Green Room

Ahmadinejad to visit Caracas, Venezuela to move its gold

posted at 10:30 am on August 17, 2011 by

Chávez and Ahmadinejad to meet in September in Caracas
Caracas and Tehran have established a close relation in recent years

President Hugo Chávez and his Iranian counterpart Mahmoud Ahmadinejad pledged to strengthen political and economic cooperation after they convened a meeting of delegates of both countries that will be held in September in Caracas, the Venezuelan Foreign Ministry said Tuesday in a statement.

In a telephone conversation, the two Heads of State welcomed the progress of bilateral cooperation and “agreed to convene the 7th meeting of the bilateral joint committee (…) in order to broaden and deepen the complementation for the independence and welfare of people,” said the text released by the Venezuelan Foreign Ministry, as quoted by AFP.

A’jad is scheduled to be in New York on September 11.

Hugo’s back in Caracas, from his latest round of Cuban chemo, and looking bloated,

Meanwhile, Venezuela Plans to Move Reserve Funds (emphasis added)

Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal.

The planned moves would include transferring $6.3 billion in cash reserves, most of which Venezuela now keeps in banks such as the Bank for International Settlements in Basel, Switzerland, and Barclays Bank in London to unnamed Russian, Chinese and Brazilian banks, one document said.

Venezuela also plans to move 211 tons of gold it keeps abroad and values at $11 billion to the vaults of the Venezuelan Central Bank in Caracas where the government keeps its remaining 154 tons of bullion, the document says.

Interestingly,

Venezuela is unusual among countries of its kind in holding so much gold, with the 13th largest gold reserves in the world, according to the World Gold Council (most of the countries ahead of it are in the G10). But this has certainly served Venezuela well: the consistent rise in gold prices has effectively papered over a fall in its reserves this year, despite high oil prices.
Moreover, for Venezuela, whose government rather remarkably seems to be capable of “losing” $29bn, $5bn is small change.

Why the move?

Analysts said the planned move made little economic or financial sense, since Venezuela would be taking its money out of secure banks in safe countries and putting it in countries that are not as safe and perhaps in currencies such as the Chinese yuan or the Russian ruble, which are not reserve currencies. “It’s a big risk,” said José Guerra, a former official at Venezuela’s central bank. Mr. Guerra said he also had heard about the documents whose authenticity was confirmed to him by Central Bank officials.

Could be that Hugo’s getting more desperate as the chemo continues,

Neither Mr. Chávez’s type of cancer nor Mr. Chávez’s prognosis has been made public. Moving the reserves may signal that Mr. Chávez and his associates could be preparing some drastic political moves—such as canceling elections—that could incur international condemnation and perhaps trigger sanctions.

Therefore – since he knows he’s running out of time, he needs the gold and cash right now.

Miguel Octavio is unfazed. One of his commenters speculates,

Is it possible that they are trying to get these reserves into a place where the new government can’t get at them?

Everything is possible.

Cross-posted at Fausta’s blog.

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Comments

This was a great post, Fausta. I didn’t manage to put together the piece I was working on yesterday, which linked to this one, but for the record, I suspect this is a little more than Chavez just worrying that he might become the Latin American Qaddafi.

It sounds like he does have some unrest to worry about surrounding the election next year — IF all other conditions remain static, and he holds it as scheduled and has to worry about a relatively critical foreign press.

Things are moving pretty fast now, however. I wonder if Chavez’s nearer concern is with precipitating a missile crisis by installing those Iranian missiles reportedly being prepared for. Doing that in the expectation of having tacit backing from Russia (and presumably China) will be crossing a Rubicon for Chavez. If he did it, he would create a condition both Russia and China could exploit to their advantage. They’re likely to support him, even if not overtly.

The shift og Venezuelana assets is definitely something to be concerned about, at any rate. It’s not a good sign that Chavez seeks even greater immunity from US retaliation than he has already.

J.E. Dyer on August 18, 2011 at 7:44 PM