March 6 (Bloomberg) -- Russia expects to continue benefitting from economic ties with Venezuela via billions of dollars in oil and weapons contracts after the death of Hugo Chavez, who led the South American country for 14 years.
“A constructive, positive and mutually beneficial agenda will remain a constant for any government, as it will from the Russian side,” President Vladimir Putin’s spokesman, Dmitry Peskov, said in the Siberian city of Novosibirsk today.
Putin tapped OAO Rosneft Chief Executive Officer Igor Sechin to lead the Russian delegation to Chavez’s funeral on March 8, Peskov said. Sergey Chemezov, head of Rustech, a government holding company that includes several weapons manufacturers, and Industry and Trade Minister Denis Manturov will also attend, Peskov said.
Since Putin and Chavez first met in 2001, Venezuela has become the most important overseas investment target for Russian oil companies and is on track to become the largest export market for Russian arms after India by 2015, according to Viktor Semyonov and Igor Korotchenko, analysts at the Russian Academy of Sciences and the Center for Analysis of World Arms Trade, respectively.
Chavez was an “outstanding leader” and “close friend” of Russia, Putin said in a statement released by the Kremlin. The Venezuelan leader was an “unconventional and strong person who looked to the future and always set the highest standard for himself,” Putin said.
Rosneft and other Russian oil producers plan to invest $17.6 billion in Venezuela to quadruple their combined output in the country to 930,000 barrels a day by 2019, Venezuela’s oil minister, Rafael Ramirez, said in January. That would be about equal to what Azerbaijan, the third-largest supplier in the former Soviet Union, currently produces.
Under Venezuela’s constitution, an election must be held within 30 days of the president’s death. Vice President Nicolas Maduro will be interim president until then, Foreign Minister Elias Jaua said in Caracas. Maduro has led Venezuela since Chavez, who died of cancer, missed his Jan. 10 inauguration.
“Worries are overblown,” said Grigory Volchek, spokesman for Lukoil’s overseas arm, by phone today. “Our deal has been approved by parliament and is profitable to the Venezuelan government and budget.”
In all, Rosneft and its Venezuelan counterpart, Petroleos de Venezuela SA, or PDVSA, and fellow Russian producers OAO Lukoil and OAO Gazprom Neft plan to spend $36 billion developing projects in the country, mainly in the Orinoco region.
Venezuela is “our No. 1 priority,” Sechin said during a trip to the country in January. Sechin wore a T-shirt emblazoned with Chavez’s picture during a trip to the country in September.
Russian fighter jets, helicopters, tanks and anti-aircraft systems accounted for almost two-thirds of Venezuela’s $5.4 billion of weapons imports in 2004-2011, according to data compiled by World Arms Trade. Russia is scheduled to supply another $3.5 billion of arms to Venezuela in the 2012-2015, six times more than China, the data show.
Russia in 2011 granted Venezuela a $4 billion credit line to buy military equipment and the two sides created a joint bank, Evrofinance Mosnarbank, to finance development projects. Venezuela’s National Development Bank Fonden holds 49 percent of the lender and Russia’s VTB Group and Gazprombank own the rest.
“Russian companies will be safe from a political point of view,” said Julian Lee, a senior analyst at the Centre for Global Energy Studies, said by phone from London. “The only real risk is that the situation develops chaotically and I don’t see that at the moment.”