On February 3, 2019, Alexander Gabuev, head of the Carnegie Moscow Center’s “Russia in the Asia-Pacific region” program, wrote an article for the Financial Times. What makes it interesting? It is a typical example of a foreign state agenda.To begin with, Venezuela at least does not belong to the Asia-Pacific region, unlike Colombia.
Mr. Gabuev does not speak Spanish, so the following questions arise: how does he communicate with primary sources in the region, how does he read the documents, how does he listen to the statements? In addition, the article contains many distortions of data and insinuations, when an opinion is given as fact. All of it to construct a certain negative image of Russia.The Kremlin is proposing to send advisers to help Venezuelan President Nicolas Maduro stay in power, that’s how the article begins. There comes the categorical statement that Russia is being drawn into a new mediated conflict with the US in the American backyard.
What did Mr. Gabuev mean? Rumors about sending out Russian private military companies? Russian economists taking part in a round table?
Then, there is an unsubstantiated accusation that it is more than an attempt by Russian President Vladimir Putin to pay for the US interference in the affairs of Georgia and Ukraine, as well as withdrawal from the INF Treaty. There is no factual evidence to prove it though. Apart from Putin, according to Mr. Gabuev, the head of Rosneft, Igor Sechin, is a key contributor to Russian politics in Venezuela. Then there is the $3 billion, a sum the state-owned oil and gas company PDVSA owes to Rosneft, clearly taken from a false sample. According to an official Rosneft statement, PDVSA paid $2.3 billion of debt in 2018, which estimated to $4.6 billion as of December 31, 2017. Now the Venezuelan company should repay another $2.3 billion. Mr. Gabuev does explain where the $3 billion came from, so his expert assessment on Venezuela is highly questionable. Perhaps Mr. Gabuev was mistaken and referred to Venezuela’s $3.05 billion public debt to Russia on arms shipments, however, this debt has nothing to do with Rosneft. In this case, it is most likely to be a manipulation of facts.In addition, Mr. Gabuev does not know the exact number nor composition of Russian oil and gas projects in Venezuela, as he speaks of two offshore gas fields and other “assets” with more than 20 million tons of oil reserves. Regarding Rosneft reserves and projects in Venezuela, according to FINAM, on February 5, 2019, Rosneft is involved in several Venezuelan projects:
● 5 projects (Petromonagas – 40%, Petromiranda – 32%, Petroperija – 40%, Boqueron – 26.67%, PetroVictoria – 40%) in oil production with 2P PRMS oil reserves of more than 80 million tons and oil production of 3,4 million tons in the company’s share;
● 100% share in the gas project (Mejillones and Patao) (with the export right) with estimated resources of 85 billion cubic meters;
● 2 oilfield services enterprises (Perforosven – 51%, Precision Drilling – 100%).
Projects on the territory of Venezuela are carried out in accordance with the legislation applicable to them, and the agreements concluded in its regard are legal and valid.According to the magazine Neftegaz.ru for December 2017, “the initial geological oil reserves of these projects exceed 20.5 billion tons.” These data are confirmed by the official Rosneft website. In a press release for February 2016, in addition to increasing Rosneft’s share in Petromonagas to 40%, it outlined those 20.5 billion and stated the company’s engagement in the following projects:
• Carabobo-2.4 project (Petroviktoria JV) – CVP (subsidiary of PDVSA) (60%), Rosneft Oil Company (40%)
• Junin-6 project (PetroMiranda JV). CVP (a subsidiary of PDVSA) – 60%, LLC NNK – 40%
• Boqueron JV. CVP (a subsidiary of PDVSA) (60%), OJSC NK Rosneft (26.67%), OMV (13.33%)
• Petroperich JV. CVP (a subsidiary of PDVSA) – 60%, OAO NK Rosneft – 40%
We may assume that Mr. Gabuev confused millions with billions, which again speaks a lot concerning the value of his expertise.Further, without facts and assumptions, it is concluded that Sechin’s meetings with Maduro in September and November 2018 are political in nature and the “assumption” is asserted that the Russian national security policy is increasingly determined by a combination of corporate interests and ambitions of influential members within the Mr. Putin’s environment.Citing two anonymous sources, Reuters reported the topics that allegedly got covered during these closed meetings. Rosneft press secretary Mikhail Leontyev told the RBK Group that the company had no issues with Venezuelan oil supplies.
“The situation in Venezuela is complex, however, we have no problems with Venezuela, but we are not ready to discuss whether something seems to somebody,” he added.
Consequently, Mr. Gabuev probably relies on Reuters information, not the official representative for Rosneft, who commented on the matter.According to Mr. Gabuev, Hugo Chavez’s “reward” for his recognition of Abzakhiya and South Ossetia was a $2 billion state loan to purchase Russian weapons, as well as the National Oil Consortium (NOC) creation later in October 2008, which owned 40% in the development of the Junin-6 field, the other 60% in PDVSA.
