Venezuela’s state oil company PDVSA, and thus the Venezuelan state, is in default. Normally default triggers a crisis for the defaulting government that must undergo major reform and for its creditors who must rearrange payments of their debts. But Venezuela’s default represents a major crisis for Latin American and potentially for the U.S. as well.
Argentina’s President Macri has already urged Washington to ban all Venezuelan oil exports to bring that government to its knees because he recognizes the continental dimensions of Venezuela’s crisis. That dimension is expressed in Moscow’s long-standing and continuing efforts to use Venezuela as a base for subversion of Latin American governments form Mexico to Argentina.
Moscow has long sought to ensconce itself in key Venezuelan energy sectors and provide loans and weapons to the regimes of Hugo Chavez and then Nicolás Maduro so they could use this assistance to destabilize the entire continent.
Thus we have tape recordings of Chavez bragging about his ability to transfer Russian weapons to the FARC in Colombia to unhinge that state.
Similarly in 2008, former Russian President Dmitry Medvedev endeavored to create an alliance of anti-American states and intelligence communities throughout Latin America, including Venezuela, Ecuador and others, to provide covert assistance to terrorists and drug traffickers. The concurrent efforts of the prominent arms seller Viktor Bout, to run weapons to the FARC in Colombia, were undoubtedly tied to such activities.
Since then, having failed in 2008, and recognizing that Maduro was no Chavez, Moscow has reoriented its main base in Latin America to Nicaragua but it still retains deep ties to Caracas. The most recent evidence of these ties is Rosneft’s buyout of major Venezuelan energy fields, reportedly the choicest energy holdings in the country, in return for major loans.
Most recently Moscow rescheduled $3 billion of Venezuela’s debt, giving Caracas a breathing space. But it is quite unlikely that the corrupt, repressive and authoritarian Maduro government will use this “breathing space” to reform its policies. Instead a default affecting all of Caracas’ other creditors is likely. Therefore we must ask what Moscow hopes to gain?
Actually, Moscow hopes to make several gains. Vladimir Putin has stated that oil prices will recover. Russian oil company Rosneft’s CEO Igor Sechin agrees. They are doling everything possible to pump prices up, from making deals with OPEC and Saudi Arabia to acquiring new fields in Venezuela.
Rising oil prices reduce the pressure of sanctions and low princes on Russia’s economy, enabling Moscow to circumvent Western pressure. It would also provide more resources with which to pacify Russia’s increasingly volatile domestic environment, where signs of socio-economic distress and demonstrations are growing rapidly.
Rising oil prices could convert these newly acquired fields into a bonanza for Moscow. Higher prices also offer leverage across Latin America and on U.S. energy through CITGO, which is owned by Venezuela and where Rosneft is a large stockholder.
But beyond money and potential political influence these deals allow Moscow to gain more influence in Venezuela and across Latin America. There Russia can work in tandem with Iran and China, who have even larger investments there to support all manner of insurgent, drug-running, terrorist and anti-American forces. Possessing the commanding heights of Venezuela’s economy solidifies Moscow’s ability to indulge in these covert games and tighten ties among its Latin American allies, Cuba, Venezuela and Nicaragua.
Furthermore, having traded Venezuelan debt in return for equity ownership in oil fields Moscow is also poised to exploit the inevitable governmental default for its own benefit.
Analysts in Washington express concern that in case of a default Moscow will again bail out Caracas but this time it will obtain more strategic assets for itself that affect the entire Latin American world. This is not as far-fetched as it may sound.
In February 2014, Russian Defense Minister Sergei Shoigu announced progress in talks with eight governments to establish a global network of airbases to extend the reach of Russia's long-range maritime and strategic aviation assets and thus increase Russia’s global military presence.
Shoigu said, “We are working actively with the Seychelles, Singapore, Algeria, Cyprus, Nicaragua, Venezuela, and even in some other countries. We are in talks and close to a result.”
Shoigu cited Russia’s need for refueling bases near the equator and that "it is imperative that our navy has the opportunities for replenishment."
Clearly, Russia can easily exploit a Venezuelan default to promote this goal with immense political and strategic consequences throughout the Americas.
Venezuela is just part of the Russian strategy in Latin America. Putin is now traveling to the Gas Exporting Countries Forum Summit in Bolivia. Russian’s ambassador claims that Russia and Bolivia actually share the same ideology and many identical views on international affairs. Meanwhile, Russian gas company Gazprom is looking to expand its already considerable holdings there.
Moscow is also angling to expand the second arm of its relations in Latin America, namely arms sales to Bolivia. And with its growing leverage in Venezuela it may try to foster more connections between those two states and itself.
Thus Macri’s insistence on the continental implications of a default is well founded, but is Washington prepared to initiate an active policy to meet a default and the larger issue of Russian probes in Latin America?
Stephen Blank, Ph.D., is a senior fellow at the American Foreign Policy Council. He is the author of numerous foreign policy-related articles, white papers and monographs, specifically focused on the geopolitics and geostrategy of the former Soviet Union, Russia and Eurasia. He is a former MacArthur fellow at the U.S. Army War College.