(The following was first published on Cumberland Advisors’ website and via LISTSERV. For details, visit https://www.cumber.com/.)

IMO, America’s enemy, Mr. V. Putin, is using his Venezuelan proxy, Nicolás Maduro, to open a third front against the US. At the end of this discussion is a list of citations in support of my view.

Summary: Like Putin, Maduro has eliminated all his political opposition. Maduro has massed armed forces on Guyana’s border, declared intentions against Guyana, activated naval forces, threatened action, blamed the Guyana government, alleged the US tried to assassinate him (Maduro), and more. Maduro is following the playbook that Putin used in Georgia (2008) and Crimea (2014) and to attack Ukraine again two years ago. For financial markets this means impacts on oil/energy and on defense budgets. The US is assisting Guyana against Russia’s solid support of Maduro’s threatened action. Guyana is vastly outnumbered. Venezuela has 115,000 men in the military; Guyana has 5000. Guyana has a huge oil field under development, and Venezuela wants to seize it. Putin has sent a Russian nuclear submarine and accompanying ships to a Havana port-of-call and Putin has conducted naval exercises in the Caribbean. This is clearly intended to ratchet up support for Maduro. US naval warships are tracking and following the Russian ships. Sources: are many news outlets for those who want to follow this closely. Note that it is in Putin’s interest not to have the Guyana oil fields developed by American oil/energy companies. Putin’s Russian war effort is sustained by oil revenues Russia obtains by circumventing US and other country’s sanctions.

No one can forecast the future, except for the Trojan Princess Cassandra, who was not believed at the time. But, IMO, this has the makings of a third front, with the Mr. Putin on one side and the US on the other.

The boundary dispute between Venezuela and Guyana has resurfaced as a threat of expanding war in 2024. See our guest commentary from Sam Rines: “Oil, Guyana, Venezuela, US Economics,” https://www.cumber.com/market-commentary/sam-rines-guest-words-oil-guyana-venezuela-us-economics. The issue is now about oil and particularly offshore oil drilling and production. Venezuela has run down its capacity and failed to maintain oil production facilities under the dictatorial regimes of Chavez and now Maduro. Meanwhile, Guyana has initiated and developed oil leases offshore, and American companies have successfully initiated development and production.

Here are the origins of the conflict. Details and updates in the resource list that follows.

The Venezuelan Boundary Dispute began in 1841, when Venezuela protested that British Guiana had encroached on Venezuelan territory. Great Britain had acquired British Guyana by treaty from the Dutch in 1814. But because the treaty did not describe a western boundary, the British commissioned Robert Schomburgk, a surveyor and naturalist, to delineate that boundary. His 1835 survey produced what came to be known as the Schomburgk Line, a boundary that effectively added 30,000 square miles to the territory of British Guyana.

In 1841 Venezuela disputed that boundary, asserting a border established at the time of its independence from Spain. That border was the Essequibo River – giving Venezuela a claim on two-thirds of British Guyana’s territory. When gold was discovered in the disputed territory, Britain responded by claiming an additional 33,000 square miles west of the Schomburgk Line. In 1876 Venezuela filed a protest and appealed to the United States for assistance, citing the Monroe Doctrine as justification for US involvement. For the next 19 years, Venezuela repeatedly requested this help, asking the US to either sponsor arbitration or intervene forcibly. The US expressed concern but did not take significant action.

Finally, in 1895, US Secretary of State Richard Olney, invoking the Monroe Doctrine, dispatched a long and firmly worded letter (later referred to as “Olney’s twenty-inch gun”) to British Prime Minister and Foreign Secretary Lord Salisbury, demanding that the British submit the boundary dispute to arbitration. Salisbury responded that the Monroe Doctrine had no validity in international law. The US rejected that response, and in 1896 President Grover Cleveland appointed a boundary commission, asserting that the commission’s findings would be enforced “by every means.” However, neither government had a real interest in going to war over the matter.

