Will change of power in Venezuela be beneficial for its main trading partners - Moscow and Beijing?

Will change of power in Venezuela be beneficial for its main trading partners - Moscow and Beijing?

Yesterday, Alexander Schetinin, director of the Latin American Department of the Russian Foreign Ministry, invited heads of the diplomatic missions of Latin American and Caribbean countries in Moscow to Smolensk Square to discussed situation in and around Venezuela. According to the Foreign Ministry, "during an open conversation, partners agreed with Russia's position on inadmissibility of destructive, and especially forceful external interference in Venezuelan affairs." Meanwhile, speaker of the Venezuelan parliament, Juan Guaido, who declared himself acting president, assured that change of power will be beneficial for the country's main trading partners, Moscow and Beijing. Some Russian experts agree with him.

Director of the Energy Development Fund, Sergey Pikin, believes that Russia's interests in Venezuela are very significant: “It's not just about projects themselves, because although Rosneft has started to work there, right now it's only on paper. Licenses have been issued for certain fields, but there's no real work yet. The most important thing is that there was a huge prepayment for Venezuela to supply oil, about $6 billion. By the way, Chinese issued a much larger payment - about $60-70 billion. That's why China has much more problems than Russia... Economy of Venezuela is in a pretty bad shape, its economic model is too reliant on oil. When oil falls — both in terms of production and prices — it's impossible to keep economic situation under control. It’s necessary to change something radically - right now we see possible radical change of power."

According to Pikin, Venezuelan economy needs new funds: “There's a need for inflow of even non-investment nature aimed at keeping economic situation under conrtol. There's catastrophic inflation, economic decline. Oil won't save Venezuela even if it will produce oil at the previous level of 3 million barrels per day. When there are no serious economic reforms, there's no development of oil industy, so the future looks pretty dim. No matter what investments Venezuela receives, money can't simply be returned to investors, companies that will be working there. I wouldn't try to defend Maduro at all cost right now."

Leonid Grigoriev, senior adviser of the head of the Russian Government's Analytical Center and professor at the Higher School of Economics, spoke about history of Venezuelan oil production: “Until the mid-1970s, Venezuela was the world's leading oil producer — it produced 3.7 million barrels per day. OPEC was led by Venezuela. But after the industry was nationalized, significant decrease began. 20 years ago, when Hugo Chavez came to power, their production was still pretty high - around 3 million barrels. Then famous oilmen strike happened, when workers were dissatisfied with how money was reinvest. It was necessary to modernize the industry, and money went to social projects. This conflict led to a loss of huge number of industry's experts."

According to him, second hige problem happened after oil prices dropped in 2015: “Oil production decreased to 2.5 million barrels since 2016. Last year, oil production fell significantly. Constantly changing oil prices in the autumn of 2018 were caused by political reasons - mostly anti-Iran sanctions. Market balance is not in a stable condition. Venezuela’s oil production decrease hurts Venezuela itself. However, the world market still doesn't react to it. If there will be a change of powe, Venezuelan oil can become market regulator. And that can cause problems."


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