Putin and Chavez Reach Major Deals in Caracas : Part Two

Publication: Eurasia Daily Monitor Volume: 7 Issue: 93

Russia’s central partner in Latin America remains Venezuela and Prime Minister, Vladimir Putin’s, visit there underscores the scope of that partnership. Putin’s trip encompassed several large deals with Venezuela that reveal the true scope of this partnership, even if bilateral trade fell to $297 million in 2009 due to the global financial crisis (ITAR-TASS, April 2).

First, Russian businesses, stimulated by the government, are discussing major projects with Venezuela. Rushydro may build generating facilities in the country, Inter RAO could sell gas turbines worth $250 million to Venezuela, and the two states will design a joint power action plan, utilizing these projects to help Caracas overcome the energy crisis (ITAR-TASS, April 2). Russia is also lending $2.2 billion to Venezuela over 7 years, allegedly not in connection with concurrent arms sales (RIA Novosti, April 2). This marks a possible retreat from what Chavez said in September 2009 that Russia would buy T-72 tanks, Smerch systems with a range of 90 kilometers, S-300 and Antey-2500 surface-to-air missiles and other air defense systems with such a loan, although other sources suggested that it is tied to Russian weapons (Interfax, April 2; The Moscow Times, April 6). Beyond these deals, Putin also announced major energy and arms sales deals.

As regards arms sales, it was announced that both sides are discussing a deal for 50 Russian aircraft, the AN-148 transport plane and Beriev Be-200 amphibious aircraft (Interfax, March 31, April 2). Putin also announced that Venezuela might spend over $5 billion to purchase more Russian weapons, although it is unclear what Venezuela could do with them or how it would maintain those arms (The Moscow Times, April 6). The State Department has warned that these arms might end up in other Latin countries and it is reasonable to assume that many of them would or will go to the Revolutionary Armed Forces of Colombia (FARC) (Defense News, April 7). Previous Russian weapons have been found among the FARC and the evidence of Venezuela supplying the FARC has been overwhelming. Meanwhile, Colombia took the opportunity to warn against an arms race with Venezuela, as Chavez clearly wants the FARC to overthrow the Uribe government there (Defense News, April 7). Nonetheless, it remains unclear if Chavez can pay such large sums of money for weapons or even if previous contracts are being fully implemented. Although deliveries (Mi-17 helicopters) continue, the fulfillment of earlier contracts was discussed at these meetings (Interfax, April 1; Jane’s Defense Weekly, April 9).

The other source of major deals was energy. This trip was unusual, as Putin flew to Venezuela for one day, just to meet Chavez and Morales, suggesting that this visit went beyond established policy guidelines and reflects his personal interest and that of his private business cronies such as Igor Sechin (El Universal, Caracas, April 3). Moscow has been frustrated by the difficulty of implementing any agreement it has made with Venezuela to the point where it demanded greater control over the weapons’ final destination in June 2008. Chavez withheld agreement on this point, causing relations to plummet. The Georgian war in August 2008 offered an opportunity to revive these ties (El Universal, April 3). That revival led to major oil deals announced on this visit, which Putin undertook to strengthen the implementation of these deals. The key deal is the opening of the huge Junin-6 oil field to Russia. This field in the basin of the Orinoco River can yield up to 400-450,000 barrels per day (bpd) of oil. The bilateral agreement calls for the development of this block by a bilateral consortium that also hopes to bid in tenders to develop the Carabobo blocks and invest about $30 billion over a 40 year period (ITAR-TASS, March 31). Venezuela’s national company, PDVSA, will own 60 percent and a Russian consortium comprising Gazpormneft, Rosneft, Lukoil, TNK-BP, and Surgutneftgaz will own the remaining 40 percent (ITAR-TASS, March 31, April 2). It is possible that the extent of Russian oil production there will equal up to 10 percent of Russian domestic production, providing an indication of the size of the Junin-6 block (ITAR-TASS, April 8).

Simultaneously, Gazprom is vying for a role in another large Venezuelan offshore gas project (Interfax, April 8). Lastly, Chavez announced that Venezuela would develop blueprints for a nuclear power facility with Russian help (Global Security Network, April 5). This was also a previously announced project, but given Chavez’s ties with Iran and his grandiose ambitions this could become something more sinister than a mere reactor or power plant.

Putin’s deals with Chavez in which big money was offered to Venezuela, suggests that while Russian elites share a consensus about establishing ties in Latin America, for Putin, and his acolytes like Sechin, the ties with Venezuela, because of the security potential for disrupting the US’ ally Colombia or for creating bases in Venezuela for Russian military forces are even more strongly felt. Moscow will continue to probe for gains in South America, mainly through energy deals and arms sales, but as long as Putin and Sechin are in the government, Venezuela will be a special friend of Russia regardless of material benefit or cost to Russia because of the potential strategic and political gains it offers Moscow in what is now a permanent contest with the US.