Author:  Eugene Bai

Posted: November,8 2016

Russia is taking a cautious stance as growing political chaos in Venezuela could have a negative impact on the value of its investments in the nation’s energy sector.

The acute political and economic crisis in Venezuela continues to attract a great deal of attention from those countries that are connected to the country via huge oil contracts, including Russia, first and foremost.

For the first time since summer 2014, when this Latin American country found itself caught up in social protests, Russia’s Foreign Ministry expressed concerns regarding growing instability in Venezuela. As Deputy Foreign Minister Sergei Ryabkov argues, Venezuela is one of the “key partners” and “allies” for Russia in Latin America.

Yet, given the fact the country is on the brink of a coup d’état amidst the confrontation between the supporters of deceased president Hugo Chavez and the opposition National Assembly, it might have serious implications for Russia — both political and economic.  After all, Russia’s military defense industry, which has multi-million-dollar contracts with Caracas, as well as Russia’s largest oil company Rosneft, have invested a lot in Venezuela.

Recently, the Venezuelan parliament launched a politically motivated trial against the country’s current president, Nicolas Maduro. This move came after the authorities blocking a referendum on the impeachment of the unpopular president. The deputies saw this stance as a violation of Venezuela’s constitution, which confirms the rights of people to organize and participate in referendums. This is enough to start impeachment proceedings, according to the parliamentarians.

At the same time, the leaders of the country’s opposition, including former Foreign Minister Armando Duran and politician Miranda Henrique Capriles, see the blocking of the referendum as “a coup d’état.” In early November the Venezuelan opposition plans to conduct large-scale protests and a demonstration called “Takeover of Venezuela,” which is intended to force the authorities to conduct a nationwide referendum on presidential impeachment.

If the referendum passes and the president steps down, the dates of early elections should be announced. However, if Maduro remains at the helm until January 2017 (which means half of his tenure), in the case of upcoming impeachment, he will have to hand over the power to Vice President Aristobulo Isturiz, who will rule the country until the next presidential elections in 2019.

However, some Latin American political experts doubt that the current president will easily hand over his power to a successor. As a journalist from Peru, Alvaro Vargas Liosa, told Russia Direct, Maduro “has rejected a compromise until now” and shied away from any scenarios of his successors taking over power.

After all, if the vote on impeachment took place within the next few years, it would hamper the reputation and position of the ruling party amidst the weakening economy. In this case, during the 2019 elections, Maduro’s tenure would end in a less than congratulatory manner, according to Liosa.

But, probably, the situation is not so dramatic. As the El Nuevo Herald newspaper argues, those close to Maduro are ready to yield and conduct the referendum, but only by the end of 2017. To pacify the social unrest, they might come up with a compromise with the opposition. The first stage of the negotiations took place in late October of this year.

The Venezuelan president is concerned with the possibility of a coup d’état and the risks of bloodshed amidst large-scale unrest, at a time when 80 percent of the population supports his impeachment. After all, he is mindful about the fate of Libya’s dictator Muammar Gaddafi. He seems to be afraid of being executed.

Moreover, he might worry about the fact that the National Assembly has already asked for assistance from the Organization of American States (OAS), an international organization for promoting democracy in Americas.

If Venezuela’s authorities keep violating the country’s constitution and human rights, it might be excluded from the OAS and find itself in isolation, given the fact that the number of Venezuela’s allies in Latin America is gradually decreasing. Brazil and Argentina, with their new right-wing presidents, are hardly likely to support the Venezuelan socialism of the 21st century.

The list of possible allies of Caracas might include only Bolivia and Nicaragua as well as Cuba and Ecuador. Yet, they seem to have become less enthusiastic to deal with Venezuela after it decreased oil supplies to its allies.

Amidst this background, the opposition should be more persistent and assertive to influence the Venezuelan authorities instead of believing in the possibility of compromise, according to Latin American experts. Madura is currently in a vulnerable position and his opponents should keep this in mind.

“The only agenda at the negotiations should be the resignation of Maduro,” said Carlos Sánchez Berzaín, executive director at the Interamerican Institute for Democracy. “It makes no sense to discuss if he steps down or not. Now it is necessary to talk about the conditions [of the impeachment] and the time, when he leaves his post.”

Russia’s challenge:

Thus, the change of the leader is quite possible in Venezuela. Amidst this background, Russia is faced with a question: Will the new authorities be ready to deal with Russia economically and observe the contracts, which have already been signed?

Rosneft has been increasingly investing in this Latin American country for the last 10 years. In October 2016, Maduro and Rosneft head Igor Sechin signed an agreement, according to which Russia should invest $20 billion in Venezuela’s oil projects in the valley of Orinoco, one of the longest rivers in South America. Moreover, Rosneft plans to transfer this Venezuelan oil to the Indian oil refinery plant Essar Oil in Vadinar.

However, Russian experts are divided in their assessment of the future of Russian-Venezuelan relations. If Venezuela changes its president, the opposition will be pragmatic and they would rather save any current contracts with other countries, because they are mutually beneficial, said Zbignev Ivanovsky. After all, after the right-wing forces came to power in Brazil and Argentina, they didn’t cancel the previous international agreements.

However, this situation with Caracas is more nuanced. Venezuela’s National Assembly makes no bones about its irritation with the fact that Russia has been supporting the regime of Chavez and Maduro, which the opposition sees as “dictatorial.”

Specifically, Moscow provided official Caracas with weapons and military equipment as well supported it politically in the international arena. And the National Assembly didn’t approve it and, moreover, warned those dealing with official Caracas about the cancellation of their projects.

“Regime change in Venezuela is possible,” said Alexei Makarkin, deputy director at the Center for Political Technologies. “Today Madura might keep afloat, but investors are looking several years ahead. Yet the new authorities might be selective in their approaches with Russia. The military-technical cooperation is hardly likely to be possible, at least because a new government will have to tighten its belt by rejecting their former ambitions.”

In addition, the U.S. might also influence the decision-making process of Venezuela’s new authorities and it may not be necessarily in favor of Russia, Makarkin added. However, the oil contracts will likely remain, yet the conditions could be tougher, with fewer benefits for the Kremlin than it was previously under Chavez and Maduro. It means the rivalry for the Venezuelan oil market will increase, with the arrival of Western energy companies there. Moreover, Russia’s companies might face the burden of new legal procedures, the expert speculates.

the kremlin’s concern over Venezuela’s future leadership is quite grounded in fact. the fact that Moscow supports primarily Maduro hampers its odds of being a mediator between official Caracas and the opposition.

Thus, the Kremlin’s concern over Venezuela’s future leadership is quite grounded in fact. The fact that Moscow supports primarily Maduro hampers its odds of being a mediator between official Caracas and the opposition. Pope Francis and the leaders of some Latin American countries currently fulfill this role. It means that Moscow is losing its influence in Venezuela, with less leverage to impact the final outcome.

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