Russia Lays Contract Groundwork in Venezuela

The two-day Venezuela’s tour of Russia’s Vice Premier Igor Sechin began yesterday, November 6, 2008. The purpose to attain is to prepare the meeting of Presidents Dmitry Medvedev and Hugo Chavez in Caracas that has been scheduled for the end of this month.

In Venezuela, Sechin and Chavez will deliberate on all key bilateral projects, focusing first of all on creation of Russia’s-Venezuela’s oil consortium. But the sources say that this major undertaking will remain a paper project because of the global financial collapse.

For Vice Premier Igor Sechin, Venezuela has recently become the most frequently visited state, while President Hugo Chavez has turned into almost the main foreign partner. But the extent of the current visit has had no precedent. Roughly 60 businessmen of Russia went to Caracas together with Sechin, all of them ready to deliberate on Venezuela’s projects. Sechin’s target there is no secret. Dmitry Medvedev will go to this Latin America’s state at the end of November and as many contracts as possible are to be inked prior and in the course of the visit.

Creation of Russia’s-Venezuela’s oil consortium is apparently one of the highlights of discussion. According to September statement of RF Energy Minister Sergei Shmatko, the consortium will unite Venezuela’s PdVSA that will get the controlling interest and five companies of Russia – Gazprom, Rosneft, LUKOIL, TNK-BP and Surgutneftegaz. Three of them are operating in Venezuela, mostly assessing heavy crude reserves of Orinoco.

Regardless, the future of consortium is hardly the brightest. “No definite work has been carried on in this direction. No one knows whether we will contribute current projects to the consortium and what it will all look like,” said a source with one of the companies that is the consortium member. “The phrase of consortium’s establishment is to be added to the intergovernmental documents, but what comes next is unclear.”

According to analysts, financial collapse is one of the problems that the project has faced even before the actual implementation. “It’s evident that the crisis will materially affect the idea. The implementation of so large-scale project calls for borrowed funds, but where to raise them in today’s environment isn’t clear,” RusEnergy Partner Mikhail Krutikhin explained.

Another danger, the expert went on, is temptation to use consortium for executing the foreign policy of Moscow. “The names of Putin and Chavez are being associated with the idea of consortium, but in Latin America, they have no big trust in them.” “I would like to believe that the consortium will be carrying exactly on business. In this region, investment terms are better than in Russia,” Krutikhin specified.