Great Britain’s global empire was under pressure in South Africa and elsewhere and the British could ill afford another conflict, so Lord Salisbury submitted the dispute to the US boundary commission, tacitly accepting the US’s right to intervene under the Monroe Doctrine. Venezuela also submitted to arbitration, confident that the commission would rule in its favor. An arbitration treaty, called the Treaty of Washington, and a boundary treaty, calling for the creation of an arbitral tribunal, were signed in February 1897 between the US (representing Venezuela) and the United Kingdom. The tribunal was convened in Paris in 1898, and in 1899 it directed that the border follow the 1835 Schomburgk Line, with a couple of significant deviations, giving Britain almost 90% of the disputed territory, including all of the gold mines in the region. The Venezuelans were bitterly disappointed but acceded to the decision.

However, half a century later Venezuela was led to renew its claim when it emerged that the tribunals workings had probably been guided by political collusion between Britain and Russia. The panel of arbitration had comprised two US representatives, two British representatives, and Friedrich Martens, a Russian jurist who was selected by Venezuela from a list of international jurists. It seems that Martens visited England and met with the two British arbitrators in the summer of 1899, then offered the two American arbitrators a choice between accepting a unanimous decision along the lines ultimately agreed or a 3-2 majority opinion that would be even more favorable to the British. That alternative would have followed the Schomburgk Line entirely and given the mouth of the Orinoco River to the British. This development was revealed by a memorandum written in 1944 by Severo Mallet-Prevost, official secretary of the US/Venezuela delegation to the arbitration tribunal, but published only after Mallet-Prevost’s death in 1949. Mallet-Prevost claimed that the American arbitrators and Venezuelan counsel were disgusted at this connivance and drafted a strongly worded minority opinion but ultimately went along with Martens to avoid depriving Venezuela of the mouth of the Orinoco and other valuable territory.

(See “Venezuela Boundary Dispute, 1895–1899” and “Venezuelan crisis of 1895.”)

Venezuela revived its claim in 1962. In 1966, Venezuela and the United Kingdom signed an agreement that “provided for recourse to a series of dispute settlement mechanisms to finally resolve the controversy,” which led in 2018 to Guyana applying to the International Court of Justice (ICJ) to get a declaration that the 1899 tribunal decision is valid and binding upon Venezuela and Guyana (“Guyana files an application against Venezuela”). On December 1, 2023, the ICJ ruled that Venezuela must abstain from taking any action that could alter the current status quo in the contested Essequibo region. (“FALQs: Guyana-Venezuela Territorial Dispute”)

How ironic, then, that Venezuela, which appealed to the United States in the 19th century to put some teeth in the Monroe Doctrine, but then was apparently duped by a Russian diplomat, should now find itself under the sway of Vladimir Putin, with its leader, Nicolás Maduro, decrying the Monroe Doctrine (“STATEMENT BY THE PRESIDENT OF THE BOLIVARIAN REPUBLIC OF VENEZUELA NICOLAS MADURO DURING THE 73RD SESSION OF THE UNITED NATIONS GENERAL ASSEMBLY”).

The Monroe Doctrine was a tough policy to enforce for the newly created United States, with no navy and limited military resources. In those days, the constitutionally required State of the Union address was delivered in written form to the Congress, and the draft from then-Secretary of State John Quincy Adams was the text of what later became known as the Monroe Doctrine (https://en.wikipedia.org/wiki/Monroe_Doctrine). But in the Venezuela-Guyana border dispute, the US asserted for the first time a more outward-looking American foreign policy, particularly in the Western Hemisphere. With the incident, the United States staked its claim as a world power and served notice that under the Monroe Doctrine it would act on its claimed prerogatives in the Western Hemisphere.

Since then, US policy toward Central and South America has waxed, waned, and included many years of neglect. But the south of the border crisis has now been elevated to immigration/asylum/deportation/dreamers/labor-force shortages/job-openings surge domestic American political strife. Because of Maduro’s dictatorship, the US has given asylum to many Venezuelans who are now successfully integrated into the US economy.

For a podcast discussion of the Guyana issue, see this excerpt from the John Batchelor show with an interview with Geopolitical Futures expert Allison Federka: “Allison Fedirka on The John Batchelor Show: Resolving the Venezuela-Guyana Border Dispute.” The complexity of the situation is well-discussed in this 12-minute interview. Recent actions and how they tie into the new Russian policy of forceful annexation is also discussed. Whether Russia and Venezuela will expand ties is unknown.

