Recommended by Ricochet Members Created with Sketch. As One Kleptocracy Crumbles Another is Worried

 

Vlad the Shirtless may end up losing another shirt. Russia has invested a lot of money in Venezuela, and like any Mafia, Don Vladimir Putin is worried about his investment.

In November 2017, Russia agreed to restructure Venezuelan sovereign debt of $3.15 billion, with repayments lasting 10 years.

Rosneft, Russia’s biggest oil producer and one of the largest globally, operates in Venezuela and has also issued loans to state oil and gas company PDVSA, backed by oil supplies.

According to Rosneft, PDVSA paid $500 million debt during the third quarter of last year, with the outstanding obligations standing at $3.1 billion then.

Rosneft, whose chief executive Igor Sechin is a frequent visitor to Venezuela, has stakes in a number of oil projects in the country. Total oil production from those projects was 8 million tons in 2017, or 161,000 barrels per day.
Rosneft’s share in that oil production was 3 million tons, according to the last publicly available Rosneft documents.

That’s a lot of rubles comrade, especially for a country like Russia, whose GDP is less than Italy’s. There is also a line of credit to Venezuela to purchase arms, to include tanks and aircraft.

None of this money has translated into groceries, or medicine for Venezuelan’s; although Maduro doesn’t look like he has missed too many meals.

From a Radio Free Europe interview:

RFE/RL: Analysts have described the governments of both Maduro and Putin as “mafia states.” Is this a useful prism for comparing the two countries and understanding their relationship and interaction?

Wigell: Maduro’s government is certainly kleptocratic. It is deeply implicated in the drug trade. It is deeply corrupted. In fact, its whole political-survival strategy is one of trying to tie criminal elements to itself, even giving key ministerial positions to criminals so that they would have an incentive to uphold the regime under any circumstances. These criminals know that if there is a democracy, they might end up in court, so they will do anything to prop up Maduro’s strategy.

So it is kind of a mafia strategy of deliberately corrupting everyone in order to unite them against any regime change.

Now, there are some similarities to the regime in Russia regarding this sort of strategy. Certainly Russian criminal elements and criminal organizations are very much present on the ground in Venezuela. And they have ties to the Venezuelan regime, and they also have certain ties to Moscow. There are these ties that go via these criminal elements, forming a certain element in the Venezuela-Russia relationship.

China’s worried as well because of their own heavy investment’s in Venezuela, but that’s a story for another day.

There are 23 comments.

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  1. Flicker Coolidge

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    • #1
    • January 26, 2019, at 7:06 PM PST
    • 1 like
  2. Doug Watt Moderator
    Doug Watt

    An article from the Financial Times, November, 2017 should answer your questions. The article is using the $ amount as did Radio Free Europe.

    • #2
    • January 26, 2019, at 7:23 PM PST
    • 2 likes
  3. Flicker Coolidge

    Doug Watt (View Comment):

    An article from the Financial Times, November, 2017 should answer your questions. The article is using the $ amount as did Radio Free Europe.

    Sorry, but it says to subscribe to read it. Oh, well. I was just wondering what kind of financial credibility either of these two countries have, one paying off loans in pesos or Petros, and the other in rubles or yuan (now that China is buying oil in yuan, I believe). Otherwise they might be using oil, or in gold which I doubt because gold is too precious right now to spend for either of them (and Venezuela’s has been essentially impounded by ethical considerations in the Bank of England).

    • #3
    • January 26, 2019, at 7:37 PM PST
    • 1 like
  4. Arahant Member

    Confusion to our enemies.

    • #4
    • January 26, 2019, at 9:21 PM PST
    • 2 likes
  5. Randy Webster Member

    Doug Watt: In November 2017, Russia agreed to restructure Venezuelan sovereign debt of $3.15 billion, with repayments lasting 10 years.

    $3.1 billion would be a rounding error in the US budget. Is Russia in that bad shape?

    • #5
    • January 26, 2019, at 9:24 PM PST
    • 2 likes
  6. Doug Watt Moderator
    Doug Watt

    Flicker (View Comment):

    Doug Watt (View Comment):

    An article from the Financial Times, November, 2017 should answer your questions. The article is using the $ amount as did Radio Free Europe.

