Russia in Venezuela

Guest post by Harish Yagnesh

Far from the spotlight (or at least the Indian spotlight), there is a cold war play happening between the Russia and the United States. The latest battleground is Venezuela where the US and Russia are currently engaged in a war of words over Russian military presence in Venezuela.

Venezuela, officially the Bolivarian Republic of Venezuela  is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean Sea. It is one of the largest oil producers and exporters of the world.  Despite being one of the largest producers of oil, an economic crisis started in 2010 and after the death of Hugo Chavez in 2013, Venezuela has been going through a downward spiral in its economy.  The economy has collapsed leading to the Venezuela migrant crisis where over 3 million people have been reported to have fled the country. In 2017, Venezuela was declared to be in default regarding debt payments by credit rating agencies.  However, Venezuela has the largest oil reserves, and the eighth largest natural gas reserves in the world.  

Hugo Chavez was a leftist politician who ruled Venezuela from 1999 to his death in 2013. A close ally to Fidel and the Raul Castro of Cube and Evo Morales of Bolivia, he was a Marxist –Leninist who fashioned himself as a follower of Che Guevara. These LatAm countries considered themselves to be “anti-imperialist” countries opposing the US policies in Latin America. In 2013, Hugo Chavez died and his successor, the current President Nicolas Maduro came to power following elections in 2013.

In 2017, Nicolas Maduro stood for re-elections and won an election which was severely contested. His opponents alleged vote rigging and malpractices. The opposition leader Guiado has proclaimed himself to be the President. He is supported by the US and the EU while Russia and China still recognize Maduro as the President of Venezuela. It is an unprecedented situation where a country has two Presidents – each President recognized by his backers in the international community.

History of Russian Involvement:

The roots of Russian involvement in Venezuela can be traced back to 2008 and earlier during the Georgia crisis. In retaliation for US support to Georgia during the Russia-Georgia war of 2008, Russia sent a nuclear warship and bombers to Venezuela. Venezuela quickly became a leading importer of Russian arms buying Su-30 aircraft between 2012-16.  In response to the shrinking economy, Russia and China poured in billions of dollars to shore up the Venezuelan government. In exchange for loans and bailouts, Russia now owns significant parts of at least five oil fields in Venezuela, which holds the world’s largest reserves, along with 30 years’ worth of future output from two Caribbean natural gas fields.  Russian investment in Venezuela is estimated to be close to 25 Billion dollars. The Moscow times in this January 2019 report reported extensively on the extent of Russian involvement in Venezuela. It talks of Russia restructuring Venezuelan debt of about 17B USD, Russian banks and their investments in Caracas and Igor Sechin’s Rosneft heavily invested in the Venezuelan oil industry. It talks of the purchases of Kalashnikov rifles, the sale of Sukhois and other military armament to Caracas. In 2018, there has been conversation of setting up a Kalashnikov factory in Venezuela.  Incidentally, the Kalashnikovs being manufactured in Venezuela are AK-103s while those being manufactured in India under a joint Indo-Russian venture are called AK-203s. The increased investment both in terms of oil, money and defence means that Russia is heavily invested in Venezuela. It makes for strategic sense too.  From a Russian perspective, Venezuela is to the US what Ukraine is to Russia. This would be considered as Russian response to US activities in the Ukraine.

Role of China:

China is also heavily invested in Venezuela. In 2009, trade agreements were signed between China and Venezuela and Venezuela’s first cell phone factory was built with Chinese help.  China is also invested in Venezuela railways and holds a 40% stake in the same. The total amount of Chinese investment in Venezuela is to the tune of almost 67 Billion USD.  According to the Diplomat, even though China has a lot invested in Venezuela, it believes its investments as too large for a future pro-Western government to make a meaningful impact. Though the author quotes Argentina and the Kirchners in his support for the argument, it cannot be denied that under Donald Trump, the rules have changed. China is in a dilemma as to whether an incumbent Guiado would indeed honor the agreements of his predecessors.

