The Iranian president, Mahmoud Ahmadinejad, is due to touch down in Venezuela on Sunday on the first leg of a Latin American tour aimed at lifting his regime out of international isolation and bolstering its sanctions-hit economy.
Ahmadinejad, who is facing growing economic discontent at home and pressure from the west over Iran’s disputed nuclear programme, will also visit Nicaragua, Cuba, Ecuador and possibly Guatemala in a search for new and improved economic partnerships to reduce the impact of sanctions. The five-day Latin America visit is scheduled to start in the Venezuelan capital, Caracas, with meetings with president Hugo Chávez, a long-time ally.
Ahmadinejad is then expected to travel to Managua for the swearing-in of the Nicaraguan president, Daniel Ortega, before travelling to Cuba and Ecuador. Reports suggest he may also visit Guatemala.
The president’s entourage is expected to include the energy minister, Majid Namjoo, who has said the tour is aimed at promoting commercial ties with Latin American countries. Analysts view Ahmadinejad’s excursion as a reaction to growing economic difficulties at home and political isolation abroad.
Michael Shifter, president of the Washington-based thinktank Inter-American Dialogue, said Iran had economic and geopolitical agendas in Latin America.
“Iran has real economic difficulties and is isolated, so the trip makes sense in that context,” he said. “Latin America, in contrast, is in pretty good economic shape and is increasingly active in global, diplomatic affairs.”
Maria Teresa Romero, professor of international studies at the Universidad Central de Venezuela, said the trip was also intended as a warning signal to Washington.
“That Iran’s president has chosen to visit the region – and only the more staunch political opponents to the US – at a moment when tensions between the US and Iran are escalating is a challenge, a threat, from the Iranian government to the US that sends a clear message: ‘We can go to your backyard when we want to,'” she said.
Iran is grappling with a range of domestic and international problems.Its currency, the rial, has plunged to a record low in recent weeks, causing mayhem at the Iranian stock market and prompting fears over the future effects of the sanctions on the economy.
High unemployment, political power struggles and fears of unrest before the parliamentary elections in March have made the domestic political atmosphere increasingly tense.
At an international level, Iran has resorted to sabre-rattling and threatening countries involved in a campaign to bring sanctions against its central bank and impose a ban on the import of its oil.
Iran raised the stakes, warningthe west it might close the strait of Hormuz, a strategically important passageway in the Gulf through which one fifth of the world’s oil is transported, should greater sanctions on its oil be imposed.
Latin America has become an increasing priority for Ahmadinejad since his election in 2005. New embassies have opened in six countries, while state-run Press TV has also been beefing up its presence in the region, with correspondents in Caracas and more recently Sao Paulo.
On the eve of Ahmadinejad’s visit, one Press TV report said: “The promotion of all-out co-operation with Latin American countries is among the top priorities of the Islamic republic’s foreign policy.”
But Shifter said Iran’s president should not hope for big advances during his tour. Ahmadinejad will not visit Brazil, the regional economic powerhouse, as he did during his previous visit in 2009 – an indication that relations have cooled since Dilma Rousseff took over as president.
“Iran should probably keep its expectations in check. If Iran’s goal is to extend its influence, Latin America does not offer a hospitable environment. It is telling that the larger, more significant countries are not part of Ahmadinejad’s itinerary. These countries may want greater independence from Washington, and may be flexing their muscles a bit on the global stage, but they are not keen to be aligned strategically with Tehran,” he said.
Romero said that in the case of Hugo Chávez, who faces a tricky presidential election in October, the visit could even backfire.
“This is an electoral year in both the US and Venezuela, and I would be surprised if the Republicans don’t use this kind of event to exert more pressure on the Obama administration. I think sanctions against Iran are likely to strengthen, but I also think they could be extended to Venezuela.”
- State Department: Ahmadinejad Trip to Latin America a Sign of Desperation (foxnews.com)
- US: Iran ‘flailing’ for friends in Latin America (seattletimes.nwsource.com)
- Iran Leader’s ‘Tour of Tyrants’ Raises Concerns – Military.com (m.military.com)
- Iran accused of diplomacy offensive in US backyard (smh.com.au)
- Iran Seeking To Expand Influence In Latin America (mysanantonio.com)
- Iranian president expected to visit Latin America – Los Angeles Times (latimesblogs.latimes.com)
Richard Miniter, Contributor
When Venezuela’s strongman Hugo Chavez announced plans to move virtually all of his nation’s overseas gold stock—211 tons of gleaming bars stored in vaults in New York, London, Zurich and elsewhere—back to South America, investors were stunned. Why make one of the largest physical transfers of gold bullion since the end of World War II?
Here and now, I will solve this mystery—and the solution will spark new doubts about Venezuela’s bonds and about President Obama’s foreign policy. The solution hits two populist presidents with the same sad stone.
It is not that investors don’t believe the official story; there is no official story. The Central Bank of Venezuela announced the extraordinary move in a short memo, in Spanish, that is entirely silent on the regime’s reasons.
So speculators speculated wildly. Did Chavez need collateral to secure his loans from China? Did he plan to steal the treasure if he lost the 2012 presidential election? Was Venezuela about to devalue its currency? Does Venezuela believe that, like Ethiopia, some of its holdings are actually gold-plated steel? Was he following the lead of ideological forebears, the Spanish communists, who, in the 1930s, shipped their nation’s entire gold reserves to Moscow to keep them from Franco? Every sleuth had a different theory.
