viernes, 25 de enero de 2019

Russia vs Us (that's us free Venezuelans)





I found it interesting to read today from Andrés Malamud the countries that imported oil from Venezuela in 2016.


Russia nowhere to be seen importing Venezuelan oil. No need, it sits among the largest oil producers in the world.


2016 being a year where Venezuelan oil production was still above 2 million barrels a day and the price of Venezuelan barrel of crude averaged $37.1 (Freight on Board).


In 2017 this average price rose to $46.5. Unfortunately for Nicolas Maduro he needed the price to be at at least $216 per barrel to balance his government's budget. Today production stands at 1.1 million barrels a day.


This is where Russia comes in lending the regime money, necessary for it to stay in power. Loans that by law need to be approved by the legitimate National Assembly, but for practical reasons were solicited directly by the executive branch.
The world as seen through the colors of the Venezuelan flag



Russ Dallen in an interview yesterday to CNBC has this to say about Venezuelan oil output in the past 20 years of Hugo Chavez legacy (Houston based CITGO being 100% owned by the Venezuelan government):

Russ Dallen: —Right, the biggest buyers are CITGO and then Valero, and then Chevron which actually has joint ventures so they're actually not necessarily buying it but getting their share of production and importing it into the United States. But CITGO is the lynchpin and its really, the United States is the only one keeping the lights on because their production has actually fallen. According to OPEC last month, their production has fallen to 1.1 million barrels a day. When Chavez was elected 20 years ago in 1998 Venezuela was producing 3.5 million barrels a day. So in other words, over twenty years when they should have been increasing their production and had plans to take it to five and then 10 million barrels a day, they actually are down to a third of what they were producing twenty years ago. And as a matter of fact, that 1.1 million barrels a day, they first achieved that as a nation in 1946.


My point is that in Venezuela, oil revenues account for 98% of the nation's income. The oil industry is controlled by the state apparatus that has destroyed its producing capacity mainly due to negligence and mismanagement. The state has also destroyed the private sector of the economy for political reasons that only they understand.


In addition, impunity to murder in Venezuela is around 98%, and the murder rate in Venezuela is the largest in the world, in some parts of the nation being 600 murders per 100,000 inhabitants (illegal mining towns in the state of Bolívar, for example).


Its time to reduce all these rates, the oil dependency of the economy, the impunity to crime and the levels of insecurity and murder. Something Russia is demonstrating no interest in taking place in Venezuela.



Russ Dallen discusses Venezuela from CNBC.

Transcript below of CNBC's Brian Sullivan interview with Russ Dallen.

Russ Dallen: —...Shortly, almost seconds and minutes after Guaidó announced that he was the interim president because of fraudulent elections that left doubts about whether Maduro had been rightfully elected, the United States and president Trump immediately recognized him, Canada chimed in moments after and then the rest of Latin America also joined in, most of the countries, except the Cuban acolytes, like Cuba, Nicaragua, Bolivia which are standing by their man.

Brian Sullivan: —He's got the support of much of the world, as you just noticed, he's got the support obviously of hundreds of thousands, if not million plus people in the country of Venezuela, but Maduro has something important, he has the army.

Russ Dallen: —Exactly, exactly. You hit the nail on the head, Brian and its, that's what this is all about. Is whether they can get the army to switch their allegiance and go with Guaidó and the opposition. And they try to make a Constitutional case, for years the Venezuelan regime under Maduro has been just scooting by and disregarding the Constitution and the National Assembly. So they are trying to give the National Guard members who carry the guns a reason to join their side. As part of this they offered an amnesty to them for coming over to their side. They are also trying to force them because the situation in the country is so bad, the average wage has fallen to below 5 dollars a month, not an hour, not a day. 5 dollars a month, you can't feed your family, you can't buy soap for 5 dollars a month. So, either strife on all of the families. Only the generals on the top are making the money because they are involved in narco trafficking and they've been indicted by the U.S., you know an sanctioned by the U.S. for those activities.

Brian Sullivan: —You and I have talked extensively also in the past about CITGO. CITGO of course the Houston based refiner that is owned by the government of Venezuela. It has been under siege in the courts, it has been under siege by a hedge fund, it has been under siege by creditors. Now you've got the possibility of an oil blockade. Do you think ultimately this will signal the end of CITGO's ownership by Venezuela and if so, is that the end of the Venezuelan economy because CITGO provides nearly all of Venezuela's government revenue at this point.

Russ Dallen: —Well they are certainly one of the largest buyers of Venezuelan oil. They are not the only buyers and some of the other buyers have actually stepped away from Venezuela...

Brian Sullivan: —...Chevron, Valero and PBF, all obviously U.S. companies have pulled back but they are still buyers.

Russ Dallen: —Right, the biggest buyers are CITGO and then Valero, and then Chevron which actually has joint ventures so they're actually not necessarily buying it but getting their share of production and importing it into the United States. But CITGO is the lynchpin and its really, the United States is the only one keeping the lights on because their production has actually fallen. According to OPEC last month, their production has fallen to 1.1 million barrels a day. When Chavez was elected 20 years ago in 1998 Venezuela was producing 3.5 million barrels a day. So in other words, over twenty years when they should have been increasing their production and had plans to take it to five and then 10 million barrels a day, they actually are down to a third of what they were producing twenty years ago. And as a matter of fact, that 1.1 million barrels a day, they first achieved that as a nation in 1946.

