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Izvestia: Russia’s Prolific Business with Venezuela

The following is a translation of a rather tongue-in-cheek article from Izvestia about the latest raft of deals between Russia and Venezuela. izvestia111308.jpg

Bolivar survived two Igor Sechin brought Hugo Chavez a hundred Russian partners By Vladimir Demchenko Russian vice-premier Igor Sechin has spent some time in Venezuela. Together with president Hugo Chavez he started up a drilling rig, as well as taking part in the work of a high level inter-governmental Russo-Venezuelan commission. The plans of both the one side and the other are impressive, as an “Izvestiya” correspondent became convinced.

To Caracas Igor Sechin set off immediately after the presidential address on last Wednesday. Concurrently with him in the capital of Venezuela deplaned a Russian airborne assault force of some 100 persons. Bureaucrats of ministries, heads of companies, representing just about the entire spectrum of sectors of industry, financiers. Until now, the most serious breakthrough in Russo-Venezuelan relations had been military-technical cooperation.Civilian turnover between our countries is far more modest – Venezuela sells us alumina, coffee and tobacco for $20 mln per year, Russia responds with machine-tools, steel and equipment for $123 mln.Until Hugo Chavez, who came to power in the year 1999, the principal partner of the Bolivarian Republic was the USA. But relations with them the Venezuelan president labelled with the energetic phrase “begone to the devil a hundred times”. And although the USA to this day is the main purchaser of Venezuelan crude oil, while the security guards in our hotel stood with American M-16s, Chavez is seeking new partners all over the world. Russia here comes under the number one.At the very least, that’s what they’re saying in Caracas. The mechanisms for the realization of concrete projects are being elaborated at the Inter-governmental commission, created back in the year 2001. This session was already the fifth.“That which we are doing now fits into the conception of a multi-polar world,” vicepresident of Venezuela Ramon Corrisales [sic; his name is actually Carrizales—Trans.] did not hide the political subtext. The Russian vice-premier was more restrained. Opening the event, he placed the accent exclusively on the business component.“We need to sign a series of bilateral documents”, said he, “in particular, agreements in the oil-and-gas sector, automobile-building and shipbuilding, aviation and other sectors. We need to examine the possibility of creating a joint bank and the use of our currencies during settlements.” “Yes, yes, we need to do away with this casino under the name of ‘Wall-street’,” took up Ramon Corrisales.“That’s how business is done”The delegation “splintered” into 8 subcommissions. At their sessions the presence of the press was not assumed. But it turned out that the doors are open and anyone can come. I spent time at all of them – the negotiations went heavily. Later their participants admitted that in all the projects the Venezuelans are trying to stipulate special conditions for themselves.In the subcommission on the ore-mining industry, for example, an attractive woman was interrogating Alexander Livshitz, representing the company “Russky aluminiy”. “Rusal” intends to build an aluminum plant, but first wants to assess all the risks.“Everything is very long”, the woman was saying, “let’s start right this year. Or else, you know, China is always approaching us. But Russia for us is a priority partner. Alexander Livshitz pondered and slowly spoke:“Together we will move as quickly as is possible.”I wanted to ask Livshitz, does it not seem to him that someone is trying to sit on someone’s neck. But I didn’t have a chance to.“The president wants to greet you”, proclaimed the secretary. It turned out that Chavez is ringing the secretary on the mobile phone. They brought the device over to a microphone.“I greet everybody”, the voice of Hugo Chavez began animatedly, “I want for automobiles to be built in our contry. I once had a ‘Lada’. A good machine. Also I want for them to make the ‘KamAZ’ [a heavy-duty Russian truck—Trans.] in our contry. By the way, maybe we should combine this project with ‘BelAZ’? I’ve agreed on this with Belarus. And another thing… I want for you to make tile in our contry.”An answer to my question was later given by a famous businessman, also having come to Venezuela:“Roughly speaking, they are indeed trying sit on our necks. And we’re trying to sit on theirs. That’s how business is done.”“Long live Fidel!”The brand-new drilling derrick “Urmaco-1” was gleaming. Helicopters were landing and taking off every minute, unloading guests of the ceremony of the startup of the drill. This is an elaboration of “Gazprom” – for now the sole large Russo-Venezuelan project which has managed to be brought to a beginning.