Current situation:

In Dec 2018, Russian long range bombers Tu-160 touched down in Caracas airport. The purpose of the bombers landing there was not known. It provoked an angry reaction from Mike Pompeo that the bombers touching down was the result of “two corrupt governments squandering public money”.  The TIME commented that this was an opportunity for Russia to show that “it can still project might into the Western hemisphere”. This also coincided with loud voices of a coup in Caracas which would be supported by the US. There was heavy speculation which suggested that the Russians were carting off Venezuela’s gold reserves/ helping to sell Venezuela’s gold to the UAE. This news came after the news that the Bank of England had frozen the Venezuelan gold reserves held by it.

In the last week of March 2019, Russian military officials arrived in Venezuela. There are reports of about 100 soldiers arriving along with a Russian Staff Officer General Vasily Tonkoshkurov, head of the mobilization directorate of Russia’s armed forces.  Gen Tonkoshkurov is a veteran of the Afghan and the Chechen wars. Until May 2018, he had served as the deputy chief of the General Staff of the Russian Armed Forces. The fact that this mission in Venezuela is headed by such a prominent military commander indicates the importance of the engagement. There are also reports of the S-300 being deployed in the country.

All of this has led to a backlash within the US. The CIA chief Mike Pompeo led the charge after the landing of the bombers in December.  However, this was not the trigger. President Trump had been quoted in 2017 about the possible use of military option in Venezuela. This was further reiterated by Secy of state Tillerson. Following massive protests post the 2017 elections, The US was the first to recognize Guiado as the legitimate President of Venezuela prompting dozens of other countries to also do the same. The EU too followed suit. However, this recognition has not been unanimous. The German government has refused to accept an ally of Guiado as an envoy of Venezuela to Berlin. South Africa today  quotes the German newspaper Neue Osnabrücker Zeitung that the Spanish Government has called on other EU member states to not recognize Guiado’s representatives.

Meanwhile, President Trump in the last week of March 2019 warned Russia to “get out” of Venezuela. However, that seems to have been mellowed by recent reports that President Trump would talk to President Xi and President Putin on Venezuela.  In the meantime, China has been acting by refusing to accept a representative of Guiado on the Inter-American development bank which due to hold its next meeting in Beijing.

Within Venezuela itself, there have been electricity blackouts which affect large parts of the country. Maduro accuses the US of cyber-attacks and bring down the electricity infrastructure in support of Guiado. An aid convoy from the US was refused at the border crossing from Columbia to Venezuela. There have been massive protests in Caracas both in support of and against Maduro. It is very difficult to understand whether these protests are genuine or orchestrated. However, with an estimated inflation rate of 1 million%, Venezuela would be worse off than Zimbabwe. According to the PanAm post, 91% of people live below the poverty line in Venezuela and 65% of that live in extreme poverty.

Impact for India:

Venezuela is the fourth largest supplier of oil to India. India has continued importing oil from Venezuela despite sanctions imposed on it by the US. India is also invested in two JVs with PDVSA on the San Cristobal JV and in the Orinoco belt. Reliance Industries is being cultivated as a big customer for Venezuelan crude.  Any skirmish in Caracas would lead to oil prices shooting up as well. There are two factors here – the availability of oil itself and then the price of oil. With sanctions on Iran and restrictions of the volume of Iranian oil that can be purchased by India, this can quickly turn into a very tricky situation.

An additional reason to be concerned about in this affair is the fact that with the addition of military troops and equipment in Caracas, this has the potential to turn into a skirmish or a hot war.  The Indo-Pak skirmish on Feb 27th was one of the examples of “climbing the nuclear escalation ladder” and something similar threatens in Venezuela as well. The difference is that the main combatants in this case would the US, China and Russia.  This has the potential to turn into another Bay of Pigs crisis. The ramifications on a fragile world economy would be enormous.