Latin reshuffle: what Russia should expect from the regime change in Venezuela

For the first time since 1999, supporters of Hugo Chavez lost the majority in the Parliament of Venezuela. That shift can affect the economic relations with Russia: the new authorities can review the existing investment projects.
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In the last parliamentary elections on Sunday in Venezuela, the opposition coalition of centrist parties "Democratic Unity Block» (MUD) won. The coalition won 99 seats in the National Assembly, or 59% of the total number of mandates. Speaker of the Parliament will be the center-right.

For the first time in nearly 17 years (since July 1999), radical left parties supporting Chavez and his successor as president, Nicolas Maduro, gave way to a parliamentary majority. Maduro conceded defeat supporting his United Socialist Party of Venezuela. According to him, the real triumph of the elections was the "economic war", which the political forces inside and outside of Venezuela are to destabilize its economy.

Democracy in times of crisis

Explaining his defeat, Maduro is not so wrong: with the end of 2013, his country is in a state of acute social and economic crisis. A year later, the situation only worsened the drop in oil prices: in the oil trade, according to OPEC, accounts for about 96% of the country's export earnings ($ 77.8 billion from $ 80.7 mLd, according to data for 2014). According to World Bank projections, this year the Venezuelan GDP should be reduced by 7%. According to official data of the Central Bank of Venezuela, the annual inflation rate was 68.5%, this year the regulator has not yet been made public figures, but President Maduro did not rule out that it may reach 85%. Due to the state regulation of prices and fixing the rate of the bolivar real figures above: The IMF suggests that it may reach 159%, and the following year to reach 200%, which will make Venezuela a world record for this indicator Finally, at the official exchange rate 6. 35 of the Venezuelan bolivar to the dollar on the black market were given to 900 bolivars, while the rate of the previous year amounted to about 1: 100.

After the death of Chavez in March 2013 and came to power Maduro has been a steady increase in the number dissatisfied with the situation in the country: the spring of 2013 their number was 57%, in a year - already 77%. Over 80% of the population among the major problems called the rise in prices, the lack of career prospects, shortages and high crime rates. Similar figures are shown and the September survey of the Venezuelan agency Hercon Consultores. Speaking about otvetsgovernmental crisis over the country, 63% of respondents blamed it on the Maduro government and only 4.1% - in the block MUD (another 6% - the opposition as a whole). Another 12% of people blamed all ideology «XXI century socialism", which after the Chavez government adheres to death.

Winning MUD opposition bloc against this background did not become a surprise to observers. Back in April 2013, a single opposition candidate in the presidential elections Henrique Capriles won 49.1% of the vote - the best runner in the history of presidential elections in this Latin American country. Since then, the unit ratings of MUD (which until September 2014 led by Capriles, now headed by a former member of the Communist Party, the journalist Jesús Torrealba) steadily increased, while remaining above the ruling party's popularity. Thus, according to surveys of various agencies during the last year (Hercon, Datanalisis, Consultores 21), for the MUD were ready to vote on the average 45-60% of Venezuelans, and for the pro-presidential movement - only about 25-30%.

At the time of delivery of the material Caracas Stock Exchange has not yet opened, but the manager of the London fund GAM UKPaul McNamara stated in a conversation with Bloomberg opinion that the results of the elections of the market players perceive positively. "The current government as a whole makes it more or less correctly, when it comes to maintaining a stable economy. Hopefully, the deputies of the new parliament will be able in any way to improve the situation in the country ", - he said the agency Bloomberg.

The expert from the Dutch fund NN Investment Marco Rueyer also believes that the victory of the Venezuelan opposition will boost the value of bonds, which means that investors' confidence in the growth of the economy. "With the Democrats a constitutional majority of two-thirds can expect changes in economic policy: the devaluation of the bolivar and the rise in gasoline prices," - said the analyst.

Narrow Channels

According to Russian Industry and Trade Ministry, Venezuela is the second after Brazil partner of Russia in Latin America in terms of trade turnover. Thus, in 2013 has grown by 26% and turnover between the countries amounted to $ 2.45 billion. At the same time, in 2014 the volume of trade fell by half to $ 1.15 billion. Over 70% of Russiaexports to Venezuela are oil and oil products, more than 70% of imports from the Latin American republics account for chemical products.

