Russia has thrown the collapsing socialist state of Venezuela a lifeline by offering to restructure the $3 billion debt owed to them.
“The Venezuelans have confirmed the terms we’d agreed on, and that’s why the process will move into the concluding phase,” Russian Finance Minister Anton Siluanov said on Wednesday. “The first part includes pretty favorable terms with a small sum due for repayment so that it’s manageable for our Venezuelan colleagues.”
The agreement comes as Venezuela is scrambling to pay off a series of debt payments credited to its state-run oil company PDSVA, with investors fearing the country could soon default. However, the $3 billion debt to Russia, used to finance the supply of Russian military machinery, is just a tiny fraction of its overall debt burden, estimated at $120 million.
“Clearly the Venezuelans have been looking for relief anywhere they can get it, and at this point Russia is their most viable source of financing,” Risa Grais-Targow, director for Latin America at Eurasia Group, a political risk analysis firm, told the New York Times. “The Venezuelans have been pushing very hard on the Russians.”
Venezuelan leader Nicolás Maduro met with Vladimir Putin last month to discuss the prospect of debt restructuring, with Maduro thanking him for “both diplomatic and political support during the difficult moments we are facing.” In his desperate search for cash, Maduro also began negotiating a $500 million deal with Putin, whereby Russia will take control of a number of Venezuela’s most profitable oil fields.
The growing relationship between the two countries comes as the Venezuelan regime continues a path towards dictatorship through the creation of an illegal lawmaking super body and fraudulent regional elections, leading to further international isolation, especially from the United States. The deal also raises fears of Russia’s interest in exerting influence in Latin America, with Venezuela being the region’s poorest and most politically unstable country.
In August, the Trump administration signed off on sanctions against the regime, prohibiting Americans from buying any further Venezuelan government debt or that of the PDSVA, as well as personal sanctions against Maduro and other government officials.
Venezuela is currently experiencing the worst humanitarian crisis in its history, with skyrocketing levels of inflation pushing the monthly minimum wage down to under $2 a month.
As a result, there is now widespread poverty amid a chronic lack of basic resources from everything such as food and power to medicine and sanitary products.