    Sorry, but it says to subscribe to read it. Oh, well. I was just wondering what kind of financial credibility either of these two countries have, one paying off loans in pesos or Petros, and the other in rubles or yuan (now that China is buying oil in yuan, I believe). Otherwise they might be using oil, or in gold which I doubt because gold is too precious right now to spend for either of them (and Venezuela’s has been essentially impounded by ethical considerations in the Bank of England).

    I have changed the link to a NYT article. Russia loaned the money to Venezuela, and Venezuela was supposed to use it to start paying off their debt, in return:

    Over the past three years, Russia has provided Caracas with $10 billion in financial assistance, and last year Rosneft took a 49.9 percent stake in Citgo, the Venezuelan state oil company’s refining subsidiary in the United States. That represented collateral for a $1.5 billion loan to the parent company, Petróleos de Venezuela, known as Pdvsa. Rosneft is negotiating to swap the interest in Citgo for oil fields in Venezuela.

    • #6
    • January 26, 2019, at 9:28 PM PST
    • 2 likes
  7. Doug Watt Moderator
    Doug Watt

    Randy Webster (View Comment):

    Doug Watt: In November 2017, Russia agreed to restructure Venezuelan sovereign debt of $3.15 billion, with repayments lasting 10 years.

    $3.1 billion would be a rounding error in the US budget. Is Russia in that bad shape?

    The 3.1 billion figure refers to Venezuelan debt in 2017, as of August, 2018 it was 6.1 billion.

     

    • #7
    • January 26, 2019, at 9:35 PM PST
    • 1 like
  8. The Reticulator Member

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    • #8
    • January 26, 2019, at 10:02 PM PST
    • 2 likes
  9. Doug Watt Moderator
    Doug Watt

    The Reticulator (View Comment):

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    If a new government comes to power and decides they will not have to honor any obligations to Russia that’s going to be a bad day for Russia. 

     

    • #9
    • January 26, 2019, at 10:06 PM PST
    • Like
  10. Fake John/Jane Galt Coolidge

    Doug Watt (View Comment):

    The Reticulator (View Comment):

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    If a new government comes to power and decides they will not have to honor any obligations to Russia that’s going to be a bad day for Russia.

    Maybe,but Russia is not without resources or more importantly the will to use them.

    • #10
    • January 26, 2019, at 10:50 PM PST
    • 2 likes
  11. Flicker Coolidge

    Doug Watt (View Comment):

    Flicker (View Comment):

    Doug Watt (View Comment):

    An article from the Financial Times, November, 2017 should answer your questions. The article is using the $ amount as did Radio Free Europe.

    Sorry, but it says to subscribe to read it. Oh, well. I was just wondering what kind of financial credibility either of these two countries have, one paying off loans in pesos or Petros, and the other in rubles or yuan (now that China is buying oil in yuan, I believe). Otherwise they might be using oil, or in gold which I doubt because gold is too precious right now to spend for either of them (and Venezuela’s has been essentially impounded by ethical considerations in the Bank of England).

    I have changed the link to a NYT article. Russia loaned the money to Venezuela, and Venezuela was supposed to use it to start paying off their debt, in return:

    Over the past three years, Russia has provided Caracas with $10 billion in financial assistance, and last year Rosneft took a 49.9 percent stake in Citgo, the Venezuelan state oil company’s refining subsidiary in the United States. That represented collateral for a $1.5 billion loan to the parent company, Petróleos de Venezuela, known as Pdvsa. Rosneft is negotiating to swap the interest in Citgo for oil fields in Venezuela.

    Then, I don’t know, is 3 billion cheap?

    • #11
    • January 26, 2019, at 11:47 PM PST
    • Like
  12. Jon1979 Lincoln

    The Reticulator (View Comment):

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    I’d assume oil (or at least control of directing Venezuela’s oil if they can ever get production going again) and granting Russia military stationing rights. Venezuela’s sitting on the largest pool of ‘heavy’ oil in the world, while most of the oil that the U.S. produces is ‘light’, and refineries around the world are built to handle one type of oil or the other.

    So has big as the American oil boom has been due to fracking and horizontal drilling, there are a bunch of refiners in the U.S. and elsewhere that can’t do anything with it (including the three Citgo refineries Maduro holds in Texas, Louisiana and the Chicago area), and need they type of oil Venezuela produces. Control over that is something Putin could be looking for, as a way to further have sway over world oil markets (as big as Russia is, it produces mainly light oil out of Siberia and the heavier Venezuelan-type oil in its fields to the west in the Urals, so it has a share of both types of world oil markets).

