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Herman Hum
27 Jul 06, 15:07
Russia Defies U.S. with Venezuela Fighter Sale
By ALEKSANDRAS BUDRYS, REUTERS, MOSCOW
DefenseNews (http://www.defensenews.com/story.php?F=1982255&C=airwar)

Russia said on July 27 it had sold 24 aircraft and 53 helicopters to Venezuela, defying the United States which has urged Moscow to halt arms sales to Venezuela’s populist president Hugo Chavez.

Russia’s arms export chief, speaking as Chavez met Russian President Vladimir Putin in the Kremlin, said the aircraft deal was part of a long-term package of arms contracts with Venezuela that was worth over $3 billion.

Chavez is a vocal critic of what he calls U.S. imperialism. Washington considers him a dangerous radical and had urged Russia to rethink the weapons sale. It bans its own producers from selling weapons to Venezuela.

"In the face of a blockade that was imposed on us, Russia extended us a hand," Chavez said after his talks with Putin.

The arms deal is likely to add to friction in an already testy relationship between Washington and a Russia which, under Putin, has taken on a more assertive international role.

Russia has already supplied Kalashnikov automatic weapons to Venezuela and some attack helicopters. Chavez says he is preparing his armed forces to repel U.S. aggression.

At the Kremlin talks with Chavez, Putin tried to reassure Washington about the weapons deals. "Cooperation between Russia and Venezuela is not directed against third countries," he said.

It was not clear if Chavez and Putin themselves had signed any weapons contracts during their talks.

Sergei Chemezov, head of Russian state arms trader Rosoboronexport, told reporters the deal on aircraft and helicopters was already sealed. "We have sold 24 airplanes and 53 helicopters," he said.

ARMS CONTRACTS

He said it was part of arms contracts with Venezuela that were signed over the past 18 months. "The value is over $3 billion," Chemezov said.

Chemezov did not give details, but Venezuela had been expected to buy at least 24 Russian Sukhoi-30 jets that Chavez wants to replace his air-force’s U.S. F-16 jets.

Russian media reported Chavez could also be interested in buying surface-to-air missiles and possibly even a submarine.

Relations between Washington and Moscow have been strained by differences over the Middle East and Iran’s nuclear program, and by U.S. allegations that Putin is backtracking on democracy.

Earlier, Chavez had savaged the United States with the colorful rhetoric that he has made his trademark.

"The biggest threat which exists in the world is the empire of the United States," Chavez said while unveiling a bust of 19th-century South American liberation hero Simon Bolivar at a Moscow library.

"It is a senseless, blind, stupid giant which doesn’t understand the world, doesn’t understand human rights, doesn’t understand anything about humanity, culture and consciousness."

Putin said in the Kremlin he "welcomes the intentions of Venezuela to occupy a place in the U.N. Security Council as a non-permanent member."
Venezuela is lobbying for the two-year seat on the Council, saying it would help counterbalance Washington’s influence.

Chavez is on a world tour that has included meetings with U.S. foes such as Cuba’s Fidel Castro and Belarussian President Alexander Lukashenko. He will also visit Iran.

Boats
27 Jul 06, 17:00
Cool...target practice...

Byron, who sincerely hopes Mr. Chavez enjoys spending all that money purchasing, maintaing, and operating these high-maintainence birds whilst his people live in grinding poverty.

CV32
27 Jul 06, 21:17
This CEPR report (http://www.rethinkvenezuela.com/downloads/ceprpov.htm) has interesting things to say, including this comment:

"So most of the news reports and articles alleging an increase in poverty under the Chávez administration are analogous to comparing winter temperatures to spring temperatures, and concluding on that basis that there is no global warming."

Boats
28 Jul 06, 11:26
Counter-point:

http://news.bbc.co.uk/1/hi/business/1925514.stm

As Venezuelan President Hugo Chavez returns to power a mere 48 hours after being ousted amid mass strikes and street protests, BBC News Online assesses his chances of revitalising the country's embattled economy.

It's not every day that demonstrators take to the streets in support of oil company executives.

