Published On: Mon, Dec 10th, 2018

Will Russia keep its $6bn promise to Venezuela?

Maduro12CARACAS - Russian officials have cast doubt on multibillion-dollar pledges to Venezuela touted by its president Nicolás Maduro, whose crisis-wracked country has become increasingly dependent on Moscow as its most prominent international supporter.

Following a three-day visit to Moscow last week and meetings with dozens of Russia’s top officials, the Venezuelan leader boasted of $6bn worth of investment pledges and a string of other deals designed to help prop up its collapsing economy that has been ravaged by hyperinflation, political crisis and US sanctions that have cut it off from the west.

The visit underscored Russia’s role as Venezuela’s lender of last resort and president Vladimir Putin as its key foreign backer— but made clear the limits of Moscow’s ability and desire to bankroll Mr Maduro’s regime.

Mr Maduro said Moscow had pledged to invest $5bn in joint ventures in the country’s oil sector, $1bn in mining projects and to export 600,000 tonnes of wheat to Venezuela to cover its 2019 needs.

He said that Russia had also agreed to modernize Venezuela’s armed forces and to look into potential projects in the country’s diamond industry.

But following Mr Maduro’s visit, Russian officials sought to damp expectations of any major financial support.

“This hardly sounds real,” said a person close to Rosneft, Russia’s state-controlled oil company that has investments in Venezuela. “Quite obviously Rosneft would have made a statement and bragged about a deal of that size had it really happened,” the person said.

“Besides, the amount of investment in the joint oil projects Maduro named sounds suspiciously close to the amount in the existing deal,” they added.

Rosneft has lent $6bn to Venezuela’s oil company PDVSA partly as pre-payment for crude, more than half of which remained outstanding as of the end of September. Mr Maduro met with Igor Sechin, Rosneft’s chief executive, in Moscow.

Mr Maduro said that the $5bn investment would aim to increase production by 1m barrels a day, almost doubling the country’s entire output. At current market prices, 1m barrels would be worth about $55bn.

“Politically, Mr Maduro wants to show internally and externally that despite the US sanctions, Venezuela still can find allies that can help it to overcome its economic woes and international isolation,” said Dimitris Pantoulas, a political analyst based in Caracas.

“The fact that one member of the UN Security Council is willing to sign multibillion agreements with you is a strong sign of support, even if these agreements will never be fulfilled,” he said. “Mr Maduro tries to protect his regime by signing deals with powerful allies . . . to offer them natural resources at a bargain price and an ally in a crucial geostrategic space.”

When asked if Russia had agreed to provide more financial aid to Venezuela, Mr Putin’s spokesman Dmitry Peskov said on Friday: “I have nothing to add to what has been said.”

“A whole range of issues related to bilateral co-operation has been discussed. There is no doubt that Russia will continue supporting Venezuela to one degree or another,” Mr Peskov added.

Since Russia’s annexation of Crimea in 2014 and the resulting sanctions imposed by the US and its allies, Moscow has sought to offset souring western relations with warmer ties elsewhere.

Its support for Caracas, which has drawn the ire of Washington, mirrors similarly friendly relations with Iran — also under US sanctions — and China, whose trade relations with the US have suffered in recent years.

In a hastily-arranged meeting between the country’s defence ministers following talks between Mr Maduro and Mr Putin, Russia agreed that its air force and navy would continue using Venezuela’s ports and airports.

But while Venezuela’s defence chief used a press conference to suggest Russia could help the South American country modernise its military equipment, his Russian counterpart focused on “exchanging delegations” and joint educational projects.

Last November Moscow agreed to restructure $3.15bn worth of debt owed by Venezuela to Russia, days after international rating agencies said the country had defaulted on $60bn worth of obligations.

Russia is keen to continue tapping Venezuela’s vast oil reserves — the world’s largest — and sees the country as both a geopolitical foothold in the Americas and a fellow ally against Washington.

“The Maduro regime will face worldwide rejection from January 10, when Mr Maduro is again sworn in for another term after fraudulent elections that banned opposition leaders and the opposition party,” said Russ Dallen, head of boutique investment bank Caracas Capital. “This is a chess move by the Russians to get further embedded in Venezuela.”

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