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What Venezuela Really Gets From Putin’s Russia

  • By Mike Eckel (RFE)- Venezuela slipped further into chaos on April 30 as Venezuelan opposition leader Juan Guaido called for a military uprising to oust President Nicolas Maduro and armed factions exchanged gunfire outside a Caracas air base.

Half a world away, Moscow is bound to be alarmed.

Russia has made major investments — political and economic — in the South American country in recent years.

Along with Nicaragua, Venezuela has served as sort of beachhead for Russian influence in the Western Hemisphere, something Moscow lost when its ties with Cuba withered in the wake of the Soviet collapse.

In addition to selling hundreds of millions of dollars in military equipment to Caracas, Russia has invested heavily in the crucial oil sector, and snapped up major stakes in the state-run oil company, PDVSA.Venezuelan opposition leader Juan Guaido talks to supporters in Caracas on April 30.

Venezuelan opposition leader Juan Guaido talks to supporters in Caracas on April 30.

The United States is among some 50 countries that have recognized Guaido as Venezuela’s president, and it has imposed sanctions to try to push out Maduro. White House national-security adviser John Bolton appealed directly to the country’s defense minister, and the head of the national guard on April 30.

“Your time is up. This is your last chance. Accept Interim President Guaido’s amnesty, protect the Constitution, and remove Maduro, and we will take you off our sanctions list. Stay with Maduro, and go down with the ship,” he said in a Twitter post.

PHOTO GALLERY: Venezuelan Opposition Leader Launches Attempt To Forcefully Oust Maduro
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In comments later to reporters, he also directed an explicit warning at Moscow.

“We expect that the Russians will not interfere with what’s going on in Venezuela; particularly now when the lives of peaceful Venezuelans are at stake,” he said.

Here’s a look at some of the things that Russia stands to lose if Maduro’s government falls and the opposition under Guaido takes control of the country.

Oil, Oil, Oil

Venezuela’s proven oil reserves are the world’s largest, according to oil cartel OPEC, and arguably the only thing that has kept the country from completely disintegrating until now.

Revenues from foreign oil sales — to the United States first and foremost — have propped up Maduro’s government, even as the country has slipped into economic chaos.

Russia and its state-owned oil giant Rosneft have invested heavily in the Venezuela’s PDVSA and Venezuelan oil projects — about $9 billion since 2010, according to Reuters.

Rosneft and the Russian government have also floated more than $17 billion in loans to Caracas since 2006, according to an analysis published in February by Alexander Gabuev, of the Carnegie Moscow Center. If Guiado, who has gotten resounding support from the United States and other countries, takes power, it becomes an open question how and when — or even if — those loans will be repaid.

“Russia is now so deeply invested in the Maduro regime that the only realistic option is to double down,” he wrote.

“Rosneft’s deep ties to Venezuela and Russia’s efforts to insert itself into the crisis there together raise questions about whether the country’s leadership is acting to preserve national or corporate and private interests,” Gabuev said.Russian President Vladimir Putin meets his Venezuelan counterpart Nicolas Maduro in Moscow last year.

Russian President Vladimir Putin meets his Venezuelan counterpart Nicolas Maduro in Moscow last year.

Also factoring into this equation is PDVSA’s stake in Citgo, a U.S. subsidiary that has been a key conduit in making sure U.S. dollars flow back to Caracas. Citgo owns three refineries in the United States along with a network of pipelines and gas stations.

PDVSA’s financial woes gave an opening to Rosneft, which received 49.9 percent of Citgo as collateral for a reported $1.5 billion loan from the Russian oil company.

That alarmed some U.S. lawmakers who blanched at the idea of Russia’s largest oil concern controlling a major piece of U.S. oil infrastructure.

In January, in a bid to pressure Maduro, President Donald Trump’s administration announced it would cut off Citgo and its U.S. bank accounts in an effort to deprive Caracas of hard currency.

