Russia gambles $5.4B in arms on Venezuela's Chavez

WASHINGTON, Nov. 20 (UPI) -- Russian leaders have approved an additional $1 billion loan to Venezuela to cover the costs of purchasing Russia's advanced, short-range TOR-M1 anti-aircraft and anti-missile system, along with Igla-S portable SAM systems, Il-78 aerial tankers and Il-76 military cargo aircraft.

From 2005 to 2007 the Kremlin also approved the sale of fighter aircraft, helicopters and Kalashnikov AK-103 assault rifles to the Venezuelan armed forces. Venezuelan President Hugo Chavez is also confident that Russian President Dmitry Medvedev and Prime Minister Vladimir Putin will green-light the export of BMP-3 infantry fighting vehicles and T-72 Main Battle Tanks later this year.

However, for Russia, the arms sales policies to Venezuela now contain an element of economic risk that was not present only a few months ago.

When global oil prices peaked at an unprecedented $147 per barrel, Russia could afford to virtually give away its most expensive weapons systems for free in order to build up a global network of strategic allies such as the Kremlin had not enjoyed since the disintegration of the Soviet Union at the end of 1991.

However, now that global oil prices have collapsed to around $60 a barrel, selling huge quantities of weapons on such easy terms will constitute a far greater drain on the Russian Treasury than was anticipated.

Nor does it make sense for Russia to accept payment in terms of oil imports from Venezuela. Russia is a vastly larger producer and exporter of crude petroleum on the global market than Venezuela, and Russia's oil is, in general, of a far higher standard before it is refined than Venezuela's.

Russia continues to suffer a serious bottleneck in its own refining capacity despite great progress that was made investing in such infrastructure during Putin's two four-year terms as president. Therefore importing Venezuelan crude with its high acidity levels, requiring intensive refining, would put unnecessary additional pressure on Russia's own refining facilities.

The Kremlin's continuing enthusiasm for enormous arms sales to Venezuela following the global oil price collapse, therefore, cannot be explained in economic terms. It only makes sense when viewed as an ambitious, long-term strategic investment in a country that may prove to be the most important and powerful regional ally Russia or the Soviet Union has ever had in the Western Hemisphere.

The scale and nature of Russia's arms investment in Venezuela are also striking. It is far greater in scale and value than Russian arms sales to China have been in recent years. Only Russian arms exports to India have been of comparable scale and volume. Some U.S. military analysts have even privately expressed concern that the Venezuelan military buildup eventually could pose a military threat to seize control of the Panama Canal.

Even after the arms buildup is completed, the Venezuelan armed forces will be in no state to pose any direct challenge to the U.S. armed forces. But if U.S. forces were removed from the region or were preoccupied with major conflicts in the Middle East or Northeast Asia, there is no other military power in the northern tier of Latin America, Central America or the Caribbean region that could stand up to the kind of regional military juggernaut that Chavez is creating with so much help from Russia. Venezuela is also purchasing additional weapons from nations as diverse as Belarus, China and Spain.