Oh, great. Russia takes over Venezuela's oil industry

We already learned that Russia was sending bombers to Venezuela for military exercises and supporting the country’s imploding economy. What could Vladimir Putin have wanted in exchange? We’re probably seeing the answer come into focus as Russia moves in to “help” Venezuelan dictator Nicolas Maduro as we head into the new year. Putin is going to bail out Maduro’s failing government with some cash in exchange for establishing some measure of control over that nation’s vast crude oil reserves that are currently lying mostly dormant. (WaPo)

As allies go, Venezuela is a relatively cheap one for Russia. But the potential returns on Moscow’s investment there could be priceless.

In exchange for modest loans and bailouts over the past decade, Russia now owns significant parts of at least five oil fields in Venezuela, which holds the world’s largest reserves, along with 30 years’ worth of future output from two Caribbean natural-gas fields.

Venezuela also has signed over 49.9 percent of Citgo, its wholly owned company in the United States — including three Gulf Coast refineries and a countrywide web of pipelines — as collateral to Russia’s state-owned Rosneft oil behemoth for a reported $1.5 billion in desperately needed cash.

This is bad news for Venezuela and also an undesirable development for the United States. We’re currently in a battle with the Russians (among others) for dominance in the international oil and gas market. We’ve only recently gained the upper hand in that arena, but with Russia now owning half of Citgo and holding the banknotes on much of Venezuela’s proven crude oil reserves, that’s going to give them a serious leg up.

The reason this bodes ill for the people of Venezuela is equally obvious. The only way they’re going to rid themselves of their tyrant (absent some sort of external military intervention which is unlikely in the extreme) is if Maduro’s corrupt socialist kleptocracy collapses under its own weight. The dictator’s continued hold on power depends on his access to cash to keep all of his schemes funded and his militias on the payroll. If he can’t manage that, someone is likely to take him out sooner or later. Venezuela’s currency is currently worth absolutely nothing, so Maduro relies on gold and hard money from stable countries to remain in business.

This new infusion of billions of dollars from Russia, along with their military presence in the country cowing Maduro’s opposition, may be a deal with the devil but it will likely keep him in power for quite a while longer. And that means there will be no relief for his starving people and no chance to reestablish some form of functional government. Meanwhile, Putin clearly would rather have a tinpot socialist dictator who he can control in charge of Venezuela instead of any sort of more enlightened government.

Maduro brought this loss of control on himself by plundering Venezuela’s national oil company and effectively shutting down production. But his problems are producing a ripple effect which impacts everyone else. In some ways, Russia is currently winning a war in South America without firing a shot. And that’s definitely not good news for the west.

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Jazz Shaw 5:31 PM on December 01, 2022