    • #12
    • January 27, 2019, at 6:40 AM PST
    • 3 likes
  13. Doug Watt Moderator
    Doug Watt

    Fake John/Jane Galt (View Comment):

    Doug Watt (View Comment):

    The Reticulator (View Comment):

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    If a new government comes to power and decides they will not have to honor any obligations to Russia that’s going to be a bad day for Russia.

    Maybe,but Russia is not without resources or more importantly the will to use them.

    There are about 400 Russian mercenaries in Venezuela at the present time. Their job is to protect Maduro from arrest by Venezuelan’s. Cuba on the other hand has approximately 1,000 intelligence officers, and special forces operatives in Venezuela. Their job is to engage Venezuelan’s in the street, and to make arrests of Venezuelan’s opposition leaders.

     

    • #13
    • January 27, 2019, at 6:55 AM PST
    • 1 like
  14. ctlaw Coolidge

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    • #14
    • January 27, 2019, at 8:06 AM PST
    • 4 likes
  15. Doug Watt Moderator
    Doug Watt

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    If they situation gets really ugly in Venezuela the Russian problem will be getting their mercenaries out Venezuela alive, as will Cuba. The Russians cannot keep Israeli forces from flying over Syria and striking Iranian forces in Syria, so their ability to control airspace to protect their assets in Venezuela is about zero. 

     

    • #15
    • January 27, 2019, at 8:22 AM PST
    • 2 likes
  16. Jon1979 Lincoln

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    The problem is that Venezuela’s nationalization of their oil companies resulted in the oil companies pulling out their people who had been running the refining and production facilities, and Chavez (followed by Maduro) didn’t replace them with people who had a clue how to run those systems — they appointed people based on their loyalty to the regime, and caused the entire system to collapse (to the point that Venezuela is in legal battles with several companies, including ConocoPhillps, who are seeking to have U.S. courts award them the Citgo refiners for non-payment of debts).

    It Russia or China want to get their investment in Venezuela paid back in discount oil, or control of the country’s oil industry, Russia or China’s going to have to run the industry themselves. Not sure how the locals or the workers under them would take to producing oil domestically not to make their lives better, but to make things better for people 6,000 miles away.

    • #16
    • January 27, 2019, at 8:50 AM PST
    • 5 likes
  17. Gazpacho Grande' Coolidge

    Fake John/Jane Galt (View Comment):

    Doug Watt (View Comment):

    The Reticulator (View Comment):

    Flicker (View Comment):

    Just out of curiosity, To whom did Russia refinance Venezuela’s debt, to everyone with an outstanding bill? And what did Russian pay in, rubles? And what did Venezuela pay it’s $500 million in, gold? Petros? Oil? Rubles? USD? Is Russia holding the PDVSA oil as collateral? If so, how much and what’s then backing the Petro?

    I was wondering about collateral, too. And how does Russia repossess its collateral?

    If a new government comes to power and decides they will not have to honor any obligations to Russia that’s going to be a bad day for Russia.

    Maybe,but Russia is not without resources or more importantly the will to use them.

    Agreed, comrade.

    • #17
    • January 27, 2019, at 9:08 AM PST
    • Like
  18. ctlaw Coolidge

    Doug Watt (View Comment):

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    If they situation gets really ugly in Venezuela the Russian problem will be getting their mercenaries out Venezuela alive, as will Cuba. The Russians cannot keep Israeli forces from flying over Syria and striking Iranian forces in Syria, so their ability to control airspace to protect their assets in Venezuela is about zero.

     

    Huh? Against whose air force would the Ruskies be fighting? From Cuba or from Russian bases in Venezuela itself, the Ruskies would have air dominance. More generally, the Ruskies, Chinese, or US could crush any third world country that nationalized assets. Only the US won’t.

    The Ruskies and Israelis have an arrangement in Syria. The Ruskies and Israelis have a deconflition agreement that typically forces Israel to fire missiles from outside Syrian airspace and even then has restrictions.

    • #18
    • January 27, 2019, at 5:16 PM PST
    • Like
  19. Richard Fulmer Member

    Doug Watt: These criminals know that if there is a democracy, they might end up in court, so they will do anything to prop up Maduro’s strategy.

    Offering Maduro and his cronies safe passage to Cuba might help resolve the stand-off. While it’s not justice, it might save some lives.

