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Venezuelan oil interesting Russian pensions

Венесуэльская нефть интересней российских пенсий

Russia invests in Venezuela six billion US dollars. On 6 December said the President of the Latin American country, Nicolas Maduro after a meeting with his Russian counterpart Vladimir Putin.

“Signed contracts to guarantee investment of more than $ 5 billion to increase oil production with Russian partners. Guaranteed Russian investments of more than $ 1 billion in the production of mining industry, mainly gold,” said Maduro posted on his Twitter page video from Moscow.

In addition, a contract was signed for the supply to Venezuela of wheat in the amount of 600 thousand tons, which is necessary to address the food crisis in the country. They also discussed options for investment in diamond mining. And earlier, the Minister of defense of Venezuela Vladimir Padrino Lopez said that the country is interested in the modernization of ground and air systems that have been supplied from Russia.

Russian investment is critical to the economy of Venezuela, which for several years is in deep crisis. According to the IMF, hyperinflation at the end of this year will exceed one million percent. The country’s GDP annually drops by more than 14%, the number of economic refugees have already reached three million. With the beginning of the year about 40% of retail companies in the country stopped working.

But if Venezuela’s Russian investments are profitable, their usefulness to our country is less obvious. Caracas looks are not the most reliable payer. In 2017 the Venezuelan authorities agreed on a debt restructuring after default of payment on the Russian loan in the framework of military-technical cooperation in the amount of one billion dollars.

According to the accounting chamber, Russia’s budget has a shortfall of 54 billion rubles for the violation of obligations. The parties agreed to postpone debt repayments until 2027. Although in 2016 Moscow have already agreed on restructuring the debt of Caracas to $ 2.8 billion, in particular, the timing of the repayments were rescheduled.

On the other hand, while Venezuela has the largest proven oil reserves in the world. According to experts, these volumes exceed 47 billion tons. While much of the oil belongs to the category heavy and super-heavy, which limits its use.

The Russian company “Rosneft” in recent years actively conducts business in Venezuela. Russia has five oil projects in the country with total production of 9 million tons per year. This is 7% of total production of Venezuela. Together with the Venezuelan state, PDVSA, developed the two largest of the field “Junin-6” with reserves of 8.5 billion tons and “Carabobo-2” — 6.5 billion tonnes.

According to unofficial data, the Russian company has already sent company PDVSA more than $ 20 billion. Only Venezuela has a public external debt amounting to 100 billion dollars, of which PDVSA has a 60 billion.

According to the official, in the summer of last year “Rosneft” has paid for the supply of oil from Venezuela $ 6 billion. prepayment. Vice-President of the company Pavel Fedorov assured that all advances are well protected. Up to this point was aware of several prepayments “Rosneft” to the Venezuelan PDVSA for a total amount of $ 2.5 billion.

August 3, 2017, the company’s President Igor Sechin said that “Rosneft” will continue work in Venezuela and intends to increase cooperation in the energy industry.

“Currently, we produce 9 million tons of oil per year annually, engaged in the trading of Venezuelan oil, and as I have repeatedly said, we never leave, and nobody will be able to drive out. We will work with Venezuela, we will expand our cooperation in the energy sphere”, — said Sechin.

The head of the company stressed that they are not engaged in politics, and develop energy projects in the country. However, business can not always ignore political events. As some experts believe, in the event of a change of power in the country, investments and projects in Russia can be threatened.

“I think that madness to invest such funds in the country as it really is in a dire situation. To borrow something of the state company for future oil supplies, which are questionable in connection with the situation in Venezuela is, to put it mildly, not a commercial decision. Moreover, PDVSA is not always fulfilled its obligations and has repeatedly disrupted pre-paid delivery. My concern is that “Rosneft” still, at least half, but state-owned company. That is taxpayers ‘money, and invest them in a country that for the future revolution can these tools never to return, then, to underestimate the risks”, — said in the last year, partner of consulting company RusEnergy Michael Krutikhin.

Some experts believe that, taking into account not the best situation for the Russian economy, these billions can and need to invest in national projects that would kick-start growth and improve the welfare of the population. Moreover, the oil industry of Venezuela, despite its huge reserves, is in crisis. Oil production in Venezuela during the first half of 2018 fell by almost half a million barrels a day, actually 5 times higher than liabilities (95,000 bbl. per day) under the Vienna agreement OPEC+. For two years, oil production fell by 1 million barrels per day, reaching the lowest level over the last 70 years.

