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Russian Involvement in Venezuela is Troublesome for Western Hemisphere

Todd Royal

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The U.S. Energy Information Administration (EIA) “projects that natural gas consumption in Asia will continue to outpace supply.” With the future growth of natural gas consumption concentrated in Asia the EIA “expects ‘non-OECD Asia’ to consumer 120 billion cubic feet per day (Bcf/d) by 2050, outpacing regional production by 50 Bcf/d.” China’s natural gas consumption will “triple between 2018-2050.” Most long-term natural gas infrastructure, global liquid natural gas (LNG) terminal(s) import and export, and demand projections are based on Asian growth.

Late October reporting in Russian media confirmed Russian energy conglomerate, Rosneft had plans to consolidate Venezuela’s National Oil Company PDVSA (Petroleos de Venezuela) under Rosneft’s corporate structure in exchange for debt relief. This counters U.S., Canadian and Mexican oil and natural gas firms from satisfying natural gas demand from non-OECD Asia. Additionally, it allows Moscow to use Rosneft acquiring Venezuelan natural gas as a geopolitical, soft power coercion tool by acquiring some of the largest recoverable oil and natural gas reserves in the world.

Venezuelan government sources, Rosneft and the Kremlin all denythe potential for a takeover of PDVSA energy assets to satisfy Russian bank loan requirements to the Madero regime. Russian energy experts have visited PDVSA to analyze the possibility of merging with Rosneft. The Russian energy giant buying out Venezuela’s best source of hard currency and domestic economic driver illustrate the “hard-hitting impact of U.S. sanctions.” The Venezuela regime-based economy predicated on oil and natural gas production is on the verge of collapsing.

Rosneft’s offer is the best way outside of western help for Venezuela to mitigate damaging sanctions, and “debt relief for a country that owes over $156 billion to external parties – and Venezuela’s debt is 740% higher than the value of its exports.” This is four times more than what is typical in emerging markets and economies according to The World Bank.

U.S. Special Envoy for Venezuela Elliot Abrams has pointed to Rosneft having joint projects with PDVSA where it took leading minority stakes, and how these ventures do not “breach” U.S. sanctions. This is positive news for average Venezuelan citizens suffering under economic malaise. Caracas’ debt to Moscow seemingly is being forgiven under the auspices of U.S. blessing. However, the Trump administration has been clear in its maximum pressure “sanctions policy towards Venezuela” that mirrors the sanctions-strategy towards Tehran. Retaliation from the U.S. could be the future of Washington-Moscow-Caracas tri-lateral relations if Rosneft tries to liquidate PDVSA assets, and release thousands of employees to skirt U.S.-led western sanctions.

The Maduro regime will also need to navigate the “$20-$60 billion in debt owed” to China. Will the Chinese have a stake in PDVSA? If so, how does that play into the current U.S.-China trade negotiations? What these geopolitical decisions points towards is a Rosneft-PDVSA merge bringing up more questions than answers.

It makes sense for Russia to be the power broker in Venezuela. This is similar to how Russia is the safe diplomatic choice in the Middle, post-Syrian civil war. According to Foreign Affairs, Russia is now “the Indispensible Nation in the Middle East.” Military troops and hardware were used to save the Assad regime, and now in Venezuela it will be oil, natural gas and petrochemicals that gives Russia a solid foothold in the western hemisphere. PDVSA is one of the “world’s most prolific oil companies” with the largest extractable oil and gas reserves in the world – estimated at 300 billion barrels and PDVSA’s estimated worth is “approximately $186 billion.”

Putting this energy portfolio under Kremlin influence gives Rosneft and other energy firms aligned with Moscow solid footing to control price and supply for global oil and petrochemical markets. The Maduro government wants to stay with previous joint venture contracts between PDVSA and Rosneft, and if the merger takes place, wants to “hand control over to Rosneft without having to go through privatization.” Financial questions arise from this arrangement; who is responsible for terms of debt, how is China able to value the deal, and would equity be defined as a public, private or some form of public-private entity? These are some of the larger issues that would need to be resolved.

