Venezuela President Nicolás Maduro

Venezuela’s Collapse Frays Its Economic Links With Russia 

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In his hardest moments, Venezuelan President Nicolás Maduro has turned to Russia for support.

When the United States approved the Venezuelan energy industry in January, Russia’s oil firm Rosneft assisted to divert its oil exports to Asia. And when rumors of an armed American intervention reached fever pitch in March, 2 airplanes with Russian military technicians landed in Caracas — a reminder Russia was on Venezuela’s side.

Yet there is expanding evidence that, beyond these high-profile gestures with limited impact on the ground, economic ties between Venezuela and Russia are fraying. Russian banks, grain exporters, even weapons manufacturers have all curtailed business with Venezuela, driven away by the very economic collapse they intended to assist Russia’s South American ally to withstand.

“Russia’s economic ties to Venezuela have really slowed down in the past few years,” said Maximilian Hess, a fellow at the Foreign Policy Research Institute in London. “The policies today are really low-cost, but they get a lot of geopolitical play.”

Russia’s public display of support came at several crucial moments since the opposition leader, Juan Guaidó, proclaimed himself the country’s interim president in January, challenging Mr. Maduro’s grip on power and plunging the country deeper into a political crisis. Russia’s support allowed Mr. Maduro to claim the backing of an effective ally and to maintain critical support in the military and the ruling party.

The Kremlin’s preference for symbolic shows of support instead of long-term investments in Venezuela is partly linked with Russia’s own economic woes. Russia’s five-year stagnation has resulted in the greatest outbreak of protests since 2013, to an exceptionally steep decline in Mr. Putin’s trust ratings and to growing public aversion to costly foreign adventures, based on Russian polls.

Russia exported just $36 million value of goods to Venezuela in the first 4 months of this year, less than half the amount it sent 3 years ago, based on Russian customs data.

Russian wheat sales to Venezuela, which Mr. Maduro touted as the replacement for American grain, plummeted sixty percent, to 187,000 tons, at the time of Russia’s agricultural export season ending in April, compared with the same period a year earlier, the customs data shows. These amounts cover up only a tenth of Venezuela’s annual wheat demand.

None of the top fifteen Russian banks had important loans to Venezuelan entities as of April, based on their regulatory filings. State-controlled Gazprombank, which used to be one of the main European bankers for the Venezuelan national oil company, Pdvsa, in April erased almost all of its Venezuelan credit portfolio after having end a joint banking venture with Mr. Maduro’s government, the filings show.

Even Russian weapons deal with Venezuela, the cornerstone of the countries’ economic relations, has been hit by Mr. Maduro’s financial woes.

Russia’s industrial conglomerate RosTec, which accounts for the bulk of the country’s defense exports, has decreased its exposure to Venezuela because of unpaid invoices, based on two people close to the company who discussed national security matters on condition of anonymity. The company has chosen not to renew some weapons maintenance contracts and halt other projects, they said.

This includes the Kalashnikov machine gun factory in the central city of Maracay, which remains incomplete 12 years after the start of construction.

Arms sales can be a politicized business, but it is still business, and it has to make economic sense, said among those familiar with RosTec.

A RosTec spokeswoman said the company’s staff in Venezuela has stayed unchanged in recent years and its technicians come and go based on its projects’ needs.

The multibillion-dollar deals for Russian weapons signed by Mr. Maduro’s charismatic predecessor, Hugo Chávez, are long gone. In the last two years, Russia exported $1 million worth of goods to Venezuela under the “secret” customs code that includes military and security equipment, based on Russian customs.

“We absolutely, officially have sold weapons to Venezuela,” Mr. Putin told reporters last week. “We have not done it for quite a while now.”

Though limited, Russia’s economic help did allow Mr. Maduro to maintain some revenue flow among tightening American sanctions. The Moscow-based bank Euro finance Mosnarbank, which is jointly owned by the Russian and Venezuelan governments and is under United States sanctions, continues to method payments for Pdvsa, based on bank wire receipts.

The Russian government responded to American sanctions against the bank in March by taking charge of the lender.

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