“The depth here – 56 meters, while we’re going to drill down to 4800 meters,” told “Gazprom” representative Nikolai Ivanov (in Venezuela, by the way, they pronounce “Gajprom” – they don’t like the letter “z” for some reason”). “This is only exploration. Research shows that at this depth there are hollows in which there may be gas. But it will be possible to say precisely only when we drill through.According to the license issued to “Gazprom”, 65 percent of the gas it takes for itself. The rest – the share of Venezuela. True, it is still unclear where “Gazprom” is going to sell its gas. Venezuela insists that it be on its domestic market. If we take into account that domestic prices for energy sources have been beaten down with subsidies to where they can’t go any lower (an 80-liter tank of gasoline comes to one dollar here), this may be disadvantageous for the Russian company. And what if there turns out not to be any gas at all in the gulf? Then all the expenditures of “Gazprom” – are its own headache. The drilling derrick, leased in Texas, comes to around $250 thsd. per day, and overall expenditures could attain $850 mln. By the way, under a favorable outcome “Gazprom” could earn annually around $420 mln.…Igor Sechin and Hugo Chavez flew in on one helicopter. They took around twenty minutes to get from the pad to the drill – Hugo Chavez was hugging everyone coming his way. Igor Sechin was focused and short-spoken. He thanked the leadership of Venezuela for the trust that it had shown to “Gazprom”.“This is the beginning of the big work of two of our companies”, said the Russian vice-premier.For Hugo Chavez the appearance could have become complex. The fact is that a large part of the personnel of the drilling rig – are Americans. But the comandante did not lose his bearings this time either:“I greet Russia, I greet ‘Gazprom’, I greet all who work here. The Russians, the Venezuelans, and the Americans from Missisipi [sic] and Ohio. Today is a historical day. This is a real revolution. We have gotten rid of those who pumped out so much oil that the ground sank. We are starting a new stage. Long live the Caribbeans, long live Fidel!Lads in red coveralls burst into ovations. The Americans from Missisipi and Ohio applauded just about louder than anybody else. Chavez waved his hand, the drill rumbled dully and plunged into the water. The first 200 meters it can go through in 24 hours. The rest will take 5 months.The first 200 metersAfter the launch of the drill I asked Igor Sechin what Russo-Venezuelan projects are most promising, if one does not count the oil-and-gas complex.“We have 8 working groups, and projects there are more than forty”, said Igor Sechin to “Izvestiya”, – “agriculture, the financial sphere, automobile-building… Today, for example, will be signed documents with respect to automobile-building. We are working through the possibility of our participation in other oil projects as well. For example, in the valley of the river Orinoco. We need a comprehensive approach, many documents will be signed during the course of the upcoming visit to Venezuela of president Dmitry Medvedev.Based on the results of the work of the commission 14 documents were signed. Research of the subsoil, foodstuffs security, the construction of electric power stations, the processing of precious metals… “Rusal” will be building in Venezuela two aluminum plants after all, while AvtoVAZ will open here an assembly production. And with the tile, for which the president of Venezuela thirsted so, everything will be in order too. Director-General of OAO “RusKaolin” Vladimir Agapov at the closing meeting declared that he is ready to build 5 factories for the manufacture of ceramics.“The incomes from the export of ceramics may be comparable with the incomes from oil”, said Vladimir Agapov. True, he was immediately laughed at with ridicule.It must be stipulated that 13 of the 14 signed documents – this is memoranda of intent. Probably, this is those 200 meters that the drill goes through in 24 hours. Ahead are still kilometers of hard earth. For now, though, the sole legally significant document – this is an agreement on mutual protection of investments, signed last Friday. According to the information of “Izvestiya”, during the reconcilement of this act arose certain complexities. Thus, the Venezuelan side flatly refused to include a provision on international arbitration as an instance resolving disputes. As a result, they agreed to create a special bilateral arbitration.A breakthrough can be considered the memorandum of mutual understanding with respect to the question of the creation of a Russo-Venezuelan bank with a charter capital of $4 bln. Through it must go settlements with respect to all bilateral projects, while the Russian rouble could become the reserve currency for these settlements. The Venezuelan president was extremely interested by this idea. He jabbed his finger into one of the subordinates and said:“Ali, you’ll go to Moscow tomorrow and get to work on the founding of the bank.That one approvingly nodded:“We think that we can buy some bank. Now this can be done very cheaply.So in something for Russo-Venezuelan relations the crisis turned out to be just the right thing.On Cuba will appear anew “Zhigulis”After the completion of the visit to Venezuela, Igor Sechin visited Nicaragua and Cuba. In Havana was signed a series of documents concerning deliveries onto Cuba of automobiles, the allocation of supplementary credits, as well as mutual interaction with respect to the prevention of emergency situations.