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  • Venezuela must now deal with the Russians 0 comments
    Oct 18, 2010 11:18 AM
    On a recent trip to Russia, Venezuelan president Hugo Chavez was caught in a photo op with Russian president Dmitry Medvedev that made the two almost look as though they were exchanging high fives. The visit had been a success from Russia’s point of view: Chavez signed a deal that will allow Russia to build and operate Venezuela’s first nuclear power station, a clue that the oil-rich OPEC member is looking to diversify its energy sources. The two countries also solidified plans for a Russian-Venezuelan bank.

    The relationship between Russia and Venezuela would seem to be a strong alliance. But is it unshakable?

    While Chavez was visiting Russia, Russian and Venezuelan Ministries of Energy signed a memorandum of understanding supporting the sale by British oil company BP of its assets in Venezuela to TNK-BP, Russia’s third-largest oil company, a joint venture between BP and the AAR Consortium, a group of powerful Russian businessmen. The sale, in the amount of $1.8 billion, also includes Vietnamese oil assets and is expected to net TNK-BP proven and probable reserves of some 290 million barrels of oil, greatly expanding TNK-BP’s strategic influence in the global energy market.

    The stock market seemed mildly pleased by the announcement; any stock broker watching the market would have seen BP stock rising modestly by .26%

    But what happens if the mercurial Venezuelan dictator changes his mind about the Russian alliance and moves to seize these oil assets? Will Russia’s Prime Minister Vladamir Putin put up with the move as docilely as the international oil-service companies whose assets Chavez seized in 2009?

    Venezuela’s Relationship With Russia

    Venezuela was one of the few countries to support Russia when Russia recognized the secession of the formerly Georgian regions of Abkhazia and South Ossetia following a brief war between Russia and Georgia in 2008. As a result, the relationship between the two nations is unusually strong. Venezuela is one of Russia’s closest South American economic and military allies, second only to Brazil in strategic importance. Over the past five years, Venezuela has purchased more than $4 billion worth of arms from Russia.

    In addition to Russia, Hugo Chavez’s most recent trip also included visits to Ukraine, Iran, Syria, Libya, Algeria, Portugal and Belarus. Analysts speculate that the trips were made less to seek specific agreements with these countries than to enhance Chavez’s reputation as an opponent of the United States.

    Will Hugo Chavez Nationalize TNK-BP Assets?


    Hugo Chavez is the classic demagogue: Although ostensibly a Socialist, Chavez is less interested in any one political or economic agenda than he is in power for the sake of power. And in the 21st century, the control of dwindling energy resources is definitely the avenue to power.

    While it seems unlikely that Chavez would risk alienating Russia, one of Venezuela’s closest allies, by moving to seize TNK-BP assets, it’s not entirely outside the realm of possibility. Chavez is notoriously mercurial, motivated many analysts believe as much by personal vanity as by political expediency. If Chavez were ever to feel personally disrespected by his Russian allies, he might consider this sufficient incentive to strike back by seizing Russian assets.

    Vladamir Putin would not tolerate this situation – or even the threat of this situation. The Russian politician who launched the internationally unpopular war with Georgia would have no qualms in utilizing economic sanctions or even military force to put Hugo Chavez back in his place.



    Disclosure: No Positions
    Themes: russia, chavez
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