Russia returned to Latin America in 2008, when former President Dmitry Medvedev visited several countries in the region, including Venezuela, for the first time in the history of their diplomatic relations. Russian interests in cooperation with Venezuela were based on the following reasons. First, the increase of Russia’s role in global governance demanded the diversification of its foreign economic policy and the development of cooperation links with countries from different regions. Both geopolitically and economically, Russia as a re-emerging power tried to expand its relations and build new partnerships all over the world, competing with Western powers. Second, at that time Venezuela was a leader of ALBA (BolivarianAlliance for the Peoples of Our America) and a left-leaning country in Latin America with strong anti-American rhetoric and economic growth based on oil exports. It was logical that Russia began to establish closer links with Venezuela from both a political and economic perspective, signing new agreements and expanding trade and investments. For instance, Rosneft and other Russian energy companies entered the Venezuelan market. Moreover, worth mentioning was the rise in Russia’s arms supply and military cooperation. There was also an increase in machinery exports, but to a lesser extent.
As time passed by, the political factor in Russia-Venezuela relations became more significant. On the one hand, the Ukrainian crisis and Western sanctions in 2014 forced Russia to deepen its cooperation with Venezuela from a geopolitical perspective. On the other, the rise of political opposition led the Venezuelan government to seek more political and financial support from its partners. As the Venezuelan government blamed the USA for helping opposition movements, it tried to secure its position through the support of non-Western countries. The economic crises in Venezuela and Russia after the fall of oil prices in 2014 made a significant contribution to the development of Russia-Venezuela relations. The majority of Russian companies, including TNCs in the energy sector, withdrew from the Venezuelan market. On the contrary, Rosneft decided to expand its presence in Venezuela and invested in new projects. This was primarily explained by large oil reserves and potential profits in the future. Second, the geopolitical environment provided greater access to the Venezuelan market even though the economic situation seemed to be very unstable.
The evolution of the financial crisis in Venezuela led to the threat of announcing default in 2017, which the Venezuelan government could not afford to do in the existing situation of declining power. Venezuela asked its allies, mostly Russia and China, for political and economic support. Neither country however was disinterested in the radical changes in Venezuelan politics. First, they had already made large investments and provided financial support, which they did not want to lose. China was more affected than Russia due to its reliance on energy resources. For Russia, whose trade and investments in Venezuela had already decreased, military cooperation and Rosneft projects continued to play an essential role. Second, Venezuela was a symbol of confrontation with the USA. Hence, geopolitically, Russia and China as re-emerging powers could strengthen their positions in global governance. In this sense, taking into account the tensions in Russia-US relations and the increase of US sanctions against Russia, the geopolitical rhetoric seemed to play an essential role. How could Russia not help its ally Venezuela, also suffering from US sanctions?
On November 2017, Russia restructured $3.15 billion of Venezuelan debt. The debt should be repaid over 10 years and for the first 6 years the payments will be very insignificant. On the one hand, Venezuela’s total debt amounted to more than $155 billion and so the volume of Russian help seemed minimal. However, Russian assistance improved the capacity of Venezuela to repay its loans and therefore increased creditor confidence. On the other hand, Venezuela received $6 billion from Rosneft in the form of an advance payment for future oil supplies, so in fact Russia’s support was greater. Moreover, on December 2017 Venezuela awarded two offshore gas field licenses (for 30 years) to Rosneft. This Russian company also holds a 49.9% stake in US Citgo’s refinery plants in Venezuela as loan collateral. Some experts argue that this represents a threat for US energy security. However, due to US sanctions against Russia and Venezuela, Rosneft could not actually use it and in February 2018 the Swiss Mercuria Energy Group asked the US for permission to buy out Citgo’s $1.5 billion loan from Rosneft. The results of this deal are still undefined.
To conclude, the evolution of Russia-Venezuela relations demonstrates that Russia has consistently developed its cooperation with this Latin American country and played a role in helping Venezuela to deal with its political and economic crisis. Their established geopolitical and economic (mostly energy-related) links show that Russia is likely to support its ally, but one should not overestimate the size of Russia’s assistance.
1. A.G. Koval, "Russian Outward Foreign Direct Investments in Latin America: Contemporary Challenges and Prospects", in K. Liuhto, S.F.Sutyrin, J.F. Blanchard (Eds.),The Russian Economy and Foreign Direct Investment, Routledge, London - New York, 2017, pp. 230-247.