Russia, Venezuela Agree Significant Expanded Trade & Investment Ties
By Chris Devonshire-Ellis April 20, 2023
Russia’s Foreign Minister has met with his Venezuelan counterpart Yvan Gil in Caracas, stating that the two countries have agreed to step up cooperation in oil extraction, agriculture, healthcare and other areas.
“We have agreed on practical steps towards broadening trade, investment cooperation and contacts between business communities. We are planning numerous projects in the fields of oil production, development of gas fields, agriculture, healthcare, pharmaceutics, communications, outer space, and high technologies.” Lavrov said at a press conference after negotiations with Gil.
The scale and pace of cooperation will grow in all of those areas, and the existent mechanisms, including the bilateral high-level commission, will continue to be used for that purpose, he said.
“We have agreed to expedite coordination of a series of new intergovernmental documents,” Lavrov said. These will include the updating of the Russia-Venezuelan Bilateral Investment Treaty (BIT) which dates back to 2008. BIT are important as they lay the legal and tax groundwork for bilateral trade and investment. They are also the building block upon which future Free Trade Agreements can be based.
Current bilateral trade is running at about US$130 million, although this has the potential, via increased energy ties, to reach into the billions. Non-energy items Russia exports to Venezuela include cereals, electrical products and meat, while Venezuelan non-energy exports include optical, beverages and fruits.
Lavrov also followed up with discussions concerning the following areas of Russia-Venezuela trade.
Energy
Venezuela has the world’s largest proven oil reserves, however its crude oil is very heavy by international standards, and as a result much of it must be processed by specialized domestic and international refineries. Russia has the capabilities to do so while the United States is embroiled in political and sanctions disputes with Caracas.
Russian companies are ready to develop oil production and refining in Venezuela via joint ventures, Venezuela’s State Owned PDVSA CEO Asdrubal Chavez said following a meeting of the Russian-Venezuelan Intergovernmental Commission in December 2022, with Chavez noting the importance of cooperation in all areas of the hydrocarbon value chain.
“We have agreed to set up a respective working group in order to develop five joint ventures between Russia and Venezuela. So, I would like to thank Russia for the presence of these five new companies, which have expressed readiness to support us in the further resumption of oil production and processing. Public companies are interested in the entire range of oil production and refining operations.” Chavez said. Venezuela is a member of OPEC, the global cartel that fixes energy prices and coordinates production.
Agriculture
An agreement on the supply of agricultural products has already been reached at a meeting of the Russian-Venezuelan Intergovernmental Commission in November last year. Russia opened its market to seven Venezuelan fish exporters in November 2022, Commission Cochairman, Russian Deputy Prime Minister Alexander Novak said. “A lot will be done in this area during 2023. More than 50 Russian and over 40 Venezuelan meat, fish and dairy product manufacturers are interested in becoming suppliers,” he said.
Novak stated that the sides are updating a trade agreement on the export and import of beef, shrimp, seafood, soybeans, sorghum, coffee and cacao and are seeking to broaden the range of Venezuelan products “on the Russian table.”
The supply of fertilizers to Venezuelan agriculture has been growing, Novak said. “The shipments grew 12% year-on-year in 2022.”
Venezuelan Agriculture Minister Wilmar Castro thanked Russia for its certification of five Venezuelan shrimp enterprises and noted that Venezuela had certified nine Russian meat manufacturers. “Companies will begin deliveries shortly,” Castro said.
There is a potential for mango, banana, watermelon, pineapple, melon, passionfruit, coffee and cocoa supplies for Russia, he said. Venezuela has requested sunflower and legume supplies. According to Castro, Venezuela is a supplier of shrimp, crab and other kinds of seafood.
Pharmaceuticals
Russia and Venezuela are developing cooperation in pharmaceuticals. According to Novak, eleven Russian drugs and vaccines have been registered in Venezuela over the past few months. “We are ready to supply Russian cancer drugs. A total of 1.5 million flu vaccine dosages were delivered after the New Year,” he said. The modernization of insulin production in Venezuela using Russian technology is a landmark project, Novak said. “It will create over 570 highly skilled jobs. Production will kick off in 2024. We are working together on a joint center for the research and prevention of infectious diseases in Venezuela.”
IT
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Russian IT companies have a keen interest in the Venezuelan market, Novak stated. “Our businesses are ready to offer solutions for telecommunications, the protection of critical information infrastructure, and urban digitalization. We encourage the establishment of the respective sub-commission.”