Maduro can possibly work around these issues when he took over Venezuela’s Supreme Tribunal of Justice. This allows Maduro to ignore the democratically elected Legislature, the opposition-controlled National Assembly, and its leader, Juan Guaido. Mr. Guaido claims he is the legitimate leader of Venezuela, but likely Rosneft with Moscow’s backing will only negotiate with the Maduro government. The Supreme Tribunal of Justice can overrule the Assembly to assist the merger towards completion. Debt repayment is important to the Maduro regime, and return to financial health.

Citgo, a U.S. based company that is a valued asset for PDVSA is another area of concern for the proposed merger in tandem with U.S. sanctions.

American officials have implemented a freeze on all Venezuelan assets based in the U.S. Washington implemented an executive order coinciding with sanctions protecting “bondholders and other parties” mulling asset sales and seizures for unpaid debts. The international desire among government and financial officials is this move by the Americans facilitate diplomatic solutions over asset seizure. The downside is it strengthens Maduro over the elected Venezuelan legislature and Assembly leader Guaido.

Debt holders who own Citgo then have to negotiate with Venezuela and Rosneft. This will be tough for bondholders to receive repayment, or will it, as this could mean tougher going for international credit markets to lend money for future Rosneft/PDVSA projects. A Moscow-Caracas alliance is something Washington could believe will increase geopolitical tension between all three countries. Debt relief for Caracas, and control over the world’s largest oil reserves are likely to be the final push for Rosneft to acquire PDVSA over escalating tensions between Moscow and Washington with Caracas stuck in the middle.

Todd Royal, MPP, is a geopolitical energy consultant and author based in Los Angeles, California. Todd has written for National Interest, OilPrice.com, EurasiaReview.com and had his works picked up Yahoo Finance, USA Today and Business Insider. His upcoming book, "Energy Made Easy," will be released this summer. Todd can be reached on Twitter @TCR_Consulting

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Trump’s blind spot

Iveta Cherneva

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The year is 1962. In the midst of the Cuban missile crisis, the United States needs Mexico to place nuclear missiles on its territory. In a phone call, Mexico’s President tells US President Kennedy that Mexico will provide whatever the United States needs. This was opening Mexico up to a potential nuclear strike by the Russians in the midst of the tense crisis, exposing the vital security of the country for the benefit of the United States, writes Iveta Cherneva.

What is remarkable about this episode is that Mexico was agreeing to a thing so ludicrous, and this was the result of a successful decade-long US foreign policy towards Latin America.

The benefit of carefully crafted US foreign policy is noticed in times of need and further down the path, not immediately. US standing and credibility matter precisely in critical situations.

Unfortunately, US President Donald Trump’s blind spot is foreign policy.

When he took the decision to betray the Kurds by withdrawing US troops from the Kurdish parts of Syria, Mr. Trump did not expect the deserved backlash from Senate Republicans. Senator Lindsey Graham, Chairman of the Senate Judiciary Committee, has called it “the biggest mistake of his presidency” and Trump didn’t understand why.

Through his approach to US foreign policy, Trump is undoing years of planning and careful calculation, and not just in the Middle East.

Trump’s Kurdish decision does not come from a specific school of thought, as some might have suggested. Trump’s moves are all over the map; he just doesn’t understand the intricate game of chess that is involved in crafting US foreign policy.

His withdrawal of US forces from the Kurdish territories is not grounded in isolationism of the principled kind preached by Senator Rand Paul. It soon became apparent that the US troops in Syria are not coming back home, they are simply being repositioned to guard the oil fields in Syria.

Coupled with the decision to send US troops to Saudi Arabia to do the same, it became clear that Trump simply likes to guard oil. He told the Kurds to go live in the Syrian parts that have oil because apparently then the US would care to protect them. He also said that the US wants some of that oil.

But guarding oil is not a grand strategy. That is oil-centered trumpism of the kind that even George W. Bush didn’t dare to articulate quite like this.

