Saturday, January 26, 2019

Taking Sides in Venezuela

China is believed to have invested around $70 billion, in the form of loans as well as social projects and maintenance of the country’s oil production infrastructure. Most of those loans are set to be paid back to China in the form of Venezuelan oil. In addition, China and Venezuela have formed several joint ventures involving the production of automobiles, mobile phones and computers, among other goods. These investments and connections make China by far Maduro’s largest creditor.

“If Venezuela collapses…China faces a large risk of diplomatic and financial blowback. Opposition politicians are well aware that China propped up…Maduro rule. A new Venezuelan government could well refuse to honor the Maduro-era obligations entirely and look to Washington for support instead."

Russia is believed to have lent and invested around $17 billion in Venezuela over the past 20 years, significantly less than China. However, Russia — through state-run companies such as Rosneft — has gained significant ownership stakes in at least five major Venezuelan oil fields along with several decades worth of the future outputs of Venezuelan-held natural gas fields in the Caribbean. In addition, and most significantly from the U.S. perspective, in 2017 Venezuela offered 49.9 percent of Citgo — its wholly owned U.S. subsidiary — along with three Gulf Coast refineries and its pipeline network as collateral to Rosneft for $1.5 billion.
 Rosneft’s interests in Venezuela are so great that its executive chairman, Igor Sechin, stated in 2017 that “we will never leave and no one will be able to kick us out of there.” Yet, as Leonid Bershidsky recently wrote in Bloomberg, “If Maduro falls and a U.S.-backed government takes his place, it’s highly likely that the Russian projects will be suspended and Venezuela’s debts won’t be repaid.”

A new U.S.-backed government in Venezuela endangers the billions of dollars in loans that Maduro’s government owes to both countries. Russia and China are aware that their interests in the country are under threat as a direct result of this U.S. push. This greatly increases the likelihood that any escalation from Washington will trigger strong responses from both countries and could quickly devolve into a tit-for-tat that could eventually develop into a major military conflict. Russia and China are unlikely to stand idly by as the U.S. installs a government that could undo their years of investment in the country and refuse to pay back billions in loans. Indeed, Russia has already sent military contractors (mercenaries) into Venezuela.

An attempt at regime change by the US in Venezuela may well mean a possible proxy civil war as in Syria. Not for any concept of democracy but to defend economic interests.

1 comment:

ajohnstone said...