    • #19
    • January 27, 2019, at 7:21 PM PST
    • 2 likes
  20. Doug Watt Moderator
    Doug Watt

    ctlaw (View Comment):

    Doug Watt (View Comment):

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    If they situation gets really ugly in Venezuela the Russian problem will be getting their mercenaries out Venezuela alive, as will Cuba. The Russians cannot keep Israeli forces from flying over Syria and striking Iranian forces in Syria, so their ability to control airspace to protect their assets in Venezuela is about zero.

     

    Huh? Against whose air force would the Ruskies be fighting? From Cuba or from Russian bases in Venezuela itself, the Ruskies would have air dominance. More generally, the Ruskies, Chinese, or US could crush any third world country that nationalized assets. Only the US won’t.

    The Ruskies and Israelis have an arrangement in Syria. The Ruskies and Israelis have a deconflition agreement that typically forces Israel to fire missiles from outside Syrian airspace and even then has restrictions.

    What happened to that agreement on Christmas Day? Your link is on a story dated December 12. The agreement seems to have lasted 13 days.

     

    • #20
    • January 28, 2019, at 12:25 AM PST
    • Like
  21. ctlaw Coolidge

    Doug Watt (View Comment):

    ctlaw (View Comment):

    Doug Watt (View Comment):

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    If they situation gets really ugly in Venezuela the Russian problem will be getting their mercenaries out Venezuela alive, as will Cuba. The Russians cannot keep Israeli forces from flying over Syria and striking Iranian forces in Syria, so their ability to control airspace to protect their assets in Venezuela is about zero.

     

    Huh? Against whose air force would the Ruskies be fighting? From Cuba or from Russian bases in Venezuela itself, the Ruskies would have air dominance. More generally, the Ruskies, Chinese, or US could crush any third world country that nationalized assets. Only the US won’t.

    The Ruskies and Israelis have an arrangement in Syria. The Ruskies and Israelis have a deconflition agreement that typically forces Israel to fire missiles from outside Syrian airspace and even then has restrictions.

    What happened to that agreement on Christmas Day? Your link is on a story dated December 12. The agreement seems to have lasted 13 days.

     

    Note your article says the planes did not enter Syrian air space but fired missiles from over Lebanon. Presumably, the further deconfliction procedures were used as well.

    • #21
    • January 28, 2019, at 3:32 AM PST
    • Like
  22. Doug Watt Moderator
    Doug Watt

    ctlaw (View Comment):

    Doug Watt (View Comment):

    ctlaw (View Comment):

    Doug Watt (View Comment):

    ctlaw (View Comment):

    This highlights an area where the US puts its companies at a competitive disadvantage internationally. A US company seeking to finance operations abroad has to price in the likelihood that its investment will be nationalized. Nobody however would dare risk nationalizing an asset owned by Russians or Chinese or perhaps even the French.

    Thus you have the absurd situation where Venezuela can seize the assets of American companies and effectively use the proceeds to buy an American company like Citgo.

    If they situation gets really ugly in Venezuela the Russian problem will be getting their mercenaries out Venezuela alive, as will Cuba. The Russians cannot keep Israeli forces from flying over Syria and striking Iranian forces in Syria, so their ability to control airspace to protect their assets in Venezuela is about zero.

     

    Huh? Against whose air force would the Ruskies be fighting? From Cuba or from Russian bases in Venezuela itself, the Ruskies would have air dominance. More generally, the Ruskies, Chinese, or US could crush any third world country that nationalized assets. Only the US won’t.

    The Ruskies and Israelis have an arrangement in Syria. The Ruskies and Israelis have a deconflition agreement that typically forces Israel to fire missiles from outside Syrian airspace and even then has restrictions.

    What happened to that agreement on Christmas Day? Your link is on a story dated December 12. The agreement seems to have lasted 13 days.

     

    Note your article says the planes did not enter Syrian air space but fired missiles from over Lebanon. Presumably, the further deconfliction procedures were used as well.

    They did fire from Lebanon, but the Israeli government made it clear that they would not allow an Iranian military presence in Syria. That is going to make things rather difficult for the Russian relationship with Iran.

     

    • #22
    • January 28, 2019, at 6:27 AM PST
    • 1 like
  23. ctlaw Coolidge

    More Syria deconfliction

    https://www.yahoo.com/news/netanyahu-talks-russians-avoid-syria-frictions-191800973.html

    • #23
    • January 30, 2019, at 5:15 AM PST
    • Like

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