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Editorial / Commentary / Opinion
Gustavo Coronel : Hugo Chavez’s irresponsible rule
The recent visit of Vladimir Putin to Venezuela was very profitable to Russia and very costly to Venezuela. Not only did Russia obtain oil areas to be developed but also large orders for new weaponry. The oil areas are in the Orinoco heavy oil region. These are areas of low exploratory risk since the oil is already known to be there. They were directly assigned to Russian companies, without a competitive bid, in terms that have not been disclosed. As far as we know the Venezuelan National Assembly, totally controlled by Chavez, did not even bother to consider and approve this agreement. A check for $600 million was brought by Putin as part of a $1 billion bonus to be “paid” by Russia. However, this money probably never changed hands, as Chavez expressed a desire to place orders for weapons “in excess of $5 billion”, according to Putin. He said: “Our delegation has just returned from Venezuela and the overall volume of orders could exceed $5 billion”. He added: “this figure included $2.2 billion in credit lines for Russian arms received by Mr. Chavez during his eighth visit to Moscow in September, including tanks and anti-aircraft missiles”. Russia is apparently signing a state-to-state agreement, not a company-to-company agreement or even an agreement between governments, in order to minimize risks of any disputes if and when Chavez leaves the presidency. In return for this giant benefits Putin promised Chavez to consider importing Venezuelan coffee. Apart from this very modest quid pro quo Chavez did no tell Putin (he probably did not know) that Venezuela is an importer of coffee from Brazil, Nicaragua and El Salvador. In 2009 Venezuela imported up to 30 percent of its coffee consumption. It cannot really export coffee to Russia. In addition, the Russian government is not in the coffee importing business, since this is in the hands of the private sector.
The enormous asymmetry between the benefits of the one side and the other amounts to treason on the part of Chavez. Not only he will be delivering important segments of the oil bearing Orinoco region into the hands of the Russian state, but also he will be using future oil production from this area as a form of payment to the Russians for both the weapons he buys and for the share of oil investments that the Venezuelan regime cannot do.
The question that many international observers are asking is: how can a ruler who manages his national assets in such a poor manner be still acceptable to the people? There is not a short answer to this question. The long answer includes Chavez’s policy of handouts to the poor (a fish a day, but no teaching about fishing) and the low quality of citizenship in the country, a sort of inertia that makes many Venezuelans feel that, as a long as they are not affected on a personal basis, everything is OK.
Gustavo Coronel is a 28 years oil industry veteran, a member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), author of several books. At the present Coronel is Petroleumworld associate editor and advisor on the opinion and editorial content of the site. All his articles can be read in Gustavo's blog. Lass Armas de Coronel . Petroleumworld does not necessarily share these views.
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Petroleumworld News 04/06/2010
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