We are overweight the aerospace defense sector in the US Equity ETF portfolio. We are overweight the domestic US oil and gas industry. For details about Cumberland ETF portfolios, contact Matt McAleer.

War and national security are destined to be major talking point issues in this presidential election year. I suspect many Americans are going to learn more about South American geography and history.

Finally, a personal note. Many years ago, I was able to be a guest on a special congressional visit to the National Archives of the United States. The archivist asked what documents we would like to see. He was expecting to hear things like the Declaration of Independence. I asked to see the Monroe Doctrine. As a result, I can absolutely affirm its existence as some John Quincy Adams-written text buried in the long message that President Monroe delivered in writing to the Congress in 1823. For further details see: “Monroe Doctrine, 1823.”

Now to the resource list.

“Another Regional Conflict that Could Impact Oil Prices,” https://www.mauldineconomics.com/global-macro-update/another-regional-conflict-that-could-impact-oil-prices

“Russia, Venezuela to boost cooperation in energy, including nuclear,” https://www.france24.com/en/live-news/20240220-russia-venezuela-to-boost-cooperation-in-energy-including-nuclear

“Venezuela Expands Military Operations at Guyana Border Threatening Essequibo,” https://www.youtube.com/watch?v=rnBcN-AVqJA

“Guyana condemns Venezuela for signing into law a referendum approving annexation of disputed region,” https://apnews.com/article/guyana-venezuela-essequibo-dispute-maduro-law-a72e94ed5417f99d090e1062c68017d7

“U.S. Southern Command Strategy, Policy, and Plans Director Visits Guyana,” https://www.southcom.mil/MEDIA/NEWS-ARTICLES/Article/3770327/us-southern-command-strategy-policy-and-plans-director-visits-guyana/

“As Russian losses in Ukraine hit 500,000, Putin buries future demographic risks at home,” https://kyivindependent.com/russian-losses-in-ukraine-hit-500-000-how-significant-is-this/

Letter from members of the US House of Representatives Secretary of Defense Lloyd Austin to convey strong support for Ukraine, May 20, 2024, https://intelligence.house.gov/uploadedfiles/5.20.24_joint_letter_to_dod_for_urgent_ukraine_aid.pdf

“Putin, Ukraine & Me,” https://www.cumber.com/market-commentary/putin-ukraine-me

“Russo-Ukraine War: Guest Comments by Byron Callan,” https://www.cumber.com/market-commentary/russo-ukraine-war-guest-comments-byron-callan

“What to know about Russia’s growing footprint in Africa,” https://apnews.com/article/mali-wagner-mercenaries-russia-abuses-b03cf8fe6d9ddbbcdb2d012464944906

“Ex-Florida deputy runs disinformation campaign from Russia, sources say,” https://www.orlandosentinel.com/2024/05/30/ex-florida-deputy-runs-disinformation-campaign-from-russia-officials-say

Dr. John sent the following to me as an example of the argument defending Putin, and I thought readers might want to view it, since I believe that the best-informed opinions are created by hearing all sides of a debate. I don’t like Tucker Carlson’s style of reporting and I am not in agreement with many things that are said in this interview, but this interview of Jeff Sachs by Tucker Carlson is an articulate example of the other side (pro-Putin) of the argument. I don’t trust Putin, and I could spend a lot of time discussing and disagreeing with some of Sach’s articulations. He invokes Gorbachev and Yeltsin and Reagan’s initiating detente without mentioning the notorious behavior of Putin, who is murderous, suppressive, and Hitlerian, in my opinion.

“Jeffrey Sachs: The Untold History of the Cold War, CIA Coups Around the World, and COVID’s Origin,” https://tuckercarlson.com/tucker-show-jeffrey-sachs

If we add Carlson and Sachs, we must also add Ronald Reagan’s 13-minute speech on the 40th anniversary of D-Day. We must respect Reagan, who knew the risks of Hitlerian behavior and who was the person to open the conversation between the US and Russia with Gorbachev. Reagan was well aware of the importance of NATO, too. “June 6, 1984 at Pointe du Hoc on Normandy beach in France,” https://www.reaganfoundation.org/ronald-reagan/the-presidency/d-day/