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Analysis: Russia Continues to Invest in Venezuela in an Attempt to Control Latin America

Analysis: Russia Continues to Invest in Venezuela in an Attempt to Control Latin America

By Antonio Belchi / Voice of America
March 06, 2020

In recent years, Russian oil company Rosneft increased its presence in Venezuela. What’s its purpose? Voice of America spoke with several analysts who said that the Russian state-owned company is not driven by gas or oil needs. Rather, its interest consists of “geopolitical reasons” aimed at eventually controlling the Latin American region.

“Russia wants to have a significant presence in Venezuela, like it had in Cuba for the last 50 years,” said Edward Glab, co-director of the Global Energy Security Forum at Florida International University.

Glab believes that the increase of investment in Venezuela is due to “a foreign policy” of the Russian government, to which the Nicolás Maduro regime owes billions of dollars that it cannot pay because of the decrease in oil sales.

According to Glab, the weak situation in the country, as a result of the serious economic, social, and political crisis, does not encourage foreign investment, since other places in the world with the ability to export oil are far more secure and economically stable.

The Russian oil company’s continued multi-million dollar investments in Venezuela are connected to the Kremlin’s strategy to control South America, he said.

“Rosneft has favorable conditions to invest in Venezuela. But who is going to invest more money in Venezuela in light of this situation and such an enormous debt?” said the expert, who spent 25 years in Venezuela working on various Exxon operations.

PDVSA’s serious situation
According to Juan Fernández, who worked for nearly two decades at state-owned oil company Petróleos de Venezuela Sociedad Anónima (PDVSA, in Spanish), “the degree of deterioration in the Venezuelan oil industry is massive.” Today, he added, “we are at the same level that we were in the last century.”

“Despite all the talk about having the largest oil reserves in the world, the Venezuelan oil industry has practically no influence,” he said, adding that the country “was the first oil producer in the world, the first oil exporter in the world, and also one of the founders of OPEC [Organization of the Petroleum Exporting Countries].”

Fernández, who in 2002 created Petroleum People (Gente del Petróleo) and lives in exile in south Florida, believes that oil and mining are still businesses that serve as “leverage for the economic recovery that the country needs.”

However, he says that it’s “important that the model that should be applied to the economy” must also include the private sector. “The state’s monopoly in the oil industry and others, such as mining or electricity, must come to an end.”

How does Rosneft help to avoid U.S. sanctions?
PDVSA has been under tough U.S. sanctions imposed on the company and its senior staff. According to the Venezuelan expert, the economic and commercial climate has forced Venezuela to resort to Rosneft, which became “the trading arm of PDVSA.” All this is aimed at “putting barrels out on the international market.”

TNK and Procerium Energy are two companies that rely directly on Rosneft.

The so-called “export structure” to avoid sanctions against PDVSA is the strategy that Venezuela has adopted lately.

“Barrels that Rosneft export are sent to a refinery called Nayara Energy in India, which processes heavy crude. TNK and Procerium send the shipment to Singapore to be able to process heavy crude in China,” he says.

“When you export oil and unload it into a Rosneft tank, that oil becomes Russian property immediately,” said Fernández, who also referred to the “ship to ship” oil exchange operations between vessels in open waters.

That’s another way to be able to export crude to international markets, he says, since “oil has no DNA” and it is impossible to identify its origin.

The Venezuelan debt in the oil sector
Horacio Medina knows the Venezuelan market very well, because he worked at PDVSA from 1980 to 2002. He says that no one knows what the future of the oil industry in Venezuela will be, or what impact Rosneft could have in the region in the short term.

Although Venezuela’s debt to Russia is unknown, the Kremlin continues to take its chances with the South American country. “From a strictly commercial viewpoint, China, Russia, or India would be much more interested in a transition process in Venezuela, so that they could have some guarantee on the debts incurred,” he says.

It seems that Rosneft will continue to operate in Venezuela with a long-term perspective. Analysts say this is not the best scenario, but Venezuela is the most strategic country to give them a greater presence and power in the Latin American market.