Key figures, 2001
Population: 24.5 million
GDP growth: 2.7%
GDP per head: $5,250
Oil production: 3.1 million barrels/day
Exports: $27.8bn
Imports: $16.8bn
Inflation: 12.5%
External debt: $35bn
Like many a previous Latin American leader, Hugo Chavez, Venezuela's populist president, was eased out of office by a last-minute shove from the army.

But his real usurpers were the ranks of the middle class, office workers and union officials protesting against Mr Chavez's perceived mismanagement of the economy.

In particular, they blame Mr Chavez for wrecking PDVSA, the vastly dominant state oil company, by sabotaging its strategy and replacing its management with yes-men.

Although their attempt to put in place a new government has failed, the episode will serve as a stark warning to Mr Chavez that many Venezuelans are running out of patience with his handling of the economy.

A good idea...

Ironically, Hugo Chavez came to office in December 1998 with the economy firmly on his mind.

With unprecedented support of about 60% of the electorate, mainly among the disadvantaged majority so often overlooked by previous leaders, Mr Chavez planned to reduce the country's debilitating dependence on oil.


Mr Chavez had the right idea, but the wrong method

It was a worthy aim. The world's fourth-biggest oil exporter, Venezuela relies on petroleum for four-fifths of its exports and one-third of its gross domestic product.

This made a lot of Venezuelans rich, but it also dangerously sucked money away from the rest of the economy.

Hefty crude oil exports artificially boosted the currency, the bolivar, making imports cheap and rendering local manufacturers unable to compete.

Of the country's $3bn-4bn in annual foreign investment, almost every cent went into oil.

... turns nasty

But Mr Chavez saw reforming PDVSA as a political, not merely an economic imperative.

By the 1990s the vast oil firm, he saw, had become a state within a state, siphoning petrodollars away from the country's poor.

He was right, but PDVSA was also "one of the best-run firms in Latin America," says Justine Thody, Latin America analyst at the Economist Intelligence Unit.

The Chavez government starved PDVSA of finance, ramped up the burden of tax and red-tape, and appointed a series of inexperienced political allies to run the firm.

The result was that dollar earnings from oil were down 20% year on year at the beginning of 2002, bringing to an abrupt end years of double-digit growth in the industry.

Bolivar wobbles

And the result of PDVSA's stumble was that Venezuelans started to get seriously nervous about the bolivar.

The middle classes, who had initially welcomed Mr Chavez as the candidate most likely to sweep clean Venezuela's rotten institutions, turned decisively against him.


Sticking up for executives' rights

Between November and February, the central bank spent $7bn trying to prop up the bolivar, as middle-class Venezuelans rushed to change their money into dollars.

The currency was floated in February, and plunged, with the central bank at one point spending $200m a day to keep it afloat.

Inflation, which had fallen as low as 12.5% in 2001, is forecast to jump to nearly 40% this year.

In April, the government poured petrol on the embers by getting rid of 19 senior PDVSA executives who were refusing to play ball with the pro-Chavez board.

Where next?

Whether Mr Chavez intends to go easier on PDVSA in the light of his 48-hour spell in the political wilderness remains to be seen.



Softening his stance would shore up Mr Chavez's political support among the middle classes, but nursing the oil company back to full health would be no easy matter.

The turmoil of recent months has taken its toll on PDVSA's performance.

It has not produced at full tilt since last year, and is likely to need a fresh injection of scarce government funds to get back on its feet.

And last week's events will not make the task of attracting fresh foreign investment to other areas of the economy any easier.


Byron

CV32
28 Jul 06, 12:17
This is not meant to be a "counter-point", but that April 14, 2002 BBC news report is very likely one of the news reports that CEPR seems to think was quite flawed.

Don't get me wrong, I think Chavez is a loonie, but its a little duplicitous for US politicians to frown at Venezuelan arms deals when ... imho ... there's a much more potentially troublesome deal happening with the F-16s (and the AIM-120C5 AMRAAMs) and Pakistan. That one has a lot of potential to come back to haunt America.

Sunburn
29 Jul 06, 14:47
An awful lot of what you read on the press about Chavez these days, be it statistics, "facts" about his personaility or "news" about either popular support for him or unrest against him, is written with an agenda (for or against him, depending on who's the pen) in mind. Venezuela has a pretty oil deposit, and the stakes are important.

Just something to keep in mind.