Sunday, April 26, 2015

Russia Is Looking For Allies,Not Deals, In Latin America

April 26, 2015 1:10 pm

Russia is looking for allies, not deals, in Latin America

Putin wants to limit his global isolation by stepping up engagement in the region
Argentinas President Cristina Fernandez ...Argentinas President Cristina Fernandez de Kirchner reacts as she walks past an honor guard upon her arrival at the Vnukovo II Government airport outside Moscow on April 21, 2015. AFP PHOTO / YURI KADOBNOVYURI KADOBNOV/AFP/Getty Images©AFP
rgentine President Cristina Fernández’s jokes were lost in translation when she sought to win over a group of bemused Russian businessmen during a visit to Moscow last week, but her central message was clear: their investments would be welcome in Argentina.
But although Russia’s commercial interests in Latin America have grown over the past decade, they remain limited and are trumped by a need for political allies as the crisis continues in Ukraine, and Moscow suffers from US and EU sanctions after its annexation of Crimea last year.
“Russia needs friends, not only in trade but also at the UN, and it is looking for them wherever it can,” says Diana Negroponte, a Cold War specialist at the Wilson Center, pointing out that Argentina’s own rocky relations with western powers such as the US and the UK make it a perfect ally.
In Moscow, Ms Fernandez thanked a smiling Vladimir Putin, Russia’s president, for his support in her government’s legal dispute with “holdout” hedge funds, which have hindered foreign investment inArgentina, and in its claim over the disputed Falkland Islands. In return, Argentina abstained in a UN vote last year calling on member states not to recognise Russia’s annexation of Crimea.
But a memorandum of co-operation signed betweenYPF, Argentina’s state-controlled energy company, and Russia’s Gazprom to develop the Vaca Muerta shale formation in Patagonia, which holds among the largest shale oil and gas reserves in the world, was vague and non-committal.
That is despite it being Argentina’s top investment priority, since its development would enable a costly energy deficit that will require investments of some $200bn, mostly from abroad, to be reversed.
“It’s very strange that Gazprom, the largest gas producer in the world with a lot of gas that it can’t sell, would come here for gas,” said Daniel Gerold, an energy consultant in Buenos Aires, suggesting that there may be a political motivation behind the deal. “I would be very surprised to see sizeable investments materialise in the short term, to put it politely,” he said.
Mr Gerold said that a Russian-financed $2bn hydroelectric plant and a contract for Russian firms to build a new nuclear power station were of greater significance — if they happen, he cautions.
Indeed, according to local press reports, executives who met with Ms Fernandez — as well as being puzzled by her joke that she would forgive her German-descended tourism minister “in spite of [Angela] Merkel” — were swift to express their concern about Argentina’s strict currency controls. They are behind dozens of complaints made against Argentina before the World Trade Organisation by countries including the US, the EU and Japan.
Russia has found markets in Latin America for its arms industry — until oil prices started falling, Venezuela proved to be its best, if most controversial, client in the region. But the country has also turned to Latin America more recently to boost food imports, especially from the agricultural powerhouses of Argentina and Brazil, after sanctions have prevented it from importing from its traditional trading partners in Europe and the US.
Russia needs friends, not only in trade but also at the UN, and it is looking for them wherever it can
- Diana Negroponte, the Wilson Center
Russian trade with Latin America has leapt from $3bn in 2000, when Moscow began to rekindle relations with the region a decade after the fall of the Soviet Union, to around $24bn in 2013, according to Ms Negroponte. But that remains small change for Russia, and pales in comparison to the $260bn in trade between Latin America and China, while the US remains the region’s top trading partner.
Vladimir Davydov, director of the Latin America institute of the Russian Academy of Sciences, said that Russia was “acting as a counterpoint to the US” in the region. “Latin America now considers itself more independent [of the US]. They want to decide their own affairs, not only in economics, but in matters of defence, of foreign policy,” he said. “And we in Russia applaud this.”
Ms Negroponte observed that, as well as Argentina, Russia is most actively deepening ties with countries that have a long history of antagonism with Washington: Cuba, Nicaragua and Venezuela.
Speculation that Russia will lease Argentina 12 Soviet-era long-range bombers in exchange for beef and grain exports has even triggered concerns in the UK government that Buenos Aires poses a “very live threat” to the Falkland Islands, where the UK ramped up spending last month to reinforce defences.
“What for? Argentina doesn’t even have any aircraft or ships that could attack [the Falklands],” said a source at the foreign ministry, who emphasised that Argentina is firmly committed to resolving the dispute through diplomatic channels.
Meanwhile, Jorge Castro, a specialist in international relations dismisses the idea that Ms Fernandez may have “pivoted” towards countries such as Russia and China away from more traditional allies. “This government doesn’t have a foreign policy. It is constantly subordinated to the needs of internal political conflicts,” he says.