Russian and Chinese Interests Key in Venezuela

By Nina L. Khrushcheva (Confidencial)

Russian president, Vladimir Putin, and his Chinese counterpart Xi Jingping. Photo taken from Project Syndicate

HAVANA TIMES – Russian president Vladimir Putin and Chinese president Xi Jinping have both defended an authoritarian model of capitalism, which could be called “development with a dictator’s face”.

But what neither of the two leaders seems to have anticipated is that the commercial sectors of Russia and China are becoming political forces in their own right; every day, they exert more pressure on the formulation of public policy.

In the last two decades, the Russian and Chinese multinational corporations – many of them with abundant cash – have been transformed into powerful tools of foreign policy within their respective regimes. At one time these were seen as modernizing forces that would help open up both business and society.

Anatoly Chubais, a key architect of privatization in Russia, promoted the presence of the energy giants such as Gazprom and Rosneft, which promise to yield capital returns for Russia and the former Soviet states that had recently gained independence, as the vanguard of a new “global empire”. These companies also united the old Soviet republics that are close to Russia.

In the same way, in China, during the presidencies of Jiang Zemin (1993 – 2000) and Hu Jintao (2003 – 2013), the rise in banks like the Industrial and Commercial Bank of China, and the Chinese Agricultural Bank, and the energy and heavy industry companies such as Sinopec, Sinochem, and the Chinese Railroad Construction Corporation were considered precursors of modernization.

Nevertheless, today no one could mistake these companies as equivalent to Exxon Mobil or a Microsoft. Given that the upper-tier executives tend to parachute frequently right into the meeting rooms of the upper political establishment, the Chinese mega-corporations have for a long time represented the fusion of big business and the State.

In addition, as Gazprom, Rosneft and the Chinese tech giants ZTE and Huawei have become more essential to their respective governments, the commercial and state interests have become ever more difficult to unravel. In the interests of their “national champions”, the Russian and Chinese governments now seem to be following policies that they otherwise wouldn’t have chosen.

This dynamic is clearly exhibited in Venezuela. Through their affiliation with the state oil monopoly Petroleos de Venezuela (PDVSA), Rosneft has channeled over US $17 billion in loans to the Chavez/Maduro governments during the last decade. Meanwhile, the company handled a total of three million tons of oil in 2017 with their operations in Venezuela; in general, Russia has invested in many Venezuelan industries, from banks to bus assembly plants. At the same time, Venezuela has been one of the major Latin American purchasers of Russian weapons.

Due to these debts and other economic ties, Putin has no other option but to support crumbling Venezuelan strong man Nicolas Maduro, even when public support in Russia for the Kremlin’s foreign interventions drops.

Rosneft’s interests in Venezuela are simply too deep to reduce, especially now that the western sanctions have paralyzed the company’s ability to assure financing in the international markets.

Russia’s support for Maduro doesn’t reach the level of their commitments in Syria, where the country’s relationship with the Assad family goes back decades. Rather, their continuous commitment to Venezuela reflects a pure and hard business calculation.

According to Reuters, private security contractors with close ties to the Kremlin have been sent to defend Maduro. At the same time, there’ve been unconfirmed but plausible reports of Russian airplanes that leave Venezuela with shipments of gold as payment for the country’s debts. Putin knows that if Juan Guaido, president of the National Assembly, assumes power, those who support Maduro will probably be expelled from the country, and Russia’s privileged access to the Venezuelan oil fields will be revoked.

In monetary terms, the fall of Maduro could mean even greater losses for China, whose investments in Venezuela are estimated at around 60 billion dollars, at least three times those of Russia. Like Russia, China got into bed with the Venezuelan regime during the decade of the 2000s, when the country was flourishing under former president Hugo Chavez.

While China obtained a very needed source of oil for its rapidly growing economy, Chavez was able to reduce Venezuela’s dependence on the United States as their principal export market. Meanwhile, the Chinese tech giants have helped Maduro’s regime in their efforts at internal spying, and (like Russia) China has sold expensive arms to Venezuela.

Even so, if Madura falls, China could be less at risk than Russia. The Chinese have taken care to cultivate contacts among a number of sectors of Venezuelan society, including the opposition. And although China still officially supports Maduro, they haven’t followed Russia in accusing the United States of attempting to stage a Coup d’etat.

This suggests that China wants to avoid the radical steps that Russia is taking. The Kremlin is now competing actively with the US to influence the course of events in Venezuela, and has described the US attempts to deliver humanitarian aid via the frontier between Colombia and Venezuela as a ruse to get contraband arms into the hands of the opposition.

Without a doubt, China’s moderate behavior owes something to its trade relations with the United States. Before extending the deadline for imposing higher tariffs on Chinese imports, US President Donald Trump indicated that Huawei and ZTE could be included in a final US – China trade agreement. That would certainly please Xi, whose primary interest is protecting the economic power of both corporations.

With the capacity to impede US companies from selling critical raw materials to the Chinese companies, the Trump administration could inflict grave damage, to ZTE as well as to Huawei. Huawei is now accused of conspiring to violate US sanctions on Iran, an accusation that led to the arrest of the company’s financial director, Meng Wanzhou, in Canada last December. And ZTE declared itself guilty of similar charges, paying fines of $1.4 billion in 2017.

At the end of the day, Venezuela can’t hold a candle to the strategic importance of these two companies. As for the Kremlin, the calculus is the same: business prerogatives define the national interest. But, perhaps to Putin’s disgust, in Venezuela that calculation has produced the opposite result.

*Published originally by Project Syndicate