Venezuela and Russia Sign Bilateral Accords Worth $8 Billion

Mérida, October 7^th, 2011 (Venezuelanalysis.com)— The governments of Venezuela and Russia signed bilateral accords worth $8 billion US dollars yesterday, in the areas of development, technical-military cooperation, energy, and agriculture. The accords were signed at a meeting in Caracas between Venezuelan President Hugo Chávez and Russian deputy prime minister Igor Sechin, who headed the Russian delegation to Venezuela.

The accords form part of a deepening strategic alliance between the two countries, and can be seen in a context “where we confront a global economic crisis,” Chávez stated.

A key accord increases the level of capital of the Bi-National Bank between Russia and Venezuela to $4 billion. Founded in 2009, the bank provides funds for projects in diverse economic sectors and aims to boost financial cooperation between the two nations.

The Russian delegation made clear that the bank would be available to fund housing projects as part of Venezuela’s “Great Housing Mission.” The Venezuelan president also stated that the Bi-National Bank “is going to continue expanding throughout the world”, with offices already established in Moscow, Peking, and Caracas.

Another accord opened a $4 billion credit line for technical-military cooperation between the two countries. Venezuela purchased over $4.4 of arms from Russia between 2005 and 2009, and has since received further loans of a similar nature.

The United States has previously voiced concern over Venezuelan purchases of arms from Russia, with a state department spokesperson questioning “the need for Venezuela to have such a robust defence system” in April 2010.

However, in 2009 Venezuela spent 1.4% of its GDP on its military, which puts it in fifth place relative to other countries in the region. The U.S. spends about 4% of GDP on the military, Colombia 3.4%, and Chile 2.7%, according to the CIA World Factbook.

Nonetheless, Chávez emphasised the importance of the agreement for defence, stating, “We have the right to equip our defence forces… [Before Russian assistance] we were disarmed.” 

Chávez has consistently stated his commitment to a “multi-polar” world, where US interests do not dominate international politics and organisations.

Agreements related to oil and gas included the involvement of Russian company Gazprom in the exploration of gas deposits in the Gulf of Venezuela.

A further agreement accelerates the creation of PetroMiranda, a new mixed capital project between Russia and the Venezuelan state oil company PDVSA. PetroMiranda will develop oil reserves in the “Junin 3 Block” in the Orinoco Belt in the east of Venezuela, which contains the largest heavy crude reserves in the world. The project is expected to begin producing 50,000 barrels of oil per day in May 2012.

Russian deputy prime minister Sechin commented that with the accords, “a good base has been created to increase cooperation between Venezuela and Russia”, and that energy continued to be the “locomotive” of that cooperation.

Finally, agricultural agreements were reached to develop a joint project to grow and export Venezuelan plantains (bananas) to Russia. As part of these agreements, Venezuela will also export flowers to Russia, with a first batch of 130,000.

Proposal for a New Organisation of Oil Giants

Hugo Chávez also suggested the creation of a new international alliance made up of countries with the largest oil reserves in the world, and proposed “watching, discussing, how we can create, in this world that is emerging, a new organisation of oil giants”. He stressed that the new organisation would not affect the role of the Organisation of Petroleum Exporting Countries (OPEC), of which Venezuela is a founder member. OPEC currently has 12 member states.

Chávez voiced the idea during a conversation with Russian energy minister Sergei Smatko, who was part of the Russian delegation visiting Venezuela this week, and later announced “we are no more than four or five, the petrol giants, and Venezuela and Russia are two of these.”

For his part, Smatko showed interest in the idea, stating “I agree, Russia and Venezuela are two oil superpowers, and on the work we are undertaking and that remains for us to do, will depend the future of the world of oil”.

Venezuela has enjoyed close bilateral relations with Russia under president Hugo Chávez, and the new accords build on a series of previous military, economic and development agreements.

Chávez also stated his intention to initiate a visit to Moscow once his period of recovery from cancer is completed, for which he was diagnosed in June and has since undergone treatment.