The Death Knell for Chavez?

In response to Chavez's seizure of oil company assets when he nationalized Venezuela's oil industry, the British government has frozen $12bn of Venezuela's assets. In protest, Chavez has once again threatened to stop selling oil to the U.S., saying that Venezuela would join an "economic war," and that they would not be the only country to do so. Daniel Drezner makes the obvious point:

If Chavez were to attempt an embargo, there's no doubt that the United States would feel a twinge of pain.

On the other hand, whatever twinge the U.S. felt would be mild compared to the massive spasms that would rip through Venezuela's economy from such a move -- especially since the only refineries that can handle Venezuelan oil are based in the United States.

This is one of those situations where, if economic warfare breaks out, the U.S. holds most of the cards.

I strongly suspect that Chavez's self-preservation motive will force him to back down -- but it would be kind of amusing if he believed his own bluster.

Drezner goes on to link to this NY Times article, describing how Chavez is losing his grip on Venezuela because of his economic mis-management:

These should be the best of times for Venezuela, blessed with the largest conventional oil reserves outside the Middle East and oil prices near record highs. But this country’s economic and social problems have become so acute lately that President Hugo Chávez is facing an unusual onslaught of criticism, even from his own supporters, about his management of the country.

In a rare turnabout, it is Mr. Chávez’s opponents who appear to have the political winds at their backs as they reverse policies of abstention and prepare dozens of candidates for pivotal regional elections. Mr. Chávez, for perhaps the first time since a recall vote in 2004, is increasingly on the defensive as his efforts to advance Venezuela toward socialism are seen as failing to address a growing list of worries like violent crime and shortages of basic foods.

While Mr. Chávez remains Venezuela’s most powerful political figure, his once unquestionable authority is showing signs of erosion. Unthinkable a few months ago, graffiti began appearing here in the capital in January reading, “Diosdado Presidente,” a show of support for a possible presidential bid by Diosdado Cabello, a Chávez supporter and governor of the populous Miranda State.

Outbreaks of dengue fever and Chagas disease have alarmed families living in the heart of this city. Fears of a devaluation of the new currency, called the “strong bolívar,” are fueling capital flight. While the economy may grow 6 percent this year, lifted by high oil prices, production in oil fields controlled by the national oil company, Petróleos de Venezuela, has declined. Inflation soared by 3 percent in January, its highest monthly level in a decade.