In his surprise at Republican Senators’ anger, it was apparent that Donald Trump didn’t understand what in terms of geopolitics was contained in a small group of US soldiers. Neither did he get the fine geopolitical balance at play. It seems that there are very few things that can make Republican Senators break ranks and foreign policy is what gets them.

A Bulgarian proverb says that “where you hit it is not where it cracks”. The Kurdish decision will reflect on other areas — US standing will crack elsewhere, not immediately and not where Trump expects it to.

Across issues and across geographical regions, Trump is undoing decades of carefully crafted policy and language where every phrase and every move meant something.

As the Mexico nuclear shield episode shows, the benefits of carefully crafted US foreign policy are noticed in times of need and further down the path, not immediately.

US standing in the international arena matters. Trump has harmed it and the results won’t be immediately apparent.

But Republican Senators see further in foresight. They will be the key figures in Trump’s impeachment. Republican Senators have the right to be angry at this lack of grand strategy and they will remember that when the impeachment comes to Senate.

Foreign policy is Trump’s blind spot and what he does not realize is that it might cost him the impeachment.

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The coup in Bolivia shines yet more dark light on America

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Just when one might have thought things geopolitical might be about to turn for the better, which means the worldwide geopolitical nightmare engineered by the U.S. and Trump and all the rest of the mob in Washington might fade a bit, it just gets worse.

Bolivia’s recently re-elected and then self-resigned President Evo Morales because he is graciously trying to avoid more upset and possible carnage in Bolivia, was on the chopping block of the U.S., and chopped he was although he is not dead yet and apparently hiding out among his indigenous supporters somewhere in Bolivia but has accepted asylum in Mexico.

Yes, Morales may have tried to overstay his presidential term by extending the term limits and maybe, just maybe, there were some very minor “irregularities” in the voting process in his country, but that’s immaterial. He still won a huge plurality of the votes against his challenger.  The U.S.’s government changing machine has been out for his head for over a decade, and he had the guts at the U.N. not long ago with Trump and Pompeo nearby to point out to the world just what the U.S. has been about for far too long: criminal meddling all over the globe.

It’s weird, though. Evo did a good job for over a decade. You cannot argue about his economic record in Bolivia. He created, surprisingly, what might be termed a “prosperous socialism” wherein ALL boats were lifted, and especially the prospects for the poor majority. One would think the oligarchs and the “rich” in Bolivia might see some benefit in a society where most everyone got at least something better than they had. But the “rich” and particularly the obscene rich, and imperialists, they can never get enough. Any diminution in their wealth, or more importantly any restrictions on how wealthy they might become because some sharing with the poor is mandated by good government, has now been forbidden. Do they not realize that social calm for all, relatively, is better than total societal discord? Apparently not. Whatever new government is formed in Bolivia, the country is going to regress violently and the poor set back forcefully, with extreme prejudice. People who are by nature cruel and lacking compassion, feeling themselves exceptional, like oligarchs, never learn…until they are strung up on lamp posts and finally destroyed, as has happening time and again in history in various locations.

It may be hard to believe, but the U.S., which is largely controlled by multi-billionaire oligarchs (and this is a phenomenon that has been building for 30 or 40 years) under an increasing “neoliberal” regime (and not just in the U.S.), may see a day when even they will see their fortunes vanish both materially and socially. Lamp posts likely await them, too, when things become unbearable for the 95 percent of the citizenry. For the privileged, greed really is bottomless for most of this class of people. They live in a fantasy world. But of course there are exceptions. Yet the U.S. aims for resources overseas that it does not control – like Venezuela’s oil, like Bolivia’s as yet mostly untapped lithium, like Afghanistan’s riches, and much more.

Which begs the question whether it was a good idea that President Rouhani told the world this week that Iran has discovered an additional 53 billion barrels of oil. Even if only 25 percent of this can be eventually extracted, it’s fabulous. Iran IS wealthy, fabulously so in every respect, especially in its people, except that for now it can’t market its petroleum wealth. Maybe that is a good thing temporarily, for Iran appears to be growing other industry, including the growth and export of saffron to name just one item.

