Venezuela, gold, and the future of sanctions | Murder in Istanbul
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Continued vaccine rollouts and warmer weather (in the North at least) are bringing with them a noticeable sense of optimism. In fact, we’re hearing chatter like: when this is over, it’ll be like roaring 1920s or the Summer of Love. People are ready to party.
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Dear companies, nope. We've been through enough. We'll even buy some of your mass-produced tat if you just go back to nice simple ads of attractive people being normal.
💰 Venezuela, gold, and the future of sanctions - an elaborate plot to avoid economic sanctions.
🕌 Murder in Istanbul - more than two years after Jamal Khashoggi’s murder, what does it say about the Saudi Arabian government?
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💰Venezuela, gold, and the future of sanctions
#Blessed with the world’s largest known oil reserves, a reputation for good governance until the end of the 20th century, and by far the most beauty pageant crowns in history, Venezuela was once the golden child of Latin America.
No longer. Venezuela’s autocratic government and its overreliance on oil exports has left the country devastated by international sanctions and falling oil prices.
In fact, Venezuela's economy has sunk so low that this week the government has been implicated in an elaborate gold-for-cash smuggling scheme. The scheme allegedly earned the Venezuelan government US$1.2 billion in 2020 (which will also get you a week-long vacay in space, in case you were wondering).
Venezuela under President Nicolas Maduro
First, some context.
80% of Venezuelans want President Maduro out of office. But over the past four years, Maduro’s gradually consolidated political power by eliminating rivals and installing loyal supporters throughout the government and judiciary.
As a result, the US and other countries have sanctioned the Maduro Government for suppressing democracy and abusing human rights.
On top of this, Venezuela’s economy is collapsing. Venezuela now boasts one of the highest inflation rates in the world at 2,685% (not a typo). Economists predict inflation will accelerate even more this year.
That’s a big problem because Venezuela imports nearly 75% of its essential supplies. Significant inflation would mean that food and basic medicines will become even more difficult for the average Venezuelan to access.
Echoing the Zimbabwean hyperinflation crisis of 2007, where the central bank literally crossed out zeroes on the currency to deal with hyperinflation, the Central Bank of Venezuela has just introduced a new 1-million-bolivar bill. 😱
Put simply, things are bad in Venezuela.
Here’s a great long read for anyone wanting more analysis of the situation in Venezuela.
The ‘Great Theft of Venezuela’s Riches’
So, what’s the deal with the Goldfinger-esque plot, and are the characters’ names as ridiculous as 🐱-galore?
Sadly, no. But the accusation levelled at the government by Julio Borges, the opposition’s special envoy, is only slightly less outlandish. During an appearance in front of the US Senate, Borges described an elaborate operation that goes a little something like this:
The government loads gold from its national reserves onto planes provided by Russia (Russia doesn’t like to be left out when it comes to these things).
The planes then fly to Mali in Central Africa, where the gold is sold for hard cash.
The gold is refined to eliminate traceability and resold to other countries including the UAE.
The cash is then used to finance the Venezuelan government, et voila! Sanctions evaded.
The operation is allegedly run by a shady network of of financial firms and wealthy individuals. It’s from the North Korean playbook, but instead of smuggling guns and drugs, Venezuela is smuggling gold. That’s an improvement… sort of.
Zoom out: might cryptocurrencies kill sanctions?
Sanctions have long been criticised as ineffective, particularly when directed at whole countries rather than specific individuals. Powerful officials rarely feel the pinch of restrictions, so the sanctions disproportionately hurt the citizens they are designed to help.
Of course, Venezuela is not the first country to dodge international sanctions, but it might be the last to do so using gold and other physical commodities.
At first glance, they seem perfectly designed for the task:
Cryptocurrencies are outside the current international financial infrastructure and thus invisible to regulators
They can be designed to be untraceable and anonymous
They are cheap to implement, at least compared to literally flying gold bars to Africa
It’s no surprise that Venezuela is already trying to use its own government-issued cryptocurrency ‘Petro’ to trade around the world. It’s only a matter of time until North Korea, Iran, and other sanctioned regimes do the same.
The silver lining to all this? Schemes like Venezuela’s - and the future use of cryptocurrencies - will hopefully convince the international community to come up with better methods than imposing sanctions to enforce global rules.
(For another longer read, check out this expose on Iran and Turkey’s ‘gold-for-gas’ scheme, which is the largest sanction evasion effort in recent history).
🕌 Murder in Istanbul
A gruesome execution
Last week, the US declassified a CIA report that concluded with a high level of confidence that Crown Prince and de-facto leader of Saudi Arabia, Mohammed bin Salman (MBS), was personally responsible for ordering the murder of Washington Post journalist Jamal Khashoggi.
We're sure this story is familiar to most of you, but here is the briefest of recaps:
In October 2018, Khashoggi attended an appointment at the Saudi Arabian Consulate in Istanbul. Once inside, he was subdued, sedated, and suffocated with a plastic bag by a team of assassins working for the Crown Prince's innermost security detail.
The night before his appointment, a team of assassins flew from Riyadh to Istanbul on two government chartered flights. The team included a toxicologist, a forensic pathologist, and a body double.
Khashoggi was allegedly dismembered by the pathologist and (***trigger warning for lovers of Indian cooking***) burned in a tandoor oven along with 30kgs of meat the Saudi Consulate had ordered in an effort to quite literally throw investigators of the scent 🤢.
The body double then dressed in the murdered journalist’s clothes and walked around Istanbul to ‘prove’ he had left the Consulate.
Here's a thorough summary of the events, and more information about Jamal Khashoggi.
