Russia’s burgeoning relationship with Venezuela demonstrates Vladimir Putin’s global ambition to recruit geographically distant states as allies in creating a new multipolar, anti-American world order. Russia has been a close ally of Venezuela since 2006 when then-President, Hugo Chávez, signed a $2.9 billion arms deal in exchange for Russian fighter aircraft. This agreement allowed Russia access to Venezuelan oil assets below market prices and gave Russia significant influence over domestic politics in Venezuela. Russia’s relationship with Venezuela began in earnest in 2008, seemingly as a counter-response to U.S. deployments in the Black Sea, which itself was a response to Russian involvement in Georgia. Today, Russia’s influence on the political, economic, and military fronts in Venezuela are significant and largely seen as malign to the West. While the question remains as to why Venezuela matters to Russia, many speculate it is rooted in part to the increasingly hostile relations between Russia and the United States.
Current Affairs
The Kremlin’s vision for Russia’s relationship with Venezuela has several key elements. First, Putin aims to restore Russia as a great power on the international stage by having the ability to influence issues in nearly every part of the world. Second, it looks to serve as a spoiler to United States’ geopolitical goals by undermining U.S. interests and using peripheral issues, like the situation in Venezuela, to maintain U.S.-Russian dialogue and sustain Russia’s role as an arbiter of international security.
Venezuelan leaders often claim that Russia and Venezuela are tied by significant historical links to have a strong and long-lasting relationship. For example, in Hugo Chávez’s first meeting with Vladimir Putin, he spoke about how a Venezuelan national hero, Francisco de Miranda, visited the Russian Royal Court in the late 18th century to meet with Empress Catherine the Great and established relationships with senior officials in St. Petersburg. Additionally, de Miranda was subsequently allowed to tour Europe on a Russian passport while wearing a Russian military uniform. Later, in 1857, Venezuela became the first Latin American country whose independence from Spain was recognized by Russia. However, it is often cited that the historical legacy of the Russian-Venezuelan relationship is scarce justification for the Russia’s rapprochement in Venezuela in the beginning of the 2000s.
The best way to analyze the strengthening of Russian-Venezuelan relations since the fall of the Soviet Union is to analyze it through the broader Russian foreign policy framework towards Latin America in the years since Putin came to power The first element was for Russia to provide new lucrative business opportunities in the region for its state-owned and privately-owned businesses, particularly for the energy and armament sector. Second was for Russia “to engage Latin American countries, even if only symbolically, in building a new multipolar world order that might challenge the existing U.S.-led world order.” In fact, anti-U.S. rhetoric was already common in the speeches of various leaders in Latin America such as Evo Morales of Bolivia, the Kirchners in Argentina, the Castros in Cuba, and especially Hugo Chávez in Venezuela.
Initial interactions between Russia and Venezuela proved mutually beneficial with respect to political symbolism in both countries. Early on in Russia’s return to Latin America, Hugo Chávez pushed to be Russia’s key partner in the region. There are several reasons why Chávez chose to do so. First, he liked the anti-U.S. led liberal order rhetoric among the post-Yeltsin political elite in Russia. Second, Chávez’s domestic political strategy, much like Putin’s in Russia and continued today by Nicolás Maduro used emotionally charged political symbolism to gain support of the electorate. Furthermore, Chávez quickly recognized and capitalized on what Russia needed most in the region: acknowledgement of the idea that Russia was once again a great power on the international stage. For Putin, it was a symbolic breakthrough that demonstrated Russia’s return to its prominent role on the international stage as a broker of great power that challenged the United States in its own hemisphere.
Political-economic factors are the most critical elements to understand current Russian-Venezuelan relation. On a political front, Venezuela remains a strategic asset for Russia in the region, as Russia seeks to offset U.S. influence in Latin America. As one of the five permanent veto-wielding members of the United Nations Security Council, Russia has threatened to veto any Security Council resolution which sought to either suspend Venezuela from the United Nations or send United Nations peacekeepers to Venezuela. The Kremlin has sharply criticized the Trump Administration’s recognition of Juan Guaidó and has warned against Western military intervention in Venezuela.
“Moscow’s backing of Venezuela is intended to demonstrate Moscow’s great power reach, thwart US policy in its own hemisphere, and underscore that a multipolar world will replace the era of American predominance.” (source)
The Rosneft Connection
Economic opportunities have provided Russia the most significant reasons to develop close ties with Caracas. On an economic front, Russia has been Venezuela’s lender of last resort. Rocio Labrador notes, “in late 2017, Moscow bailed Venezuela out by restructuring more than $3 billion in sovereign debt, which allowed the Maduro government to meet its obligations to other creditors.” (source) The two countries engage in a not-insignificant amount of bilateral trade, but it is Russia that primarily provides goods to Venezuela. Additionally, as one of Venezuela’s largest foreign backers, Russian state-owned oil and gas giant Rosneft has loaned roughly $2.5 billion in exchange for future energy shipments. Rosneft is also widely understood to be an instrument of Russian foreign policy.
Rosneft participates in several joint energy ventures (primarily oil) in Venezuela:
- Carabobo-2,4 (Petrovictoria), where Rosneft owns 40 percent.
- PetroMonagas, where Rosneft owns 16.7 percent.
- Junin-6 (PetroMiranda), where Rosneft owns 40 percent.
- Boquerón, where Rosneft owns 40 percent; and
- Petroperija, where Rosneft owns 40 percent.
