No Petro Dollars, No Petro Foreign Policy

Benedict Mander at the Financial Times points out that the crash in oil prices is causing Venezuelan President Hugo Chávez to abandon some of the more expensive diplomatic activities that the government has been using to up its influence in the region.  How long before we see similar cuts in Russia?  It seems that in times of low prices, petrostates like to concentrate their resources where it matters the most – propaganda.  But the most important question for Venezuela, as the FT points out, is whether they can count on Russia for loans if the economy gets really bad.

His government has responded to falling oil prices, and export revenues, by restricting the amount of dollars allotted to importers and Venezuelans travelling abroad. PDVSA, the state oil company, is reviewing its operations. Caracas has also dipped into the central bank’s $50bn in foreign exchange reserves with $12bn in “excess” reserves being handed over for use by the government. (…)

However, Mark Weisbrot, an economist at the Centre for Economic Policy and Research think-tank in Washington argued that there was no imminent danger for Venezuela’s economy, thanks to ample reserves, low foreign debt and a comfortable, if reduced, current account surplus. “There’s no pressure on the government to devalue,” said Mr Weisbrot, arguing that in the worst-case scenario the government could borrow from China and Russia. “The question is whether the government does enough, fast enough, to prevent the economy slowing down,” he said.