iran without a need for stopover. The aircraft is a 340-300 Avior, Aviasa’s property, that will pass to ConviasaNational Airline. According to PanAm Post, this giant aircraft has capacity to transport 275 tons and travel 13,500 km without a stopover.[16]  

This unprecedented wide-scale corruption scheme was built up by Álex Nain Saab Morán, a Colombian businessmen from Barranquilla, capital of the Atlántico Department and a conduit for drug and illegal money, who is known from the Panama Papers.[17] Saab is a dual Colombian and Venezuela national. His career started from selling key chains and, subsequently, work uniforms on the streets of Barranquilla, and he ended up exporting merchandise to Venezuela. Saab was not only involved, but was even a mastermind for its expansion into the Chavista regime’s corruption network during Hugo Chávez’s presidency because of his connection to Colombia’s government. In 2011, Chávez launched the ‘Great Housing Mission’ to build the houses at affordable prices for low-income people. Saab and Pulino signed a contract to provide materials for construction of houses with Chávez and his Colombian counterpart, Juan Manuel Santos.[18]   

According to Alberto Ray, Saab—a super-facilitator—was “an architect of the regime’s money-making schemes, especially through drugs, gold and oil.”[19] Natural resources (oil and gold) are extracted through by armed non-state groups (i.e., the FARC – Fuerzas Armadas Revolucionarias de Colombia and ELN – Ejército de Liberación Nacional) to cover the food and medical equipment spending was a spinoff for a wide international corruption scheme that allowed Venezuela to evade US sanctions. Saab is second from the top in the scheme’s layers, after Maduro and his cronies. He is a front man to hide all illicit operations and to engineer the logistics of the operations of this illicit network.

On 12 June 2020, Saab was detained in Cape Verde, the West African island nation, pursuant to an INTERPOL red notice for extradition to the United States. Currently, all the extradition paperwork is in process because the US and Cape Verde do not have standing extradition treaty. According to Center for a Free and Secure Society report,Venezuela’s Minister of Industries and National Productions, Tereck El Aissami, appointed by Maduro in June 2018, sent Saab as an envoy to Teheran to set up a ‘gold–for–gas’ scheme.[20] In July 2019, the US Office of Foreign Assets Control (OFAC) designated both Álex Saab and his business partner Alvaro Pulino, as Specially Designated National (SDNs) blocking their assets, for running CLAP’s scheme on behalf of and for the benefit of Maduro’s regime. However, not only the US, but also Colombia has requested Saab’s extradition because of his drug trafficking activity and his connection to Jorge Luís Hernández Villazón, known as Bolliche, a Colombian former commander of the Self Defense Forces of Columbia (Autodefensas Unidas de Colombia–AUC), a right wing paramilitary group and a drug trafficker.

Conclusion   

The Chavista corruption scheme reached an unprecedented level of sophistication due too the involvement of extra-hemispheric sanctioned powers: Turkey and Iran. This large-scale corruption network not only meddled in US foreign policy toward Venezuela, but also benefited these rogue regimes through influencing Venezuela’s government’s behavior toward keeping its incumbent dictator in power. To do this, the extra-hemispheric powers maintained their influence in Venezuela because of their similar authoritarian alignment to the Caribbean regime. In addition, they embedded themselves in one of the corruption layers not only to amass theft money from natural resources, but also to evade US sanctions imposed against them, to make a deal with Venezuela’s kleptocratic regime, and to entrench their reach in the Western Hemisphere.

Venezuela is a safe heaven for terrorist groups from the Middle East: Iran’s proxy, backed militia, Lebanese Hezbollah, found a perfect camp for their training. Finally, the Maduro regime publicly supports Iran’s nuclear program and provides some of the strategic minerals that do not exist in the Islamic country. Turkey also found an ally in this Latin American country because of its alignment with Maduro’s kleptocratic regime.

Despite the altruistic branding of the Chavista missions—their stated goal was to alleviate starvation among Venezuela’s populace—Chávez took power over the elites and nationalized natural resources to ostensibly distribute the funds from resources among Venezuela’s people. Unfortunately, this was largely a ruse and the disadvantaged segment of Venezuela’s society was robbed and deceived. Hugo Chávez and later Maduro used a kleptocratic regime to forge a ‘Bolivarian Joint Criminal Enterprise’ for resource extraction that not only robbed their nation, but betrayed their people and, sold their country by allowing rogue foreign powers to penetrate and meddle in Venezuelan domestic affairs. 

Endnotes

[1] Steve Ellner, “Social Programs in Venezuela under Chavista Government.” The Next Step Project. 7 August 2017, https://thenextsystem.org/learn/stories/social-programs-venezuela-under-chavista-governments.

[2] Sharon Otterman, “Iraq Oil for Food Scandal.” Council on Foreign Relations. 28 October 2005, https://www.cfr.org/backgrounder/iraq-oil-food-scandal.

[3] Ibid.

[4] Ellner, op. cit. (Note 1).

[5] Scott Smith and Christopher Sherman, “U.S. Sanctions two Mexican companies linked to Venezuela.” El Universal. 19 June 2020, https://www.eluniversal.com.mx/english/us-sanctions-two-mexican-companies-linked-venezuela.

[6] “Disrupts Corruption Network Stealing From Venezuela’s Food Distribution Program, CLAP,” Press Release, US Department of the Treasury. 26 July2019, https://home.treasury.gov/news/press-releases/sm741.

