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Nicolás Maduro, Venezuela’s embattled President, faced with threats and sanctions from the US (in which Canada has now joined) and savage criticism from US President Trump, is intending to travel to Moscow in early October to attend Russia’s Energy Week.
It is a certainty that during his visit to Moscow Maduro will meet with top Russian officials, including almost certainly President Putin himself.
A little noticed fact is that over the last few months, as the economic crisis in Venezuela has deepened, Russia has quietly emerged as Venezuela’s major foreign investor and financial backer, with Russia’s state oil company Rosneft positioning itself to become a major investor in Venezuela’s oil industry.
Rosneft’s investments in Venezuela, though providing Venezuela with desperately needed foreign exchange, are not uncontroversial both in Venezuela and Russia.
Inevitably there have been complaints in Venezuela and elsewhere that Rosneft is taking advantage of Venezuela’s economic crisis to achieve a preponderant position in Venezuela’s oil industry – potentially one of the biggest in the world – whilst in Russia, given the unstable political situation in Venezuela and the certainty that any oil concessions granted to Rosneft will be set aside if the Venezuelan opposition comes to power, there have been questions about the long term wisdom of Rosneft’s investments.
Igor Sechin, Rosneft’s powerful CEO, however remains personally committed to Venezuela, whilst for Maduro and his embattled government financial and technical support from Russia and Rosneft, including to keep the oil industry going – which by some accounts is otherwise heading towards breakdown – is essential if a total economic and political collapse in Venezuela is to be avoided.
Maduro’s trip to Moscow in October is obviously intended to put a seal on the relationship.
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At this point I would add a personal view, which is that supporters of Maduro’s government both within Venezuela and elsewhere consistently underestimate the extent to which Venezuela’s current economic crisis has been caused by the government’s fundamental errors of economic management. By contrast there is far too much emphasis on Venezuela’s alleged external economic destabilisation. Quite apart from the fact that before the Trump administration’s latest sanctions there was actually scant evidence of this external destabilisation, in my opinion this has had the bad effect of providing the Venezuelan government with an alibi, enabling it to excuse itself for its fundamental economic and political mistakes.
The result is that those mistakes – such as the government’s ruinous insistence on using its scant foreign currency resources to pay Venezuela’s external debt on time, instead of using these resources to pay for essential imports whilst seeking a restructuring – have been perpetuated.
These mistakes the government has been making have a variety of causes, but not the least of them is the absence of properly trained and experienced technocrats within the government, with the result that economic policy has been made emotionally on the hoof in an amateur way, often with disastrous consequences.
Russia by contrast has an abundance of highly qualified technocrats. If Russia really wants to help Venezuela out of its crisis – which given the size of Rosneft’s planned investments in Venezuela it should do – arguably the single most useful thing it could do is provide Venezuela with the technical advice and support it desperately needs in order to stabilise its economy.
The fact that Venezuela has now apparently asked Moscow for help to achieve a restructuring of its debt may be a sign that this is finally happening. This – as well as Rosneft’s investments in Venezuela’s oil industry – will no doubt be the subject of Maduro’s talks with the Russians in Moscow.
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