By John Helmer in Moscow
Russian strategy for extending its alliance for energy production and energy transportation into the backyard of the United States — a region Washington views as off-limits for foreign powers, since the 19th century Monroe Doctrine — marched several paces forward this week in Moscow, during the state visit of Venezuela’s President, Hugo Chavez.
Chavez and President Vladimir Putin agreed to plan a range of deals in the oil and gas sector; in steel supplies for energy transportation across the American continent; and in production of aluminium from local and regionally mined bauxite. The most immediate, and concrete of the deals provides Chavez with the means to protect himself from US pressure, which has been mounting. The arms to be delivered by Moscow include Russian-made Kalashnikov army rifles, 24 Sukhoi-30 fighter jets, and 53 helicopters. The jets replace obsolete US F-16 aircraft, which cannot be refitted since the imposition of an arms embargo by Washington on deliveries to Caracas. According to Putin, “the cooperation between Venezuela and Russia is not aimed against any third parties.”
Not since the Soviet Union’s 30-year alliance with Fidel Castro of Cuba have relations between the Kremlin and a Latin American leader been so productive. Putin also said at a press conference with Chavez that the “potential private investment of Russian companies [in Venezuela] may reach hundreds of millions, billions of dollars.”
During the week’s visit, Pipe Metallurgical Company (TMK), Russia’s biggest producer of pipes, signed a memorandum of intention (MOI) with the Venezuelan government, in anticipation of major new pipeline projects to be planned jointly in Latin America by the two governments. According to a company release by TMK, it has been agreed with the Venezuelan Ministry of Heavy and Mining Industry to negotiate contracts for delivery of seamless pipes to Venezuela’s oil and gas industry. In addition, the MOI anticipates the establishment of a TMK mill in Venezuela to turn out pipes for export to other Latin American buyers.
While in Moscow, Chavez specifically requested Russian assistance in building a natural gas pipeline to link Venezuela as energy supplier to other Latin American countries; this is estimated to cost $20 billion. Gazprom, Russia’s largest enterprise and the world’s largest producer of natural gas, is already active in the Venezuelan market, after the energy giant won a tender for the Rafael Urdaneta natural gas project , and received exploration and development licences, a year ago, for gas fields in the Bay of Venezuela; these have an estimated capacity of 100bn cubic metres of gas. “For us, it’s very important that Russia participates in the construction of a large gas pipeline that will run from Venezuela to the south and will span 8,000 kilometers,” Chavez said in Moscow. “In the face of the pressure and even an embargo that they wanted to impose on us, Russia has extended its hand to us.”
Chavez has invited LUKoil, currently Russia’s largest oil producer, to participate in oil exploration in Venezuela.
During the week, Siberian Ural Aluminium (SUAL) — the Russian bauxite to aluminium producer, headed by Brian Gilbertson, signed an undertaking for an 18-month feasibility study of a smelting project in Venezuela. The state-owned Corporación Venezolana de Guayana (CVG) currently produces 6 million tons of bauxite, 2 million tons of alumina and 650,000 tons of primary aluminium a year. That compares with SUAL’s production of 5.4 million tons of bauxite, 2.3 million tons of alumina, and more than 1 million tons of aluminium. The CVG agreement “calls for a range of areas to be covered in the feasibility study including geological exploration, extraction, transportation and processing of bauxite, alumina refining, primary aluminium production and the manufacture of high value-added aluminium products,” an official statement said. It also added a caution: “The signing of the Letter of Intent does not imply the establishment of a joint venture at the initial stage of cooperation. If the evaluation based on the results of the feasibility study for the integrated aluminium complex proves to be favourable, the parties plan to sign a related agreement on project implementation and initiate appropriate legal and administrative procedures.”
CVG’s agreement with SUAL is the second it has signed with a Russian aluminium producer. In 2004, it signed an MOI with Russian Aluminium (Rusal) for consideration of a new smelter capable of turning out about 1 million tons of primary aluminium a year. Nothing concrete has emerged from that scheme. Russia media reports suggest that Rusal wanted exclusive development rights in Venezuela, while the Venezuelans have proposed more than one aluminium complex developer.