According to the deputy head of the Russian-Venezuelan Business Council, former State Duma deputy Vladimir Semago, trade relations between Russia and Venezuela as a whole are reduced to the cooperation in the oil and defense sectors. "Around 2006 private business projects have been curtailed, and Moscow took a course on trade capacity through the state, primarily oil, the company", - he said. It turns out that Russia's economic cooperation with Caracas made just for two main channels.

The reason for the downturn in turnover could be freezing joint projects of Russian oil companies to the Venezuelan state corporation PDVSA, said Semago. Many investors are gone, and the Russian side is now left almost one "Rosneft", which, he believes, can not because of debts to actively participate in the project. "Rosneft" in Venezuela participates in five joint projects in oil production, "Carabobo-2", "Junin-6 &raquo ;, «PetroMonagas" "Boqueron" and "Petroperiha". The "Gazprom oil" also has 20% of the National Oil Consortium (the remaining 80% - in "Rosneft"), which owns 40% of the Russian-Venezuelan joint venture with PDVSA Petromiranda, we have been developing "Junin-6".

In May this year during the visit of the head of "Rosneft" Igor Sechin to Caracas signed contracts to develop fields in the valley of the Orinoco River, are considered potentially the largest in the world, as well as the establishment of new joint ventures, reported by PDVSA. "We had an excellent meeting and we agreed on investments of $ 14 billion," - he said at the time Maduro expressed hope that this money will help increase the production of oil in Venezuela twice. In the past year, "Rosneft" has also entered into an agreement with PDVSA, under which the Russian company will buy the five years from Venezuelan partner 1.6 million tons of oil and 9 million tonnes of petroleum products. Overall, the Venezuelan side of the Russian company will supply 3.2 million tons of oil and 16.5 million tons of petroleum products within five years. Prepayment for the May contract will be$ 2 billion, the second terms of the contract were not disclosed.

In addition, Venezuela is a major purchaser of Russian weapons. According to the Federal Service for Military-Technical Cooperation Service, in 2014 the share of Venezuela in the structure of Russian arms exports amounted to about 6% (fifth place in the world and first in Latin America). On the Venezuelan army is armed with Su-30, T-72 tanks, armored vehicles BTR-80A, multiple launch rocket systems "Grad" and other military equipment purchased in Russia. As reported in February, TASS, by mid-2013 the parties signed contracts valued at approximately $ 11 billion. The armed forces of Venezuela, with the exception of transport aircraft and the fleet is almost entirely staffed by Russian technique, indicating gosinformagentstvo on the occasion of the visit to Moscow, the head of the Ministry of Defense of the Bolivarian Republic of Vladimir Padrino López .

The risk of a new team

In this situation, the opposition victory does not bear a direct threat to Russia's interests in the country, but it calls into question the existing trade relations. Having a simple majority, MUD can make changes to the state budgetsm and will be able to initiate a parliamentary investigation in respect of individual officials. Parliament under the leadership of the opposition will also be able to make laws on amnesty of political prisoners. If the opposition had controlled 101 seats, it would have received the right to make a vote of no confidence vice-president or the ministers, if proponents of democratic reform will enlist the support of 112 deputies, that is, two-thirds of the legislative body, then their power will change the constitution and to change The Supreme Court and the Central Election Commission, but only with the consent of the executive branch.

"The National Assembly has limited powers, though claims on the post of government officials - Semago explains. - But MPs influence the adoption of the budget of the country. " The new parliament, does not exclude it, want PDVSA to achieve termination of the contract with "Rosneft" for the development of stranded oil, declaring it "deal under duress."

In addition, the expert explains, the opposition has always maintained that Venezuela is not under military threatFirst, it can not be excluded in the future, the reduction of military expenditures and to establish closer relations with the US. "The reason for this is not a dislike of Russia, but the desire to restore the country's economy a proven way - a partnership with the US", - said Semago.