Russia Attempts to Save Chavist Regime to Recover Investments

Russia Attempts to Save Chavist Regime to Recover Investments

By Julieta Pelcastre/Diálogo
March 15, 2019

Moscow tries to recover the financial assets it entrusted to Maduro.

Russia risks losing its political and economic investments in Venezuela for supporting Nicolás Maduro’s regime. In the face of an imminent change of government in Venezuela, Moscow hedges its bets on different fronts to back up the Chavist leader, recover its decision-making influence in Caracas, and save whatever it can.

“The Russian government is aware that Russian investments are at stake if its strategic partner is overthrown,” Yadira Gálvez, a defense and security specialist and professor at the National Autonomous University of Mexico, told Diálogo. Within this context, a Boeing 777 belonging to Russia’s Nordwind Airlines landed for the second time at La Guaira Airport in Caracas on January 28, 2019. What it brought and what it left with three days later is unknown.

“A plane arrived from Moscow with the intent to take at least 20 tons of gold,” Venezuelan National Assembly member José Guerra told the press. “We urge the Central Bank of Venezuela to provide details of the situation. That gold belongs to the Venezuelan people.”

Russian authorities said through state press agencies that they had “no information” about the “presumed flight.” The same cargo aircraft landed next to the presidential hangar at the same airport on December 3, 2018, when Maduro traveled to Moscow to strengthen strategic relations with Russian President Vladimir Putin.

“The Russian flights are a provocation,” said Juan Belikow, a professor of International Relations at the University of Buenos Aires. “This confirms Russia’s support for Maduro,” he told Diálogo.

“The Russian aircraft’s visit coincides with sanctions the U.S. government imposed on state oil company Petróleos de Venezuela S.A. [PDVSA, owner of Citgo gas stations],” Gálvez said. “So far, this is one of the strongest measures against Maduro’s regime, which is under increasing pressure. PDVSA is the largest source of revenue in Venezuela.”

Putin and Maduro labeled these actions as illegal. Days later, on December 10, Russia sent two bombers from its Air Force to Venezuela to display its military power. “Maduro clings to Moscow to remain in power, and Putin clings to Caracas because it’s part of his political and personal plan for global projection in the new international scene,” Gálvez said.

Country at risk

In 1999, Venezuelan President Hugo Chávez declared before Congress that lack of investment in public services was pushing the country into a state of emergency, and recommended obtaining loans for strategic infrastructure. In 2005, Venezuela owed $45 billion to China. Russia took advantage of the situation to offer money in exchange for oil.

The loans were used for purposes other than those initially stipulated, including excessive militarization, while national infrastructure continued to deteriorate. For example, the power outages that started on March 7, 2019, and affected most of the country are a result of deteriorated and obsolete electric networks and equipment, as well as lack of maintenance as workers lost their jobs for protesting against Maduro. “These power outages caused the deaths of at least 17 people who received medical care in hospitals,” said Juan Guaidó, Venezuela’s interim president, on March 10.

Conditional support

According to Belikow and Gálvez, Russia earmarked billions of dollars to support the Chavist regime, from increasing oil and mining production to granting loans to buy weapons. In January 2019, Russian Minister of Finance Anton Siluanov told the press that Venezuela needed to pay at least $100 million by late March, so as not to default on its $3.15 billion debt with Russia.

This debt was incurred in November 2017, backed by 51 percent of Citgo’s shares. Russian company Rosneft holds 49 percent of the shares, according to its website. The terms in the agreement said the loan should be paid in 10 years at most.

Russia’s Deputy Finance Minister Sergei Storchak told the press that so far no payments were delayed, but did not rule out a potential missed payment due to the political crisis in the country. “There may be problems. It all depends on the Army, the military, how obedient they will be,” he said without clarifying what sanctions Russia might impose or what type of allegiance would be required of the military.

Weapons in exchange for oil

In January 2018, Putin expressed interest in equipping the South American country with new weapons. According to a report on Weapons Systems and Military Equipment Acquisition from the Civil Association Citizens’ Control of Venezuela, the country is the top Russian weapons importer in Latin America.

“Russia runs the risk of not getting paid for weapons it sold unnecessarily to support a questionable regime,” Belikow said. “As long as it continues to support an illegitimate, even criminal, regime, it runs the risk of losing all its investments.”

Beyond the political claims in support of the Chavist regime, as well as its display of military power, Russia tries to secure its position for fear of losing its investments. “Putin will keep his promise of doing whatever it takes to defend Maduro’s regime, except militarily,” Gálvez said. “But Russia knows that its strategy is limited,” Belikow added.