Meanwhile, as risky as it may be, Iran has allegedly “blown past” uranium enrichment levels mandated by the JCPOA. This is absurd. Iran is allegedly enriching uranium up to levels of 4.5 percent. That nowhere close to bomb material at over 90 percent. The JCPOA permits 3.6 percent, allegedly.  The IAEA and the European signatories to the JCPOA are concerned and want Iran to go back to the limits of the deal. This includes limits on the size of the stockpile of enriched material, too, which is currently, according to reports, less than 100 kilos above that limit.

However, Iran is doing just what it said it would and no more — inching away from the JCPOA because the signatories of the JCPOA, the Europeans, have done virtually nothing, cowards that they are, to stand up to the Trump mobsters and realize that their long-term interests reside east of the Bosporus. At least Nordstream 2 is soon going to be a delivering fact. Europe did not back down to U.S opposition to that, and should have stood by Iran when Trump, caving to Netanyahu, abandoned the JCPOA. As far as many observers are concerned, particularly after the U.S.- coup in Bolivia, Iran is doing just the right things and the world, literally, prays that pariah America falls on its own swords.

From our partner Tehran Times

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Floods, Fires, Coups and Impeachment Make a Busy Week

Dr. Arshad M. Khan

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Venice is flooded.  The water is hip high in St. Mark’s Square threatening the church and the expensive shops and restaurants on its perimeter.  The mayor blames climate change.

In Australia, the bush fire season is underway.  One in New South Wales is scorchingly close to nearby homes having already destroyed two buildings on a country property owned by the actor Russell Crowe.

Floods, too, in the north of England, while Boris the chameleon has a comfortable 10-point lead in the polls over his labor opposite number, Corbyn the plonker.  No matter how outrageous or inept, Boris might be, the plonker makes nary a dent on that voluminous target.  So much for the left in Britain as it awaits another drubbing at the polls.

Then in Bolivia, Evo Morales has fled to Mexico claiming his life was at risk.  If he clearly looks Bolivian Indian, his successor, the leader of the senate, Jeanine Anez is just as clearly white.  As in South America elsewhere, the white Spanish elite are at the top of the food chain, followed by the mixed mestizos and at the bottom the indigenous people.  The exceptions are Argentina where the original inhabitants were massacred out of existence, and Chile which is German immigrants from long ago.

Trump welcomed the coup in Bolivia — was there covert support?  If Morales won plaudits for fighting poverty and as the country’s first indigenous leader, he also overstayed his welcome, at least internationally.  He defied constitutional limits by running for a fourth term in a close election which the Organization of American States faulted for “clear manipulation”.  Mr. Morales promised fresh elections.  But the elite-run military and police clearly saw an opportunity.  Morales supporters are organizing demonstrations. 

The US does not have coups; it has impeachment.  Bill Clinton notable for his expression, “It depends on what the meaning of ‘is’ is” … and for a new low in disgusting personal behavior, was impeached.  The procedure requires the House to determine articles of impeachment and then send a team to prosecute in the senate.  The individual being impeached has the right to his own lawyers to mount a defense.  The senate eventually retires to consider and deliver a verdict.  A two-thirds majority is required for conviction.  Bill Clinton survived despite his impeachment being based on facts unearthed by Special Prosecutor Kenneth Starr.  Can anyone then imagine a Republican senate convicting Donald Trump over a sentence in a phone call?

So what is the purpose of this futile exercise in the House of Representatives?  Perhaps Democrats hope to sling enough mud to sway the independent note in the forthcoming election.  Perhaps they want a few moments in the limelight, and TV interviews before, during and after.

A fraught world with real climate issues the legislators prefer to ignore — after all they are well-funded by fossil fuel interests.  Forget the actual storms, our elected representatives prefer storms in a tea cup.  The House Intelligence Committee, which is holding the hearings, will probably forward the matter to the full house as the political games continue. 

Meanwhile, record numbers of homeless sleep under bridges as temperatures plunge to -15C (5 F)  in the midwest and the east of this wealthy country.  Do the politicians care?

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