“Guaido’s assumption of control of Citgo and PDVSA virtually assures that it will lose the money it loaned to the Maduro regime in exchange for a percentage ownership of Citgo, unless it deals with Guaido’s government,” Evan Ellis, a researcher at the Washington-based Center for Strategic and International Studies, wrote in an article earlier this year.

Arms Sales, Military Cooperation

In early December 2018, two nuclear-capable, long-range Russian strategic bombers landed at a military airport outside Caracas. It was a very public and symbolic display by Moscow to show Washington and its allies that it was serious about military support for Maduro’s government.

A Russian Blackjack bomber is intercepted and escorted by a French Mirage jet above French coast in this image taken and distributed by the French Air Force in February 2017.
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Moscow isn’t selling long-range bombers to Caracas, but it has sold it billions in other weaponry. In 2006, then-President Hugo Chavez signed a nearly $3 billion deal for Russian fighter jets. Moscow also got access to Venezuelan oil at below-market prices. According to the Russian news agency TASS, Caracas purchased around $11 billion in armaments between 2005 and 2013.

The weaponry Caracas obtained included the sophisticated S-300 air-defense system, Su-30 fighter jets, T-72 tanks, as well as things like man-portable Igla surface-to-air missiles, and other smaller weaponry.

It’s unclear how much money Caracas still owes Russia for the weaponry. But the turmoil and any possible change in government throws in doubt whether Moscow will be paid for past deliveries, not to mention ongoing service contracts or future purchases.Venezuelan Opposition Leader Launches Attempt To Forcefully Oust Maduro

Photo Gallery:

Venezuelan Opposition Leader Launches Attempt To Forcefully Oust Maduro

The other wildcard, both in terms of weapons supplies and support for Maduro, is the presence of private Russian mercenaries, who reportedly arrived in Caracas earlier this year and are said to have been serving as an elite guard force for Maduro and his inner circle.

There is also the danger that private Russian military companies, also known as PMCs, could end up widening the Venezuelan conflict, said Sergei Sukhankin, a researcher at the Washington-based Jamestown Foundation and the Kyiv-based International Center for Policy Studies.

“In this case, there is a distinct possibility that Russian PMCs would help escalate Venezuela’s civil strife into a regional conflict,” he wrote in a commentary in February.

Other Commodities

Venezuela is a major importer of Russian grain and it is a key market for Moscow as it expands its farming exports and cuts into the market share of the United States, Brazil, and other agricultural powerhouses.

Russian state-linked banks also teamed up with Venezuelan financial institutions in an effort to ease investments and give Russian companies more flexibility as they push deeper into Venezuela’s economy. That joint venture bank, Evrofinance Mosnarbank, is controlled by Gazprombank — the financing arm of Russian state-gas producer Gazprom, and state bank VTB. The Venezuelan National Development Fund holds a 49.99 percent stake.

In March, the U.S. Treasury Department slapped sanctions on the bank, accusing it of trying to evade previously imposed sanctions that targeted Maduro and his supporters.

Reputation

Arguably, the biggest thing Russia stands to lose if Maduro’s government falls is its reputation; the Kremlin’s, and Vladimir Putin’s, in particular. The Russian presence in Venezuela is a way of projecting power, with echoes of the Soviet presence in Cuba, and building relationships in Central America. It’s also a way to bother the United States, which has long considered the Western Hemisphere part of its natural sphere of influence.

Russian President Putin meets with his Venezuelan counterpart Maduro in Moscow (Courtesy photo - abril.com - for education only)

Russian President Putin meets with his Venezuelan counterpart Maduro in Moscow (Courtesy photo – abril.com – for education only)

“Certainly, Moscow’s interest in Venezuela is driven by its quite tense relations with the United States and it wants to [provide a counterbalance to] the United States,” Mikael Wigell, a researcher specializing in Latin America at the Finnish Institute of International Affairs, told RFE/RL in an interview in January.

“Establishing close relations with Venezuela gives Moscow a certain nuisance power in relation to the United States, and that can be used as a bargaining chip in future dealings with the United States. It also can be kind of a showcase for Russia’s aspirations to be considered a global power,” he said. (Radio Free Europe – RFE Source)

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