Why is Russia defending Nicolas Maduro‘s claim to the presidency in Venezuela despite international pushback? Simply put, the South American country owes the Kremlin a lot of money and oil, experts say.
Maduro is also an important ally for Russian President Vladimir Putin, who has built his reputation at home on his ability to project Russia’s power into parts of the world where the Soviet Union once held sway.
Putin would look weak in the eyes of the Russian people if he failed to defend one of his friends against the United States, according to Vladimir Rouvinski, who studies Russia at the Woodrow Wilson Center’s Kennan Institute. That’s why Russia is so concerned that Maduro’s position is in jeopardy.
“It will be a defeat — a defeat which will be extremely difficult to explain to the Russians,” Rouvinski told Global News by phone from Colombia, where he also teaches political studies at Icesi University.
Maduro visits Russia several times a year and is well-liked by Russia’s elites, including Putin, Rouvinski says.
“In Russia, where personal relationships are so important, I think this is a factor that is playing in favour of Maduro,” Rouvinski said.
“There will be a sense of personal loss (in Russia) if Maduro falls.”
Russian President Vladimir Putin (R) meets with Venezuelan President Nicolas Maduro (L) at the Novo-Ogaryovo state residence outside Moscow, Russia, on Dec. 5, 2018.
The United States, Canada and several countries in the European Union have stopped recognizing Maduro as president, amid concerns over his latest election win and the state of the Venezuelan economy. Maduro has presided over a devastating economic collapse in Venezuela, where hyperinflation has ruined its currency and millions have fled the country in search of a better life elsewhere.
Russia, China, Turkey and Iran have steadfastly supported Maduro throughout the crisis.
The U.S. and its allies have thrown their support behind opposition leader Juan Guaido, whom they have recognized as interim president. They’ve also hammered Maduro with heavy sanctions designed to cut off his access to the government’s foreign investments.
However, Maduro still controls Venezuela’s military, and he has refused to surrender the presidency while powerful allies like Russia have his back.
“We view the attempt to usurp power in Venezuela as something that contradicts and violates the foundations and principles of international law,” Kremlin spokesperson Dmitry Peskov said on Jan. 24.
Approximately 400 suspected mercenaries were dispatched to Venezuela that same week to protect Maduro from harm, Reuters reported. The mercenaries are associated with a group called Wagner, a private military contractor that employs more than a thousand former Russian soldiers. The shadowy group has reportedly fought for Russian interests in Syria and Ukraine, although the Kremlin describes them as unaffiliated volunteers.
Here’s why Russia is so determined to prop up Maduro, even in the face of international efforts to topple him.
Venezuela reminds Russia of the olden days
Vladimir Putin rose to power in 2000 by promising to restore Russia to its former glory, and part of that meant befriending the Soviet Union’s former allies in Latin America. Putin set out to do just that, and cut several deals to equip those countries with Russian-made weapons, not American ones.
“He needed Latin America to show that Russia is a global player, that it has global reach, and that it’s back in Latin America,” Rouvinski said.
Most of Putin’s old friends in the region are now gone, leaving Maduro and Venezuela as Russia’s last major foothold in Latin America.
Rouvinski described Venezuela as an important Russian ally in the United States’ backyard, much like Ukraine has become an American ally under the shadow of Russia. Putin looks strong by maintaining that friendship with Maduro, and he would look ineffective if Maduro fell.
“Venezuela is practically the only country left for Putin,” Rouvinski said. “It is an attempt to do exactly what the United States did to Ukraine.”
In this file pool photo taken on Oct. 4, 2017, Russian President Vladimir Putin, right, shakes hands with Venezuela’s President Nicolas Maduro during their meeting at the Kremlin in Moscow, Russia.
Rouvinski adds that Maduro has a lot of friends in Russia, and those friends will not abandon their Venezuelan ally.
“They’re trying to support the Maduro government however they can,” he said.
Maduro owes Russia a lot of money
Russia has reportedly poured more than $17 billion into Venezuela in loans and investments since 1999, according to reporting from The Associated Press. Venezuela has paid back much of that debt, but it still owes Russia approximately $3.15 billion.
Russia and Venezuela agreed to a 10-year repayment plan for that debt in November 2017.
The U.S. has tried to cut off Maduro’s ability to repay that money by sanctioning the state-owned oil company, PDVSA. The sanctions are expected to cost Maduro $11 billion in lost export proceeds next year, and will block him from accessing PDVSA assets worth $7 billion, White House national security adviser John Bolton said last month.
