Foreign Policy Blogs

Venezuela Signs New Oil Contract with Russia, but Who Will Benefit?

Russian oil companies, including Gazprom and Lukoil, will pay $1 billion to Venezuela for the chance to develop oil reserves along the Orinoco. Even though Caracas and Moscow are allies, I still have doubts about the final payout for these businesses. In 2006 the Venezuelan government pushed out some foreign oil companies, and forced others to agree to terms that favor PDVSA, the national oil company. These changes came at what appeared to be a convenient for Venezuela, when oil prices were high, and after foreign companies had spent millions in exploration projects.

One wonders, where will this huge amount money from the Russian companies go? The mission of PDVSA states that it is dedicated to serving the Venezuelan people. According to its website:

“In order to put oil resources to the service of the wider population and create a new economic model, putting an end to the social inequalities so apparent in Venezuela in the last decades, PDVSA promotes Fondespa (The Fund for Social and Economic Development within the Country), which has the task of promoting social development through a transparent and fair distribution of oil revenues.”

It is not clear how much of the new influx of oil-related funds will go to the general public, or whether the majority will support the lifestyles of officials tied to the company. (This inquiry is based on general conversations with Venezuelans, but a further blog entry is needed to fairly investigate this situation.)

What can be said of PDVSA’s past management its resources? When oil was at a lower price per barrel earlier in the year, PDVSA did not have the funds to pay the contractors working on its behalf. These service providers went on strike in February of this year before they finally received their wages.

On the internet, PDVSA states that as a new, national organization it “is a testament to the new spirit of public accountability” and will “permit the effective use of resources”, experience shows this is questionable. However, in 2007, Venezuela as a whole ranked 162 out of 179 nations in Transparency International’s Corruption Perception Index (CPI). This meant it was sandwiched between Turkmenistan and the Democratic Republic of Congo.

There is a maxim in Spanish, “dime con quien andas y te digo quien eres”, roughly translated as: “tell me with whom you walk with and I will explain who you are”. When it comes to corruption in Venezuela, not much more needs to be said.



David D. Sussman

David D. Sussman is currently a PhD Candidate at the Fletcher School of Law and Diplomacy (Tufts University), in Boston, Massachusetts. Serving as a fellow at the Feinstein International Center, he was awarded a Fulbright Scholarship to study the lives of Colombian refugees and economic migrants in Caracas, Venezuela. David has worked on a variety of migrant issues that include the health of displaced persons, domestic resettlement of refugees, and structured labor-migration programs. He holds a Masters in International Relations from the Fletcher School, where he studied the integration of Somali and Salvadoran immigrants. David has a B.A. from Dartmouth College and is fluent in Spanish. He has lived in Colombia, Honduras, Nicaragua, Mexico and Venezuela, and also traveled throughout Latin America. In his free time David enjoys reading up on international news, playing soccer, cooking arepas, and dancing salsa casino. Areas of Focus: Latin America; Migration; Venezuela.