Girish Gupta

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Venezuela’s generous Russian friend
Oct. 7, 2011

Published by Financial Times

In yet another bullish move that will prick up the ears of Washington, Venezuela has accepted a $4bn loan from Russia in order to purchase weapons, in return for access to heavy crude and offshore gas fields there. President Hugo Chávez and the visiting Russian delegation confirmed the loan around midnight Thursday on state television.

The two nations enjoy warm relations and this is not the first agreement between them. Chávez visited Russian Prime Minister Vladimir Putin in 2008 and accepted a $1bn loan before he returned with $4bn from another visit to Moscow two years later. Since 2005, Venezuela has spent at least $5bn on Russian Sukhoi fighter jets, Mi-17 combat helicopters and Kalashnikov assault rifles.

“We are simply doing the task of defending the fatherland from the threat of empire and its allies,” Chávez said in Moscow last year. Russia’s Deputy Prime Minister Igor Sechin – who was in Venezuela this week – is known to be strongly anti-American and there are concerns among the US and its allies that Russia and Venezuela are attempting to counterbalance US influence in the region.

All Russia is doing is keeping up a relationship to remind Washington that it still has some influence, says Stratfor Latin America analyst Karen Hooper. “What you’re seeing now is the maintenance of that relationship because Russia isn’t going to walk away from Venezuela just like it’s not going to yield its relationship with Iran or North Korea or other countries that are a thorn in the United States’ side.”

The Russian loan follows a $4bn loan from China to Chávez’s government, which was announced in July. Rather than weapons, that loan is destined for social projects which are on the up as presidential elections loom in a year’s time [Oct 7 2012]. Many sceptics see this as money spent on votes. China has lent the Latin American nation $32bn in recent years, which is to be repaid in oil shipments – a common theme for Venezuela.

The latest loan from Russia will play to a domestic audience, especially Chávez’s fanbase keen to see their Comandante on the world stage after recent treatment for chemotherapy. “It’s a chance for Chávez to say, ‘Look at the new toys I’ve got you,” adds Hooper. “I don’t think Russia expects to get paid back on these loans… Essentially all Russia is doing is buying weapons from itself, essentially as a subsidy for their domestic arms industry.”

Chávez uses oil income to fund his Bolivarian revolution, which he has said is “peaceful, but armed,” adding that he and his top generals would resist orders of any post-Chávez government. With elections looming in October 2012, many are wondering exactly what the weapons are to be used for, with fears that that they may end up in the hands of Chávez’s own Bolivarian militia.




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© Girish Gupta