It is noteworthy that Venezuela kept purchasing Russian weapons before 2008, therefore there is no causal link. There is also no connection of NOCs taking part in the Junin-6 (Junin-6) development, because Russian companies have been involved in the hydrocarbon extraction well before that. For instance, LUKOIL began drilling the first parametric well in the Junin-3 block (Junin-3) at the end of 2006. Therefore, the indicated link of the events in Georgia with these economic contracts looks like an attempt to present what is desired. Meanwhile, both the weapons supply and oil production are high-yield investments that have loaded Russian enterprises and brought them income.
Mr. Gabuev argues that Russia does not have technologies for processing heavy oil, so “NOC would have to pay billions to Western companies to construct additional facilities.” At the same time, the report is silent that the oil extracted from the fields could have been sold on the open market. There are enough customers to buy it, including the ones in the United States. The fact that Rosneft acquired 49.13% of the Essar Oil Limited (EOL) shares in August 2017 was also ignored.
“Rosneft acquired a stake in a first-class asset … The oil refinery in Vadinar, Gujarat, has great flexibility in terms of raw materials, more than half of all processed raw materials are heavy Latin American oil,” the company said in an official press release.
Nowadays Junin-6 is 80% owned by Rosneft, and only the Surgutneftegaz and LUKOIL shares were bought directly, TNK-BP package was included as part of the company. The package consolidation was completed by December 2014. The desire to acquire a profitable asset that generates a profit is the goal for any commercial organization in a market economy. The more bizarre seems the criticism of Rosneft’s actions in this case.
Probably, Mr. Gabuev believes that the interstate lending market is bad. Because he draws the readers’ attention that Russia (including Russian companies – V.A.) has given Venezuela (including PDVSA – V.A.) $17 billion since 2006. Then comes again the figure of more than $6 billion taken from the false sample.
Math is quite simple in this case. Deputy Finance Minister Sergei Storchak, speaking about Venezuela’s debt to Russia, said: “The nearest payment is at the end of March (2019). We have had payments in September and March. There are no overdue amounts. Last time the service was carried out on September 30th. Now at the end of March. They still keep the grace period, so only the interest is paid. The last time a fairly large amount was more than $ 100 million. ”
In November 2017, the amount of restructured debt amounted to $ 3.15 billion. We add $ 3.15 billion of government debt from $ 2.3 billion of PDVSA debt to Rosneft and we get $ 5.45 billion, which is no more than $ 6 billion.
Russia has not given out new loans to Venezuela for a long time, so Mr. Gabuev’s statement that Moscow has become a creditor, the last resort of Caracas, is not confirmed by anything. We recall that in 2017, PDVSA redeemed $ 2.3 billion to Rosneft. I would like to draw a parallel with the Ukrainian national debt of $3 billion, that the neighboring country is not going to return. Against such background, investment in Venezuela looks attractive indeed.
Mr. Gabuev concludes that because of Rosneft’s investments in Venezuela, Russia now has no choice but to support the Maduro’s “regime”. With the fall of Mr. Maduro, the new authorities will publish disreputable information about Moscow’s deals with Caracas, which will make it easier for Washington (implemented by the new Venezuelan authorities – V.A.) to annul them.
Let us recall that Maduro is the president of Venezuela, chosen in accordance with the Constitution, if not to go deep into his fight with opposition candidates before the elections. Therefore, the regime of the Venezuelan National Assembly (unicameral legislature) Juan Guaydo, who proclaimed himself president and was supported by the United States and its allies, should be called “regime.”
The FT article’s author mentioned only one Spanish oil company Repsol, meanwhile, there are oil companies from all over the world in Venezuela, including the United States. Below is a non-exhaustive list:
- Chevron, ConocoPhillips (US)
- Sinopec, CNCP (China)
- Eni (Italy)
- Total (France)
- Statoil (Norway)
- PETRONAS (Malaysia)
- PetroVietnam (Vietnam)
- IOCL, OIL (India)
- PETROECUADOR (Ecuador)
- Petropars (Paraguay)
All these companies consider hydrocarbon production to be profitable in this country and invested billions of dollars in Venezuela before the Americans imposed sanctions on August 26, 2017. Why should Rosneft and Gazprom, with the latter not mentioned in the article, give up profitable projects to please the United States in the current climate?
As we proved with figures and references, there are so many inconsistencies and discrepancies in the Gabuev’s article that one cannot even talk about subjective “objectivity”. The article is based on irrelevant data and rumors. At the same time, the image of the all-powerful “Putin’s friends” who make up foreign policies is being created. It is not supported by the actual facts nor data.
Associating the purely economic interest of oil and gas companies with foreign policy highlights a narrow stance taken by the political scientist. Mr. Gabuev’s comments on the matter could not be obtained at the time of the publication.
Vadim Arapov
