MOSCOW, Jan 29 — Russia expects Venezuela will probably have problems servicing its sovereign debt to Moscow, Russia’s Deputy Finance Minister said today, after Washington imposed sweeping sanctions on Venezuela’s state oil firm in a move the Kremlin called illegal.
The Trump administration yesterday imposed restrictions on the PDVSA oil company, aimed at curbing the Opec member’s crude exports to the United States and at pressuring socialist President Nicolas Maduro to step down.
Venezuela has sunk into economic and political turmoil under Maduro, with inflation seen rising to 10 million per cent this year, leading to food shortages, protests and mass emigration.
The opposition disputes the legitimacy of Maduro’s re-election to a second term last year, and opposition leader Juan Guaido, 35, proclaimed himself interim president this month. Washington has recognised Guaido as Venezuela’s rightful leader, while Russia has continued to back Maduro.
When asked if the new US sanctions would cause problems for Venezuela when it came to servicing its sovereign debt to Russia, which stands at US$3.15 billion, Deputy Finance Minister Sergei Storchak told reporters:
“There will probably be problems. Everything now depends on the army, on the soldiers and how faithful they will be to their duty and oath. It is difficult, impossible to give a different assessment.”
Storchak said the next twice-yearly interest-only payment from Venezuela of over US$100 million was due at the end of March.
Despite Storchak’s downbeat prediction, the Russian finance ministry issued a separate statement later today saying it still expected the next payment to be made on time.
“No changes in the agreement have been introduced and correspondingly Venezuela must fulfil the obligations it has taken upon itself to the creditor,” the ministry said.
The Kremlin today condemned the US sanctions as illegal interference in Venezuela’s affairs, while Russia’s Ministry of Foreign Affairs said they looked like an attempt to confiscate Venezuelan state assets.
Russia has accused Washington of trying to usurp power in Venezuela and warned against military intervention.
White House national security adviser John Bolton said yesterday the sanctions would cost Maduro US$11 billion in lost export proceeds over the next year and block him from accessing PDVSA assets worth US$7 billion.
Russia, a close ally of Venezuela, has acted as a lender of last resort for Caracas, with the government and Rosneft handing Venezuela at least US$17 billion in loans and credit lines since 2006.
Kirill Tremasov, a former economy ministry official and now head of research at Loko-Invest, said the new US sanctions were a direct blow to Russia’s interests.
“(Russia) will most likely now encounter non-payments on loans it has handed out. At the same time, Russia’s Ministry of Foreign Affairs is officially saying it will do everything necessary to support Maduro,” he said.
“I think the likelihood of a worsening in Russian-US relations is growing and with it sanctions risks.” — Reuters
