Russian President Vladimir Putin, seeking to build alliances to counter Western influence, signed several energy deals in Latin America this past week.
The first stop on Putin’s six-day tour was Havana on July 11, where he met with Cuban President Raul Castro. The two sides reached an agreement that could see Russia exploring for oil in Caribbean waters, which would build up Cuba’s offshore oil industry. Putin also decided to wipe away 90 percent of the $32 billion worth of debt Cuba owes Russia, most of it dating back to the Soviet era.
The agreement was no doubt motivated by Putin’s desire to push back against what he views as U.S. meddling in Ukraine. Exploring for oil only a few dozen miles from the U.S. coast is a finger in Uncle Sam’s eye. “We will provide support to our Cuban friends to overcome the illegal blockade of Cuba,” Putin said on July 11, referring to the U.S. ban on trade with the island nation.
Cuba only produces about 55,000 barrels of oil per day, but the island sits atop an estimated 124 million barrels of crude, much of which his located in the waters surrounding the island.
Putin’s next stop took him to Buenos Aires, where he met with Argentine President Cristina Fernandez de Kirchner.
A financial crisis is looming over Argentina, as the Kirchner government negotiates with New York-based hedge funds over unpaid debt left over from its 2001 default. Argentina has until July 30 to pay around $1.5 billion, but has argued that doing so would open up the door to other claims that the country cannot afford to pay.
The standoff has soured relations between Argentina and the U.S., a fact that has not gone unnoticed in Moscow. It is possible that Putin’s appearance in Buenos Aires was also meant to bolster an alliance with a country under attack from U.S. financial “vultures,” as President Kirchner described the hedge funds.
The Russian president went to lengths to emphasize the healthy relationship his country had with Argentina, saying the two sides “cooperated in all areas.”
Nevertheless, energy was at the heart of the deal announced on July 12.
While in Buenos Aires, Putin signed an agreement over nuclear energy, which could lead to the construction of two nuclear reactors in Argentina. Russia’s Rosatom – the state-owned nuclear company – would offer ““comfortable” financial terms to Argentina for their construction, according to Reuters.
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Although no cooperative agreement was announced to develope resources in the Vaca Muerta — where some of the world’s largest shale oil and gas reserves are trapped -- Russia said it would send a delegation to the site.
Putin finished his visit in Argentina just in time to watch the Argentine soccer team fall to Germany in the World Cup final. He was on hand at the famed Maracana stadium in Rio de Janeiro, where he gladly accepted the symbolic FIFA baton from Brazilian President Dilma Rousseff (Russia is set to host the next World Cup in 2018).
“I want to congratulate President Rousseff on how the World Cup was organized,” Putin said at the ceremony.
Putin reveled in the spotlight, but probably received greater enjoyment over the energy deal he reached with the Brazilian president. On July 15, Putin and Rousseff met in Brasilia, cementing a memorandum of understanding between Rosatom and Brazil’s Camargo Correa, which envisions the construction of a nuclear power plant and a spent fuel storage facility in Brazil.
Finally, Putin and Rousseff joined other leaders of the BRICS countries (Brazil, Russia, India, China, and South Africa) for a summit in the northeastern Brazilian city of Fortaleza. There, the leaders called for the creation of a multilateral bank that would rival the International Monetary Fund. At the meeting, Rousseff said the five BRICS countries “are among the largest in the world and cannot content themselves in the middle of the 21st century with any kind of dependency,” referring to the IMF. The bank will likely be based in Shanghai.
Russia also proposed an energy association for the BRICS countries, which would include a research institution and a fuel bank.
Part of Putin’s goal is to expand Russia’s economic relationships, using Russia’s main export, which is energy. But some observers think he has a broader strategy in mind -- to erode U.S. influence in what has traditionally been America’s geopolitical backyard. That view says Putin hopes to gain access to ports and naval bases in the region by dangling energy carrots to Latin American governments in need. Ultimately, he wants to use energy to expand Russia’s geopolitical clout, establishing alliances in the region and peeling them away from U.S. influence.
By Nick Cunningham of Oilprice.com