The shocking scenes from Caracas provide a vivid illustration of what can happen if a country fails to properly manage the move away from oil dependency.

NOT so long ago they called it “Venezuela Saudita” — Saudi Venezuela — on account of the energy riches of the country with the biggest proven oil reserves in the world. Now they talk about the “Somalization” of Venezuela as it joins the ranks of the failed states.

The shocking scenes reported from the capital, Caracas, last week — the president dancing the samba while behind him riot police fired on protesters — were a vivid illustration of what can happen if a country fails to properly manage the move away from oil dependency.

Policymakers across the Arabian Gulf, all striving to diversify their economies, have a vital interest in what is happening in Latin America’s latest disaster, and of learning from it.

I was in the country last year, accompanying a senior Arab executive on a business trip, and can report with first- hand knowledge of the chaos that is Caracas. As well- off looking foreigners, we were regarded as prime kidnap targets and were accompanied everywhere by armed guards. It is disconcerting when your trip to the mall has to be in the company of a man with a .38 strapped to his hip.

Not that there was much to buy in the mall anyway. Chronic shortages of food, medicines and almost all necessities meant the shelves were virtually bare.

The ironies multiplied: In a city on the edge of the Amazon jungle, there was no mosquito spray available. In a country sitting on 300 billion barrels of oil — in comparison, Saudi Arabia has about 270 billion — the mall closed early because of power shortages, the same reason the lifts and escalators only worked a few set hours a day at our “five- star” hotel.

Normal business was virtually impossible. There is a large community of Middle East business people there, mainly from Lebanon and Syria, who saw the opportunities in the boom days. But now they live in constant fear of kidnap — they have to pay a fortune for bodyguards, who sometimes “sell” them to the “colectivos,” the private armies that dominate the security industry — and also the criminal activity in Caracas, the world’s murder capital.

Welcome to a failed experiment in economic diversification.

It is worth pointing out that Venezuela’s plan was different in inspiration from the various strategies being pursued in the Gulf. Here, the main motivation to diversify away from oil is an imperative to modernize regional economies ahead of the “day when the oil runs out.” It is aimed at protecting the future generations of citizens by providing them with full employment opportunities in a thriving, diversified economy.

No doubt the late Hugo Chavez, the populist elected president of Venezuela in 1998, also had the interests of citizens in mind, but his driving impulse was ideological. He was an opponent of Western ( especially American) style capitalism and saw himself in the grand tradition of Latin American revolutionaries going all the way back to Venezuela’s 19th century founder Simon Bolivar.

Soon after he was elected, he announced a program of social reform and welfare that was very popular in the country, reducing food, medicine and utility prices for the majority of people. He was able to pay for this ambitious program via the nationalization of foreign oil company assets, and because of the rising oil price.

But gradually, his stance grew more extreme, taking over other sectors of industry, extending expensive subsidies, and alienating foreign investors in the country with his anticapitalist and anti- American rhetoric.

Already rocky from the global financial crisis, Venezuela was nakedly exposed when oil prices started to collapse. By then, Chavez was out of office ( he died in 2013) but his successor Nicolas Maduro had none of his charisma but all of his faults. He also had a greedy coterie of hangers- on, and allegations of corruption became commonplace.

Now, Venezuela is an economic nightmare. Foreign investment has dried up completely; reserves have been almost completely depleted; inflation is at the hyper level; and those who can, are getting out.

With a president who shows no sign of wanting to give up the privileges of power, Venezuela looks doomed to suffer the ravages of civil war, total economic collapse and social anarchy. That is Somalization.

There are many lessons to be learned by regional governments pushing through their own transformation plans, but two stand out.

First, do not alienate global friends and allies who are in a position to help if the going gets tough, as Chavez did with the US and the financial institutions.

Second, and most important, do not promise your citizens some kind of utopian renaissance, as Chavez did in Venezuela. A future where oil is a much smaller part of the economy will be difficult and will involve sacrifices and uncertainty. In the long term, life will be better, but do not expect an overnight miracle. Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai