Russia Shows Socialist Solidarity With the US Dollar As It Freezes Venezuela’s Accounts

The screws are tightening on the socialist regime of Venezuela’s Nicolas Maduro. The country is starving. Perhaps the only silver lining available to a nation that literally can’t afford to buy toilet paper is that they have no food making toilet paper entirely superfluous. The Venezuelan bolivar has entered the realm of the Weimar reichsmark which cost more to print than it was worth. Hundreds of thousands have fled Venezuela…primarily the people who made the economy work and not the leech class catered to by Hugo Chavez and Maduro. There are daily demonstrations against the government and the dichotomy of security forces joining the protesters while, at the same time, government death squads are at work against protest leaders shows a fragility of the regime that is frighteningly reminiscent of what happened in Romania right before the happy ending where the Ceaucescus were pushed against the wall and shot.

Until recently, the single factor allowing Maduro to keep his head off a pike, other than a for-the-time-being loyal army, was the close relationship between Russian banks and the Venezuelan oil industry. Venezuela was mortgaging its oil production and facilities to the Russians for cash. This is from Brad Slager’s Vlad Putin Making More Moves On Venezuelan Oil

As laid out in The Washington Post Maduro has struck economic deals with Putin, giving the dictator needed liquidity while Russia makes some serious inroads in the oil-rich country. Following the G-20 Summit held in Argentina in November Maduro went to Russia for meetings with Putin. The two leaders worked out a deal rooted in mutual self-interests.

The result: Five billion dollars in pledges towards the corrupted Venezuelan oil production. Russia will then beneffit with additional exports to its crude customers. An additional billion dollars goes towards mining interests in the country. Another deal has 600,000 tons of Russian wheat exports to be delivered to the literally starving nation.

This new economic arrangement follows previous financial assistance that Russia provided that sees Putin holding a major stake in a US oil corporation. An earlier $1.5 billion infusion to Venezuela gave Russian oil giant Rosneft a 49% percent stake in Citgo. This leads to numerous entanglements, especially here in the States.

Late last month that cozy relationship came to a screeching halt. John Bolton took to the lectern, trolling all the way

3/7 This image shows John Bolton at the White House holding a pad with a note reading “5,000 troops to Colombia.” https://t.co/sZyXroZhQM pic.twitter.com/O7h40MLecx

— CBC News (@CBCNews) January 29, 2019

to announce that the administration had imposed sanctions on the Venezuela national oil company, PdVSA, and its US subsidiary, Citgo. All in all, it froze some $11 billion in cash and prevented Russia from making a claim on some $7 billion in assets that are currently securing loans to the Maduro regime.

Politics is one thing, but money is and entirely different matter and ultimately money talks and socialist bullsh** walks. Russia has turned off the tap. Three days ago, Russian oil giant Lukoil announced that it was severing its relationship with PdVSA:

Litasco, the international trading arm of Russia’s second-biggest oil producer Lukoil, stopped its oil swaps deals with Venezuela immediately after the U.S. imposed sanctions on Venezuela’s oil industry and state oil firm PDVSA, Lukoil’s chief executive Vagit Alekperov said at an investment forum in Russia.

…

Because of Moscow’s support for Maduro, the international community and market analysts are closely watching the relationship of Russian oil companies with Venezuela.

“Litasco does not work with Venezuela. Before the restrictions were imposed, Litasco had operations to deliver oil products and to sell oil. There were swap operations. Today there are none, since the sanctions were imposed,” Lukoil’s Alekperov said at the Russian Investment Forum in the Black Sea resort of Sochi.

Venezuela tried to find other Russian routes to evade sanctions:

BREAKING: Venezuela’s oil giant PDVSA moves joint ventures’ bank accounts to Russia’s Gazprombank – report https://t.co/7ddiWT8NkJ

— RT (@RT_com) February 9, 2019

Venezuela shifts oil ventures’ accounts to Gazprombank in what appears to be an effort to evade US sanctions https://t.co/J2uw95aKGM

— Bill Browder (@Billbrowder) February 10, 2019

Yesterday, another body blow landed:

Russian lender Gazprombank has decided to freeze the accounts of Venezuelan state oil company PDVSA and halted transactions with the firm to reduce the risk of the bank falling under U.S. sanctions, a Gazprombank source told Reuters on Sunday.

While many foreign firms have been cutting their exposure to PDVSA since the sanctions were imposed, the fact that a lender closely aligned with the Russian state is following suit is significant because the Kremlin has been among Venezuelan President Nicolas Maduro’s staunchest supporters.
…
Russian officials have said they stand by Maduro and have condemned opposition actions as a U.S.-inspired ploy to usurp power in Caracas.

But Russian firms find themselves in a quandary, caught between a desire to endorse the Kremlin line and back Maduro, and the fear that by doing so they could expose themselves to secondary U.S. sanctions which would harm their businesses.

US sanctions, the cessation of oil swaps, and the freezing on accounts by Gazprombank have essentially rendered Venezuelan oil unsalable.

How much longer can Maduro hold out? Who knows. But what seems certain now is that the issue is when and how Maduro leaves, not if he leaves.

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