Despite all this, the respondents “SP” experts believe that in the case of investments in Venezuela risks of Russia are justified, although they certainly are.

Deputy Chairman of the CPRF Central Committee, first Deputy Chairman of state Duma Committee on natural resources, property and land relations Yuri Afonin believes that cooperation with Venezuela could give Russia important leverage over the world oil market.

— The Communist party believes that the money you have to invest, primarily in the development of their country. Because the Russian economy is suffocating without investment — this is evidenced by very weak economic growth. There are lots of critical problems in the social sphere.

But as far as investments in the oil sector of Venezuela, in this case, as it seems, it is possible to make an exception. Because these investments can create a situation when Russia and Venezuela will determine the price of oil in the world for the greater part of the twenty-first century. Tempting, isn’t it?

“SP”: — how is this possible?

— Two factors. First: Venezuela — state conducting an independent policy from the US, which is rare in today’s world. And second, Venezuela is the country with the largest on the planet oil reserves. According to the latest authoritative Energomera BP, the oil reserves of Venezuela more than Saudi Arabia, which is usually considered the main oil “pod” of the Earth. But the oil in Venezuela is very difficult. And the main prospective oil resource of Venezuela, the Orinoco belt is generally mainly oil Sands. The Venezuelans don’t have enough money and technology to extract this oil. Here Russia can help.

“SP”: — But how this investment can bear fruit given the economic situation in Venezuela?

— You know, in the Russian liberal media for many years, the situation in Venezuela is described as an economic catastrophe, collapse and chaos. To put it mildly, not so. Yes, this country after the fall of oil prices in 2014, there was a lot of acute problems, which are exacerbated by pressure from the United States.

But let’s not forget that, despite all this, the ideological heir of Chavez — Maduro — this year surely has been elected for a second term. After that, all the Russian liberal analysts, whether they are honest people, would have to eat your keyboard, by which they scribbled articles about the imminent and inevitable collapse of chavismo in Venezuela.

And another interesting fact: on entering the apartments, based on the population of Venezuela is ahead of Russia! There since 2011 in the framework of the social program “the Mission of Vivienda” built and delivered to the poor more than 2 million units of decent housing. To chuistov these people lived just in the slums on the hills surrounding the Venezuelan city. Somehow doesn’t really seem like a total disaster, right?

In General, the cooperation with Venezuela has a lot to give Russia. And above all — enormous leverage on the world economy in the form of control over the price of oil.

Head of laboratory of the Institute of Latin American Academy of Sciences Victor Semenov does not exclude the possibility of a regime change in Venezuela, but considers that in this case, in the next five years, Russian investments are in comparative safety.

The situation is very difficult in the country, the recession increases, the rate of decline of GDP for the last three years account for 14.5% annually. Hyperinflation this year is expected to reach 1 300 000%. In such circumstances, it is not clear what will happen to the ruling regime. Therefore the risks, of course.

But the fact that we already have in this country a significant investment, especially in the oil industry. It operates “Rosneft”. They produce about 180 thousand barrels per day, which is about at the level of the Chinese companies that are also active in Venezuela.

By the way, in September, Maduro was in China on a visit, and he has also agreed to invest in the gold mining and oil fields. And while these agreements look very similar to ours, even called the same amount of $ 5 billion. In addition, Beijing has increased its stake in China’s CNPC in a joint venture PDVSA 9.9%. So China has risks, but increases support for Venezuela.

We have also begun to establish cooperation with Venezuela, even ahead of China, in 2001 Vladimir Putin met with Hugo Chavez, so we have a long tradition in this regard.

“SP”: — But there is a danger that all this cooperation will spill if you come to power another regime?

— I do not exclude that in Venezuela the government can come centrist mode. But the economy is still “APB”. In such circumstances, an effective foreign company, such as “ASPnet”, just need Venezuela. At least five years it will most certainly operate in the country. Also there will in any case continue the work of our repair and service the Russian technology base, even if new weapons will no longer be purchased. So, if the regime in Venezuela will change in the coming years, our position there is no danger.

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