Veteran observers of Venezuela’s central bank were equally puzzled. Reached on the streets of Caracas, economist Richard Obuchi bluntly told me: “I can see no economic reason for this move.” Moving vast stores of gold away from world markets, especially at a time when gold is testing new highs, he added, just doesn’t make sense.
The mystery only deepens the more one thinks about the costs and risks. An insurer, if one can be found, could easily charge 4% of the market value of the stockpile, plus security and shipping charges. All told, that could be almost $100 million. And moving the gold will almost certainly lower Venezuela’s credit rating, which Moody’s Investors Service puts at B2—well into junk-bond status. Standard & Poor’s also rates the nation’s creditworthiness as junk. Making Venezuela’s government assets more opaque will only lower their value. So shipping bullion makes matters worse and means Venezuela will pay even more in borrowing costs.
Don’t forget the risks. A bold pirate could seize tons of gold in a single brazen raid. Or a storm could take it to the muddy bottom of the Atlantic.
So why is Chavez moving his gold? What’s the strongman’s real reason?
First, some facts. Venezuela was once a growing economy that exported food, welcomed and rewarded foreign investment, and maintained the rule of law. Twelve years into Chavez’s socialist experiment, the South American nation imports food. Indeed, food imports have risen 442% over 2003 levels. Nationalizing farms and food distribution firms has meant long lines at supermarkets with half empty shelves due to the constant shortages of basic goods, including corn, coffee and sugar. Since 1999, Chavez’s troops have seized some 2.5 million hectares of land; only 50,000 hectares remain in use. Under the gaze of government managers, these lands have not become more productive.
Foreign investors are harassed and work under the ever present threat of expropriation. Coca-Cola, PepsiCo, McDonald’s, Wendy’s, ExxonMobil, ConocoPhilips and more than a dozen other publicly-traded American companies have seen their assets seized. The total value seized tops $23.3 billion, according to Ecoanalítica, a Caracas-based research firm. Since 2007, the rate of nationalizations has climbed 924%, according to Coindustria, the equivalent of Venezuela’s chamber of commerce. The World Bank, in its 2011 Doing Business Report, finds that Afghanistan is a better place to do business than Venezuela.
Meanwhile, a Spanish judge has found that Chavez’s regime is linked to two terrorist groups, ETA in Spain and the FARC in Colombia. When Walid Makled, a drug lord with family roots in the Palestinian territories, was arrested in Colombia, he admitted to paying some $40 million to the Chavistas. He is also suspected of financing terror plots.
Finally, at the World Bank’s International Center for Settlement of Investment Disputes (ICSID), American and European companies have filed at least 18 claims against Venezuela for illegally seizing their properties. Those claims total more than $14 billion.
The value of Venezuela’s overseas gold reserves? Roughly $12.3 billion.
So let’s connect the dots and solve the mystery of the moving gold.
Chavez knows that ExxonMobil and ConocoPhilips will eventually prevail before the World Bank’s arbitration panel and win roughly $14 billion in compensation. If Chavez balks at paying his debts, court orders could be secured to seize Venezuela’s only real asset under American and European control—the gold in their vaults.
Even if Chavez could somehow hold the World Bank at bay, the growing evidence of human rights abuses and links to international terrorism boosts the likelihood of international sanctions. And the most effective sanction is holding Venezuela’s gold reserves until it reforms.
So Chavez is moving his gold to continue to cheat American shareholders out of their just compensation for their looted lands, plants, and oil fields as well as to continue to punish his own people with his miserable misrule.
Now consider the role of the Obama Administration. It has steadfastly refused to criticize the theft of billions of dollars worth of American property in Venezuela, let alone impose sanctions. Secretary of State Hillary Clinton warmly greeted Chavez at a recent summit in Brazil. When reporters ask about the beleaguered American shareholder, the “on-background” guidance is always the same: the World Bank arbitration panel would put everything right. Let the process work. And so on.
So, when Venezuela announced one of the largest physical movements of gold in world history, the Obama Administration didn’t worry. Just routine. Nothing to see here, folks. The World Bank will straighten it all out.
Last week, Chavez’s regime began to formally withdraw from ICSID, the 157-member international body that will likely rule against him. Venezuela became a signatory State of the ICSID Convention in August 1993. Now Chavez is leaving before he gets stuck paying the tab for his illegal seizures. The Obama Administration, which was counting on the ICSID to do its work, is left holding an empty bag.
What does the Obama Administration say now? Crickets.
ExxonMobil’s shareholders can join Chrysler’s bondholders on Obama’s enemies list. If that seems a tad harsh, consider this: When made to choose between millions of American shareholders and one South American dictator, the Obama Administration chose Chavez.
Why is the Obama Administration sitting in paralyzed silence while Chavez removes himself from international accountability? Is it perceived ideological comradeship, a loathing of investors, simple dereliction of duty or some other reason? Now that is a mystery.
- Venezuela, Guyana to talk in territorial dispute (seattletimes.nwsource.com)
- The Mottled Relationship: Iran and Latin America (mb50.wordpress.com)
- Chavez Wants Gold Holdings Transferred To Venezuela (npr.org)
- Chavez to nationalize gold production in Venezuela (cnn.com)