[7] “Treasury Targets Sanctions Evasion Network Supporting Corrupt Venezuelan Actors.” Press release, US Department of the Treasury. 18 June 2020, https://home.treasury.gov/news/press-releases/sm1038.

[8] Michael Smith and Monte Real, “Venezuela–Turkey trading scheme enrich mysterious Maduro’s crony.”Bloomberg Businesses Weak. 25 April 2019, https://www.bloomberg.com/news/features/2019-04-25/venezuela-turkey-trading-scheme-enriches-mysterious-maduro-crony.

[9] Ibid.

[10] Aykan Erdemir, “Treasury Venezuela’s sanctions target the tip of the Turkish Iceberg.” Policy Brief. The Foundation for Defense of Democracies. 26 July 2019, https://www.fdd.org/analysis/2019/07/26/treasurys-venezuela-sanctions-target-the-tip-of-the-turkish-iceberg/.

[11] Laurie Mylroie, “US warns Turkey on Venezuelan sanctions after shady Venezuelan official visits Ankara.” Kurdistan 24. 3 February 2019, https://www.kurdistan24.net/en/news/1d43adca-f25f-4b88-95cd-4bdd2d20f343.

[12] Ibid.

[13] Ibid.

[14] “Iran prepared to continue oil shipments to Venezuela despite US sanctions: Report.” Middle East Eye. 15 June 2020, https://www.middleeasteye.net/news/iran-prepared-continue-oil-shipments-venezuela.

[15] Mehdi Jedinia and Carolina Valladares Perez, “What's Behind Iran's Fuel Shipment to Venezuela?” Voice of America. 31 May 2020, https://www.voanews.com/extremism-watch/whats-behind-irans-fuel-shipment-venezuel.

[16] Sabrina Martin, “Maduro compra avión de Avior para eludir sanciones y volar sin escalas a Irán.” PanAm Post. 20 June 2020, https://es.panampost.com/sabrina-martin/2020/06/18/maduro-compra-avion-de-avior-para-eludir-sanciones-y-volar-sin-escalas-a-iran/.

[17] Leaked documents on offshore entities with personal financial information of wealthy individuals and public officials. It was created by Panamanian law firm led by Mossack Fonseca.  See “Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption.” International Consortium of Investigative Journalists (ICIJ). 3 April 2016, https://www.icij.org/investigations/panama-papers/20160403-panama-papers-global-overview/.

[18] Gerardo Reyes, “El oscuro pasado de dos millonarios contratistas del gobierno venezolano. ” Univision. 3 March 2017, https://www.univision.com/noticias/univision-investiga/el-oscuro-pasado-de-dos-millonarios-contratistas-del-gobierno-venezolano.

[19] “The Fall of Álex Saab, the Venezuelan Regime’s Trusted Money Man,” InSight Crime. 15 June 2020, https://www.insightcrime.org/news/brief/fall-Álex-saab-venezuela/.

[20] Joseph M. Humiree, “Iran, Turkey, and Venezuela’s Super Facilitator: Who Is Alex Saab?” Secure Free Society.30 June 2020, https://www.securefreesociety.org/research/who-is-alex-saab/.

[21] Douglas Farah and Caitlyn Yates,  “MADURO’S LAST STAND: Venezuela’s Survival Through the Bolivarian Joint Criminal Enterprise.” Washington, DC: IBI Consultants, LLC and National Defense University (INSS), May 2019, https://www.ibiconsultants.net/_pdf/maduros-last-stand.pdf,

Additional Reading

Douglas Farah and Caitlyn Yates,  “MADURO’S LAST STAND: Venezuela’s Survival Through the Bolivarian Joint Criminal Enterprise.” Washington, DC: IBI Consultants, LLC and National Defense University (INSS), May 2019.

Alma Keshavarz and Robert J. Bunker, “Hybrid Criminal Cartel Note 1: Former Venezuelan National Assembly Member Adel El Zabayar Indicted on Charges of Narcoterrorism and Links to Hezbollah (Hizballah).” Small Wars Journal. 1 July 2020.

Max G. Manwaring, “Venezuela 2019 - A Cautionary Tale.” Small Wars Journal. 19 February 2019.

Moises Rendon and Arianna Kohan, “Identifying and Responding to Criminal Threats from Venezuela.” Washington, DC: Center for Strategic & International Studies (CSIS). 22 July 2019.

 

 

 

 

 

 

 

 

Categories: El Centro

About the Author(s)

Dr. Magdalena Defort served as an Intern Analyst at the Foundation of Defense of Democracies and as a Research Fellow at the Center for a Free and Secure Society. She recently received a master’s degree in National Security from the David Morgan Graduate School of National Security. She previously served  as a Scholar/Researcher in Latin American security issues at the University of Miami, Coral Gables where she directed an interdisiplinary research group on Latin American issues.. She holds a Ph.D. from the Universidad National Autónoma de Mexico (UNAM) and master’s degree from Universytet Wroclawski (Poland). She participated in post–doctoral studies at the Instituto de Ciencias Sociales (UNAM). Magdalena is the author of five books and various articles published in scholarly journals. Defort’s research interests include terrorism, drug trafficking, insurgencies, civil-military relations in Latin America and military collaborations in countering the new threats in the Americas.