Navigation
Moscow and Caracas have signed a contract to deploy a Glonass measurement station in Venezuela, an agreement signed on the sidelines of a meeting of the Russian-Venezuelan Intergovernmental Commission.
Yury Roi, general director of Russia’s High Precision Instrument Systems (HPIS) research and production corporation, and Bolivarian Agency for Space Activities head Adolfo Jose Godoy Pernia are the signatories. HPIS is a holding company within the Russian state-owned Rostec group involved in the defence-industry complex, and focuses on high-precision systems and weapons for the combat tactical zone. It implements the full production cycle of weapons and defence equipment, from generating ideas to product distribution.
Measurement stations provide precision navigation for users of the Precise Point Positioning technology. They continuously monitor open signals from spacecraft of the Glonass, GPS, Galileo and Beidou global navigation satellite systems to measure current navigation parameters, receive navigation messages from satellites and transmit measurement results and navigation data to the processing center in real time. It was reported earlier that Roscosmos was in talks on the deployment of Glonass measurement stations in Argentina. Similar stations might be opened in other countries in South America, such as Brazil, and Paraguay.
Finance
The Russian-Venezuelan Evrofinance Mosnarbank and Venezuela’s National Superintendence of Cryptoassets and Related Activities (Sunacrip) signed an agreement on digital development, agreed at a signing ceremony held on the sidelines of a meeting of the Russia-Venezuela intergovernmental commission last December, attended by the Evrofinance Mosnarbank CEO Sergei Yarosh and Sunacrip head Joselit Ramirez.
Rostec, which owns Russia’s 52% stake in Evrofinance Mosnarbank announced in November 2022 that a set of digital financial instruments would be developed for managing cross-border transactions. The new instruments are expected to help handle mutual settlements as part of trade and economic cooperation between Russia and Venezuela and other parties concerned.
One of these products is a digital platform for raising investment and searching for business partners. The 48% Evrofinance Mosnarbank stake is held by the Fonden Venezuelan Development Fund, which was sanctioned by the United States in March 2019 in connection with the PDVSA Venezuelan state-owned oil company. This agreement is a natural development to allow both Russia and Venezuela to trade without resorting to US dollars or banking networks.
Banking
Moscow and Caracas are developing steps to connecting Venezuela to the Mir payment system and using the respective card in Venezuela, Russia’s Ambassador to Venezuela, Sergey Melik-Bagdasarov has said.
“Connecting Venezuela to the Mir payment system and the opportunity to use this card in Venezuela would be useful for servicing the travel industry,” the diplomat said, adding that “the sides are developing steps in this direction, though it is too early to speak about specific dates.”
Summary
This flurry of activity has shown to some extent the limit of US and Western sanctions, and especially those upon a major economy such as Russia as the country already has significant ‘friendly’ global partners, many of whom are also subjected to sanctions, such as Venezuela, Iran and to some extent, via trade tariffs, China along with many others to varying degrees in Asia and Africa. Venezuela however, along with Iran is significant due to its energy reserves.
It is strategically important to note at the same time, the two countries have engaged in satellite cooperation, an important on-going issue as concerns global navigation but also one that can be put to military purposes – an issue Washington will no doubt be concerned about. Given that this also includes existing cooperation with the US backed GPS system and the EU Galileo system as well as China’s Beidou, it is not implausible that future US / EU conflicts with Russia and China divide Global navigation into two separate units.
The financing issue is also a step forward to solving the trade sanctions that both suffer from and are bringing forward a mechanism to permit bilateral trade without having to use US dollars or the SWIFT banking network. Future bilateral currency swaps and the imposition of the Ruble as a lead currency may well manifest themselves shortly. China’s position as concerns Venezuela may also be part of this.
The MIR card issue is a stepping stone to a wider remit in terms of debit card use, and may later, when technologies arrive within Russia’s SWIFT alternative, the SPFS system, be rolled out to also facilitate trade, although currently this move indicates a growing move to developing Russian tourism to Latin America. Russia introduced direct flights between Moscow and Cuba earlier this year. However, the main prize for Russia is securing Venezuelan oil reserves and the refining of these. Those will be heading for friendly LatAm, Asian and African markets rather than the United States or Europe.
Russia’s 2023 Foreign Policy Concept, which came into immediate effect earlier this month, makes specific reference to the Latin American and Caribbean regions as areas to be targeted. Moscow has been quick to follow this through. Lavrov’s next meetings are with the Cuban Foreign Minister Bruno Eduardo Rodríguez Parrilla with details following in our next article.