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What does Russia stand to lose in Venezuela?

Vladimir Putin meets with his Venezuelan counterpart, Nicolas Maduro, at the Novo-Ogaryovo state residence outside Moscow on December 5, 2018
Vladimir Putin meets with his Venezuelan counterpart, Nicolas Maduro, at the Novo-Ogaryovo state residence outside Moscow on December 5, 2018
Maxim Shemetov / Reuters / Scanpix / LETA

Russian Foreign Ministry spokeswoman Maria Zakharova has once again slammed “progressive Western society” for flouting “international law, state sovereignty, and the principle of noninterference.” The latest catalyst for these truth bombs is the presidential crisis in Venezuela, where the U.S. and others have recognized opposition leader Juan Guaidó as the new acting leader, following protests that have already killed more than a dozen people. Moscow’s support for President Nicolás Maduro, whose landslide 2018 reelection is now in question, is no surprise, given Russia’s massive loans to Venezuela. What does the Kremlin stand to lose, if Guaidó comes to power? The website The Bell studied this question, and Meduza summarizes that report.

Money money money

Russia has spent an enormous amount of money in Venezuela to support close ties with the regimes led by Hugo Chavez and Nicolás Maduro. According to an investigation published in August 2017 by Reuters, Moscow issued at least $17 billion in loans and credit lines between 2016 and 2017, becoming Venezuela’s “lender of last resort.” After Maduro’s most recent visit to Moscow in December 2018, he announced that Russia would invest more than $5 billion in Venezuela’s oil industry, more than $1 billion in its mining industry, and send more than 661,000 tons of grain. Perhaps fortunately for Russia, this money wasn’t released before the current presidential crisis.

The relationship has had some turbulence, however. Two years ago, Venezuela fell behind on payments for a $1-billion loan issued in 2011 to buy Russian military goods, before settling on a 10-year $3-billion deferment plan. Venezuela’s state oil company PDVSA is repaying almost all its debt to Russia with oil, but these shipments aren't always on time, and Moscow has complained that Caracas never seems to fall behind schedule with its obligations to China.

By 2013, Russia's arms exporter Rosoboronexport had sold roughly $11 billion in arms to Venezuela — again mostly on credit. In 2006, the company agreed to invest $474 million in the construction of factories to build Kalashnikov weapons and ammunition, but corruption has derailed the process and these plants are still inactive, even though they were due to come online last year.

You've got a friend in me

What does Russia get in return for all this trouble? First, there’s the international publicity. In an era of sustained sanctions and attempted isolation by the West, Moscow takes the friends it can get. Chavez visited Moscow eight times between 2006 and 2013, Maduro has come four times over the past 5.5 years. First as deputy prime minister and later as Rosneft president, Igor Sechin has been the Kremlin’s point man in Venezuela, visiting Caracas once or twice a year since the mid-2000s.

Venezuela was the only major country to recognize the independence of South Ossetia and Abkhazia (apparently Sechin's personal negotiating feat), and Maduro’s rhetoric on Crimea has been sympathetic to Moscow (though Caracas hasn’t formally recognized Russia’s annexation).

Snarling at the Monroe Doctrine

In terms of military presence, Russia has struggled to convert its partnership with Venezuela into a meaningful alliance for its armed forces, but Russian bombers have flown to Caracas three times (in 2008, 2013, and 2018), alarming the United States and disrupting Washington's generally uncontested hegemony in the Western Hemisphere.

A national security threat?

In exchange for all the credit its coughed up, Rosneft has also acquired minority shares in five joint ventures with PDVSA. In another challenge to the United States, Rosneft also signed a deal in 2016 giving it 49.9% of the U.S.-based refiner Citgo as collateral for a $1.5 billion loan to PDVSA. If Rosneft moves to take ownership of these shares, the U.S. government could try to block the acquisition on national security grounds, leading to “a compelling standoff between Venezuela, Russia, and the U.S.,” according to Forbes.

Report at The Bell by Pyotr Mironenko and Irina Malkova

Summary by Kevin Rothrock