But Maduro’s opponents have accused him of trying to pay back his allies in other ways.
Opposition lawmaker Jose Guerra claimed last week that Maduro sent approximately 20 metric tons of gold to Russia aboard a mysterious passenger jet that paid an out-of-the-ordinary visit to Caracas on Jan. 28. The 400-seat Boeing 777 arrived directly from Moscow with no one on board except for its flight crew, sparking speculation as to its true purpose. It remained on the tarmac in Caracas for two days.
Guerra accused Maduro of loading more than $800 million worth of gold onto the jet, citing unnamed sources in Venezuela’s monetary authority. He said the gold would amount to 15 per cent of the reserves in Caracas, although his claims have not been independently verified.
A bank in Portugal blocked Venezuela’s attempt to transfer $1.2 billion to banks in Uruguay, lawmaker Carlos Paparoni said at a congressional session on Wednesday.
“This transaction has until now been halted, protecting the resources of all Venezuelans,” Paparoni said.
Venezuela is in the grips of an economic crisis, with many residents struggling to get their hands on basic necessities.
A senior official told Reuters last week that Maduro plans to sell a total of 29 metric tons of gold to the United Arab Emirates by the end of February in exchange for cash. Twenty-nine tons of gold would be worth approximately $1.2 billion, based on current market prices.
Russia acknowledged last week that Venezuela will likely have trouble meeting its repayment schedule.
“There will probably be problems,” Sergei Storchak, Russia’s deputy finance minister, told reporters on Jan. 29.
“Everything now depends on the army, on the soldiers and how faithful they will be to their duty and oath. It is difficult.”
Storchak says Venezuela is due to make its next twice-yearly, interest-only payment of over $100 million at the end of March. It made its last payment in September.
Venezuela’s Russian rifle factory
Russia has a lot of military entanglements with Venezuela, which it views as a strategic ally in the Western Hemisphere. Venezuela has bought more than $4 billion in weapons from Russia since 2005, including approximately 50 helicopters, 24 fighter jets and 100,000 Kalashnikov rifles.
Kalashnikov Concern, the Russian-based gun manufacturer behind the original AK-47, is slated to open a new rifle factory in Venezuela at the end of the year, according to Russia’s Interfax news agency.
The factory would be the first-ever Kalashnikov manufacturer in the West, and is expected to produce tens of thousands of weapons for Russia every year.
Soldiers, armed with Russian-made rifles, participate in a military act hours after Venezuelan President Nicolas Maduro was sworn again as president of the country, in Caracas, Venezuela, on Jan. 10, 2019.
“This plant is of strategic importance for the independence of Venezuela and its armed forces,” Venezuela’s defence minister, General-in-Chief Vladimir Padrino Lopez, told Interfax in Moscow last April.
The project was originally announced in 2006 but delayed for over a decade due to corruption scandals and mismanagement.
Oil, oil and more oil
Venezuela’s state-run energy company, PDVSA, operates the largest underground oil reserves in the world, and Russia is heavily invested in maintaining access to those reserves. Rosneft, Russia’s No. 1 oil producer, has loaned PDVSA billions and pre-purchased a vast amount of oil to help keep it afloat. Rosneft is also one of several foreign oil companies operating in Venezuela.
PDVSA currently owes Rosneft $2.3 billion, the Russian oil company said on Tuesday. Rosneft says PDVSA made its last debt payment on time, reducing the amount owing by about $800 million.
American sanctions aim to prevent PDVSA from exporting roughly 500,000 barrels of crude oil per day to the U.S., which is one of its primary customers. American refineries can buy the oil but the money gets locked away in an escrow account until Maduro is no longer in control of PDVSA.
Oil once fuelled Venezuela’s economy, but that economy collapsed after oil prices dropped in recent years, plunging the country into its current crisis. Selling oil will be a crucial part of Maduro’s efforts to pay back Russia and China, his other major creditor. Venezuela owes Beijing approximately $20 billion.
Rouvinski says Russia might be drawn into a military conflict if a pro-American leader takes over in Venezuela and seizes Russian oil assets, without providing any compensation. However, combat is the “least desirable option,” because Russia is too far away to sustain a fight in Venezuela, he said.
“I believe this would be the last option,” he said. “Russia understands that it may end up with unpredictable results.”
He adds that Russia doesn’t want to be pushed into a corner, but it will react if things get too heated in Venezuela.
“For them, the point of no return will be U.S. invasion.”
— With files from Reuters and The Associated Press
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