Venezuela: Beyond the Russian Debt Deal

Nora Molina-Salazar Analysis

5 minute read

 

In headlines reminiscent of the 1960s Red Scare, Russian intervention in Latin American affairs is once again the center of major controversy. Last Wednesday, Caracas announced accepting a $3.15bn loan from Moscow to alleviate a total debt of $140bn owed to foreign investors. This deal is expected to provide the cash-strapped country with some relief by allowing Venezuela to make “minimum” repayments on its Russian line of credit.

But how did Putin end up in Venezuela?

The Russian loan to Venezuela is the latest development in a series of courtship moves made by the Kremlin towards Latin America. In February of last year, Pope Francis and the Patriarch Kirill met in Havana in a public display of standing global relevance. The Patriarch, a key player in constructing Russia’s national image of conservatism and traditionalism, is now an ambassador representing those values on foreign soil. This visit by the religious leader was preceded by Vladimir Putin’s trailblazing Latin American tour in the summer of 2014, where he spent six days visiting regional leaders in the midst of the Ukraine crisis back home. Putin has since further cemented his ties on the continent by a series of official declarations, notably extending trade with Brazil and backing the recent results of the Venezuelan elections.

These efforts by Moscow come at a time where Washington’s relations with its southern neighbors are at an all time low: in between the infamous USA-Mexico border wall and the cutting of several programs facilitating entry for Latin American refugees, the United States has made few allies south of its border.

This paints a picture Washington knows only too well: a White House isolated from its allies while Russia gains diplomatic terrain. There is no arms race at play this time, only a race of influence. With the unsuccessful attempts of Trump’s White House to make any advances in de-escalating the nuclear threats from Pyongyang and its cold relations with NATO allies, the Venezuelan loan is only the latest development in which Washington is excluded from its historical role as a mediator.

What comes next in the Russo-Venezuelan saga?

A waiting game. The world sits tight as repayments for the $3.15 billion loan trickle from Caracas to Moscow. The series of extensions on the Russian loan after Venezuela’s failure to pay in 2014 and 2015 do not bode well for the outcome of this major restructuration. Meanwhile, Petroleros de Venezuela (PDVSA), the state owned firm responsible for 95% of export earnings, is increasingly controlled by Moscow. In a last ditch attempt to meet payments to foreign creditors, PDVSA has been selling up to 225,000 barrels per day to Russia’s oil giant Rosneft, who then resells those barrels on the international market. This strategy has allowed Russia to both control Venezuela’s cash flow and positioned Moscow at the center of the international market’s access to Venezuelan oil.

In the midst of financial turmoil, Venezuela is also facing a political crisis. On November 16, the country’s ex chief prosecutor, Luis Ortega, has requested the International Criminal Court to try Nicolas Maduro for crimes against humanity for murders committed by the country’s police and armed forces. This comes after protests against food and medical shortages has left hundreds dead of cadavers strewn across the streets of Caracas. As a result, South America is now preparing for a Venezuelan refugee crisis as thousands of citizens seek political refuge in neighboring countries like Colombia.

Maduro has called upon the Mesa de la Unidad Democrática (MUD), the official opposition, to rally with his own party to provide respite to the protests and allow for discussions on the country’s future. Trust, however, is hard to achieve as the MUD denounces Maduro’s party for supposedly flawed elections that cost the MUD their stronghold in the state of Miranda in the October 15th regional elections.

How does this deal affect affect the people of Venezuela?

The desperation of the Maduro government for liquidity is a bad omen for civil rights: the government, already criticised for its persecution of critics and political opponents, might further crackdown on protests and activists as the international community’s gaze focuses on Maduro’s country. Moreover, the government has still not announced a relief plan for its hospitals, 76% of which have claimed to lack access to basic medicines.

The Russian restructuring deal while providing debt relief also offers no hope to the 12% of Venezuelans eating two or less meals a day. And as Venezuela has proved, hunger severely alters the democratic process: Maduro’s government announced to voters its electoral technology enabled them to verify who had voted, the same government who is also responsible for the food distribution on which a majority of Venezuelans now depend on.

Venezuelans now have to face the Herculean task that is the rebuilding of their country. From detaching themselves from Russian meddling to overcoming the massive exodus of emigration, the consequences of the decisions of President Nicolas Maduro will extend far beyond the 10 year repayment plans of his debt deals.