The Congressional Research Service indicates that through Rosneft and other companies, “Russia now handles more than two-thirds for of Venezuela’s crude oil.” In fact, almost all Rosneft’s recent ventures abroad have targeted other areas that are politically unstable but geopolitically sensitive to Russia. For example, in addition to Venezuela, Rosneft has targeted energy development opportunities in Egypt, Iraqi Kurdistan, and Mozambique.
However, many energy experts consider the long-term prospects of Rosneft’s foreign investments rather uncertain, primarily because the company does not consider political risk when doing business.
“That failure is exacerbated by the need for substantial initial capital investments in new projects—all at a time when U.S.-imposed sanctions severely limit the company’s ability to borrow in external markets or acquire new technologies and modern equipment.”
Rosneft’s motivation to continue business ventures with Venezuela, despite mounting problems, is nothing more than politics first and economics second. Yet, despite the difficulties, Rosneft continues to remain committed to Venezuela. However, there are persistent questions about the capacity of the Venezuelan government to fulfill its financial obligations to the Russian government and companies.
Rosneft’s capacity to financially support the Maduro regime remains an open question, especially considering increasing sanctions pressure from the US and collapsing global energy prices. In any case, Venezuela remains the largest recipient of Rosneft’s foreign investment—and there is no easy way for the company to divest itself of those investments. Moscow has signaled its commitment to provide a lifeline to Caracas, although there have been signs over the past several weeks and months that the economic lifelines from Moscow are not fully guaranteed.
In October 2018, Russia sent a team of experts to Caracas from its Ministry of Finance, Ministry of Economic Development, the Russian Central Bank, Federal Tax Service, and several other ministries and departments to assist the Venezuelan government in the “development of measures in the field of economic management in a crisis situation.” In fact, the Venezuelan government requested the presence of senior officials from Russian ministries in order to “exchange experience in the field of economic reform.” About the same time these Russian experts arrived in Caracas, reports circulated indicating that Evrofinance Mosnarbank, one of Russia’s largest commercial banks, was helping the Venezuela government work around U.S. financial sanctions.
Evrofinance Mosnarbank is a joint venture owned by the Fondo de Desarrollo Nacional SA of Venezuela and two other Russia banks, and both Russian and Venezuelan nationals sit on its governing board. In March 2018, it became the first international financial institution to back Venezuelan cryptocurrency, the petro. Soon thereafter, the Maduro regime began to advise Venezuelan companies to conduct all foreign transactions via Evrofinance Mosnarbank in Moscow.
As of the writing of this paper, the status of Rosneft in Venezuela appears to have complicated, from both a political and economic standpoint. This is in part due to the global price war launched by Russia and Saudi Arabia after a failure to agree on a unified production cut. Furthermore, the ongoing digressionary effects of the coronavirus (COVID-19) spread have caused a further collapse in oil prices, thus forcing all major oil producers to reevaluate strategic resource deployment and production. On top of that, in February and March of this year, the U.S. imposed two additional rounds of sanctions on Rosneft and its subsidiaries for helping prop up Maduro and the Venezuelan economy.
In late March, the Russian state-controlled firm made a dramatic announcement that it was “ceasing operations” in Venezuela and selling all its assets in the country as a result of these geopolitical developments. Upon closer analysis, the asset sale appears not to have been Moscow abandoning its position in the country, but rather a restructuring of asset ownership from Rosneft directly to the Russian government. Although some have declared this restructuring a victory for the U.S. sanctions regime, it remains to be seen how and if this significantly alters Rosneft’s posture in Venezuela, or if it is a strategic move designed to wait out the ongoing global instability in both the energy and political arenas.
In summary, while the Russian government does not view losing investment as a desired outcome, the value of Venezuela to the Russian Federation is not measured in terms of economic value alone. There are other factors to consider relating to two unique aspects of post-Cold War Russian relations with Venezuela. The first is Russia’s recognition that the key value of Venezuela to the overall Russian grand strategy is due to its geographical proximity to the United States. The second is an unusual sense of comradeship and trust developed by a critical part of the Russian political elite towards Venezuela that began during the reign of Hugo Chávez and has continued through Nicolás Maduro.
Military
Arms sales were the foundation of the modern Russian-Venezuelan bilateral relationship. With $11 billion in military hardware sales since the mid-2000s, Russia is by far Venezuela’s largest supplier of weapons, and Venezuela is Russia’s largest arms consumer in Latin America. The purchases, which are primarily conducted through Russian arms exporter Rosoboronexport, include assault rifles, fighter jets, tanks, and missile systems, among other assorted weaponry. Furthermore, Russia engages in joint military exercises with Venezuela, and Russian jets and warships make routine stopovers in Venezuela. In 2008, the political utility of the Russian-Venezuelan tie was evident when Russia sent TU-160 strategic bombers to Venezuela for a joint naval exercise in the Caribbean Sea. “This served as a counterpoint to US support for an increasingly pro-Western Ukraine and for Georgian President Mikheil Saakashvili during Moscow’s war on Georgia.
Russia and Maduro v. Guaidó
The persistent efforts of the Venezuelan leadership, through Chávez and on through Maduro, to engage with Russia have ultimately coincided with the anti-American worldview of members of the Russian political elite looking to rebrand Russia’s image on the international stage. Even today, a significant part of Russia’s political establishment shares Maduro’s view that Venezuela’s domestic problems and unrest are the work of external forces, primarily the United States. Despite economic downturns in Venezuela, Russia’s political elite still values the relationship between Moscow and Caracas because current Venezuelan leadership continues to support Russia politically. Well before the current crisis, Russian Defense Minister Sergei Shoigu publicly attributed domestic political unrest in Venezuela to an American-supported attempt at a color revolution.