It really pissed off Turkey
In the days following the murder, the uppermost echelons of Turkey's justice ministry, intelligence agencies, and even President Erdogan himself, were furious.
With good reason - not only did Saudi Arabia fly in a team of assassins to execute a journalist in the heart of Istanbul, an affront to Turkey’s sovereignty, but they tried to blame Turkey for the whole affair.
In response, Turkey publicly released audio recordings from inside the Saudi Arabian Consulate. While we don't know the extent to which Turkey compromised the Saudi Consulate's security, it's safe to assume officials in Riyadh were outraged that Turkey's intelligence agencies captured conversations between the assassins and Saudi diplomats.
(Diplomats are paranoid that conversations they have are monitored. Indeed, every embassy we've ever been to demands even the most senior visitor leave all electronic devices in a storage room before entering the building).
The incompetence of absolute power
Is it just us, or these days are we all asking some version of: 'omg that is so stupid, I must be missing something’?
Was President Trump playing 3D chess or just bumbling from one gaffe to the next? What was Putin really thinking when he ordered the killing of Navalny via toxic underwear? World leaders can't be this dumb... can they?
Never attribute to malice that which is adequately explained by stupidity.
For most interactions in life, Hanlon’s Razor is a sure bet. But is it really just stupidity that the agent acting as Khashoggi's body double was recorded saying:
It's spooky to wear the clothes of someone whom we killed 20 minutes ago.
Is it really just stupidity that MBS assumed that the world would ignore Khashoggi’s murder? After all, journalists who criticise brutal regimes are killed with shocking regularity. A week after Khashoggi was killed, a Bulgarian journalist was murdered, but it barely registered a blip comparatively.
Or perhaps MBS was trying to send a message to other Saudi Arabian dissidents to not to criticise his regime. Is it just stupidity that no one in his inner circle had the high-school level of foresight to realise that dismembering a well known critic might permanently destroy MBS’s image as a reformer?
While MBS may well be both a brutal autocrat and a reformer, he isn’t stupid. Maybe adapting Hanlon's Razor for the world of modern geopolitics can help us think about this:
Never attribute to complex long term strategy that which can be explained by the arrogance and incompetence of unaccountable power.
-Intrigue's Razor 😉
Applying that model, it becomes easy to imagine MBS in the autumn of 2018, perhaps newly emboldened by favourable international media coverage, summoning his inner circle in a fit of rage at a tweet by Khashoggi and demanding that he be silenced.
It’s not hard to imagine his closest officials then scrambling to satisfy his demands, without pushing back or even pausing to consider the second or third order consequences of such an outrageous plan.
A climate of fear and absolute power creates an echo chamber within which no advisor or confidant, no matter how senior, is able or willing to point out the absurdity of a decision.
So what? Aka realism vs idealism
Over the last week, multiple columns have condemned President Biden's decision not to sanction MBS personally.
And fair enough - not only does it go against a promise Biden made while campaigning, but there's evidence that former President Trump's close relationship with MBS may have emboldened the Saudi leader.
But what would financial sanctions or a travel ban against MBS actually achieve? Certainly, a sense of closure for Khashoggi's friends and family, and a sense of moral satisfaction for the rest of us - both important things.
But if there was a definition of diplomacy it would be: balancing the constant tension between working to make the world the way you wish it was, and acknowledging the way it actually is.
And the way the world actually is looks a lot like a Putin-MBS high-five one month after Khashoggi's murder:
By not sanctioning MBS, Biden is implicitly acknowledging a reality that journalist Medhi Hasan described as:
Saudi Arabia is the cause of, and solution to, most of the instability in the Middle East.
While that's a little hyperbolic - the US is plenty responsible itself - it does illustrate who holds a lot of the cards in the Middle East. If the US wants support for its policies on Iran, or terrorism, it will need Saudi Arabian support.
Here’s the real question: if Saudi Arabia is crucial to stability in the Middle East, then as long as it is led by a government reckless enough to publicly execute a journalist in a foreign country, how stable can the Middle East ever really be?
A documentary about the Khashoggi murder called The Dissident will be released later this year. Early reviews suggest it will be worth watching.
➕ Extra intrigue
Switzerland has banned (non-COVID related) facial coverings. The law stops short of explicitly naming Islam, but it disproportionately impacts Muslim women. Minarets are also banned.
It was only a matter of time before the Mockingjay’s signal became a protest symbol irl. Pro-democracy demonstrations by some of Myanmar’s civilians (mainly women) against the military are still going strong, one month on from the coup.
Pope Francis recently visited parts of Iraq once held by the Islamic State, a time of occupation that forced many Christians to flee. He met Iraq’s Grand Ayatollah Ali al-Sistani, the 90-year-old spiritual leader of millions of Shia Muslim. Reports the Ayatollah referred to the Pope as ‘youngblood’ couldn’t be confirmed.
Foreign visitors to China have complained about ‘psychological pain’ after receiving COVID-19 anal (yes, anal) swab tests in Beijing. China insists that its testing methods are ‘science-based’. Talk about a rude surprise. 😬
🔎 Intriguing recommendations
👩🦱 Helen: We are big fans of charts and graphs. Check out Harvard Business School’s Visual Library. Noteworthy charts include overlooked strategies for saving Titanic passengers (RIP Jack), and a handy flowchart on whether you should hold a meeting in these Zoomy times. (The answer is nearly always ‘no’.)
👴 John: This week in how the internet has broken my brain:
Lots of people commented that my struggle understanding NFTs was real for them too. For those who still don’t get it (i.e. me), reader Miguel Camacho drew our attention this excellent article on why they’re selling for so much.
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