Center for World Conflict and Peace

Center for World Conflict and Peace

Saturday, March 9, 2013

Russia’s Uncertain Position in post-Chávez Venezuela

The domestic and regional implications of the death of Hugo Chávez are numerous and wide-ranging, but unique to Venezuela is the reverberations the death of its leader will have in faraway Russia and Eastern Europe. With the passing of “El Comandante," it’s possible that Russia’s geopolitical influence in Latin America may weaken and that it’s arms exports will decline, directly affecting Russia’s economic growth. Much of this depends on who succeeds Chávez and what sort of relationship his successor pursues with Russia.
In the 21st century, Russia has had a tendency in its foreign policy to pursue relations with smaller, less powerful, but in many cases very central, states in regions around the world (i.e. Serbia in the Balkans, Syria in the Middle East, etc.) in an effort to increase its own role in the so-called “multi-polar” world. While Russia’s major ally in Latin America is actually Brazil, Russia has found Venezuela to be a willing partner in supporting Russia’s own foreign policy, with Venezuela even going so far as to (hypocritically) recognize South Ossetia’s declaration of independence from Georgia while opposing Kosovo’s independence from Serbia because of the “bad precedent” it would set. Venezuelan vice president Nicolás Maduro said that "the unipolar world is collapsing and finishing in all aspects, and the alliance with Russia is part of that effort to build a multipolar world."
Russia’s ties with Venezuela as its Latin American partner was a perfect match- Chávez was an outspoken critic of the United States and his country controlled vast reserves of energy, which gave Russia an excellent opportunity to exert its influence in the country and counter American power in the region, namely, by combining mutual feelings on U.S. influence abroad with the capacity to develop Venezuela’s energy industry.

Venezuela was billed as a regional leader for Latin America. For while Chávez’s leftist administration was one of several that proliferated throughout the region, his had been by far the most vocal (it is not uncommon, in fact, for Latin American governments to be relatively aligned on the right-left spectrum, with rightist governments predominating in the 1970’s and 80’s). Chávez carefully developed relations with Evo Morales of Bolivia, Rafael Correa of Ecuador and the two most recent Argentine administrations, that of the late Nestor Kirchner and his wife Crisitina Fernández (who succeeded her late husband in 2007). His flamboyant anti-American rhetoric was occasionally balanced out by Brazil’s center-left president Inácio Lula da Silva and Lula’s successor, Dilma Rousseff. Nevertheless, Venezuela provided a beacon through which Russia was able to exert geopolitical influence in a region far beyond its periphery.

One of the biggest areas of cooperation between Russia and Venezuela is the energy sector, a fact recently underscored by Vladimir Putin’s decision to send Igor Sechin, CEO of Russia’s state owned oil company Rosneft, as a special presidential envoy to Hugo Chávez’s funeral. Venezuela has the largest proven reserves of crude oil in the world, but the oil is in need of a more intense refinement process than most other crude supplies around the world. Russia has the technological capabilities Venezuela needs to refine its heavy crude, and Russian energy companies are active in several aspects of the Venezuelan energy industry.

Russian companies plan to invest $17.6 billion in Venezuela by 2019 and multiply energy output fourfold in an attempt to expand cooperation to offshore areas and oil services, according to Reuters. Sechin has said Rosneft will finance production with loans from Russian banks and credit lines from international banks. Because the Venezuelan economy is currently in shambles, it is highly likely that the Russian-Venezuelan energy cooperation will continue, with the possibility that if a government friendlier to the United States should take power, existing contracts with Russian companies would continue, but that American companies would be invited to participate in new ventures.
The situation in Venezuela may actually effect Russia’s energy relations with one of its Eastern European neighbors- Belarus. Belarus has had a rather unique relationship with Russia, and is part of a “union state” with Russia. Yet since 2007, the one thorn in the side of Belarus-Russia relations has been energy, mainly because of a dispute which emerged when Russia accused Belarus of siphoning Russian gas transported through Belarus and selling it at world market prices (Belarus had enjoyed Russian gas at a discounted price). When Russia refused to meet Belarusian quotas for energy imports, Belarus turned to Venezuela for energy imports starting in 2010, with energy shipped via tankers from Venezuela to the Ukrainian port of Odessa, then up to Belarus through a pipeline.

Belarus has sought 23 million tons of oil from Russia for 2013, but Belarusian President Aleksandr Lukashenko has stated that if Russia will only sell Belarus up to 18 million tons (as it has stated) and it will import energy from Venezuela and Azerbaijan. Yet if Venezuela for any reason suspends its sales of energy to Belarus, this may give Russia more leverage over Belarus as it (Belarus) will have lost a valuable supplier of alternative energy. This situation seems unlikely since Venezuela can only benefit from the influx of cash, but is still an example of how far reaching the implications of the upcoming transfer of power in Venezuela really are.
After energy, Russia’s most valuable export is armaments and military hardware. Chávez constantly feared a U.S. invasion of Venezuela, and had been engaged in a long-standing dispute with neighboring Colombia over the presence of U.S. troops in Colombia (these U.S. troops including most notably the U.S.’s élite Special Forces, whose purpose is to assist with counter-narcotics and counter-insurgency). This, in principle, was the basis for his decision to enter into contractual agreements with Russia regarding arms sales.

Venezuela is the second-largest customer for Russian military hardware (after India), and as Russia’s economy is famously lacking in diversity of exports outside of energy, a willing market for arms is greatly welcomed (a situation only enhanced by the instability in another major importer of Russian arms- Syria). In 2009, then-Secretary of State Hillary Clinton warned of a possible arms race between Colombia and Venezuela.
Since 2006, the gross income for Russian military sales abroad has doubled, and Russian arms sales are now almost exclusively handled through state-owned company Rosoboronexport. Chávez’s death, however, could reduce Russia’s client relationship with Venezuela in the arms industry, depending on how the succession plays out. It would be easy to assume that Nicolás Maduro, Venezuela’s vice president, would succeed the late Chávez, yet Venezuela’s opposition is relatively strong. The Venezuelan economy, despite the strength of the country’s crude reserves, is not entirely healthy, and if the Venezuelan opposition ends up in power they may decide that it is not economically viable to have such contracts arms with Russia. Viachelav Nikonov, deputy chair of the Russian Parliament’s committee on foreign affairs, has stated that he does not believe a new Venezuelan administration would be able to opt out of currently existing contracts, but future contracts may not be pursued.
Given the fragile state of Venezuela’s economy, Russia will most likely remain a major player in Venezuela’s foreign relations, because even if the opposition were somehow to come to power, Russian participation in the country’s energy sector is still largely necessary for it to be able to produce energy in adequate amounts and at sufficient levels of refinement. Yet Russia may lose a large part of its customer base in the armaments industry, and if a right-wing administration comes to power, or at least a Chávez lieutenant who seeks to improve relations with the United States, Russia may also find itself with less of a partner in the geopolitical arena of countering U.S. influence in Latin America.

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