Brian Sullivan: —Yeah...

Russ Dallen: —So they've fallen so far behind that they are back to what they did in 1946 before we even had modern technology.

Brian Sullivan: —And if that number is even right. When I was in the OPEC meeting, Ross, in Viena a couple of months ago, I looked the Venezuelan oil minister in the eye, I asked him how much they're producing, he said 1.6 and I sort of chuckled internally because every other source has them much less than that. Either way we know OPEC is kind of a game where they're going to put the numbers that they want. Final question Ross is, ultimately, is there a possibility of an upside here in terms of production if the Guaidó administration does succeed in becoming sort of the rule, the official leader of that nation where U.S. companies will re-invest in Venezuela and put some much needed capital into a deteriorating oil infrastructure.

Russ Dallen: —There is a huge upside, Brian. You can't imagine. You can walk around in Venezuela, stick an umbrella in the ground and find oil. So its easy to get the oil out of the ground, so the sky is limit[less], it could be the gold rush of the 1840's in California, in America. If the right government was put back into place. If we get a democratic government that follows legal, you know legal property rights and those things which the current government has not, which is why they've taken the country with the largest oil reserves in the world and brought it to bankruptcy.





Tom Keene, Bloomberg Surveillance Podcast (Min. 7:38): —...With the economy minister of Russia, here he is, Jon Ferro.

Jonathan Ferro, Bloomberg Surveillance: —Thank you very much as we wrap up our week in Davos, Switzerland to the World Economic Forum I am pleased to be now joined by the Russian economy minister, Maxim Oreshkin. Minister, great to catch up with you.

Maxim Oreshkin: —Yes.

Jonathan Ferro: —Initially we did not think you would be coming because a committee here at Davos were banning three prominent Russian businessmen and here you are. I believe you are the leader of the delegation here for Russia. How have you been received through the week? How has it been?

Maxim Oreshkin: —Well everything was perfect, a lot of collateral meetings with other countries, with companies, so, everything was good.

Jonathan Ferro: —The sanctions on Russia from the Europeans and from the United States are still there, what kind of an impact have they had for the moment?

Maxim Oreshkin: —Well it is a different kind of story, the sanctions, you know, the mood from the U.S. side and from the European side is already different because, you know, Europe is trying these days to be more independent, to care for its independent policies so it is already a different story.

Jonathan Ferro: —How do you see that playing in the sense of removal of sanctions? Do you think the Europeans will move them back?

Maxim Oreshkin: —Well we are not talking about that. We are talking about improving our relations, improving our trade. If you look at the past couple of years the volume of trade between Russia and Europe: plus 40%. So it is a question of dynamics, it is also investment, it is also, you know, cooperation in the ecological agenda, so it is moving on.

Jonathan Ferro: —So you are clear, enjoying a clear distinction between the policies of the Europeans and the United States. Are you more hopeful about the relationship with Europe than with the United States?

Maxim Oreshkin: —Well, what we see is that Europe is becoming much more pragmatic. Of course, two main factors are behind that. The BREXIT from one side and the actions from the U.S. side, for example the tariffs that they implemented on the Europe in the terms of steel and aluminum so all those steps forces the Europe to be more pragmatic and more oriented on its own goals.

Jonathan Ferro: —So the objects might look better, what does it mean for the substance? What is your base case for what is going to happen? The relationship between Europe and Russia?

Maxim Oreshkin: —Well, what we are doing is actually, like I said, trade to know is growing. We have, you know, a number of big investment projects in Europe which we are doing with our European partners. It is the North Stream, we are building a couple of nuclear plants, it is in Finland, it is in Hungary. We are doing joint projects with mainly French companies and other companies in the Russian north, arctic energy. So you know, the cooperation is growing step by step.

Jonathan Ferro: —Some people from the outside looking in might say that the Russian economy, the trend of where things are heading is not great at the moment. What do you say back to that? What is your read on the economy that at the moment?

Maxim Oreshkin: —Well, our estimate of the growth potency is unit 2% growth and towards what we have created in the past couple of years is sustainable and stable growth going forward. On per capita basis it is the same pace as the world is growing so it is more than 2% because we have negative demographic tendency in Russia and we actually prefer to have a stable longer term dynamic rather than to have plus seven, minus six volatility.

Jonathan Ferro: —Do you have accommodative monetary policy at the moment?

Maxim Oreshkin: —Well, the monetary policy is purely aimed at delivering stable inflation dynamics. We have a target of 4% and the recent data for 2018 its 4.3, so we are at the target level.

Jonathan Ferro: —There is often down side-ristic growth, we see that in Russia too, you have had a couple of rate hikes at the back end of last year coming to this year as well. How is that helpful?

Maxim Oreshkin: —Well, we expect that this year growth in Russia will be current so we expect only 1.3% because there are of course external factors, the global growth is slowing substantially, but there are also some internal factors. We for example addressing long term issues, we have increased VAT beginning this January the 1st so it will be weighing negatively on the growth dynamic, especially in the first quarter.

Jonathan Ferro: —One of the global factors is oil. Oil is stabilized, Russia is quite clearly...

Maxim Oreshkin: —Oil is not issue any more for Russia, because, you know, 4 years ago it was $115 per barrel...

Jonathan Ferro: —Yeah.

Maxim Oreshkin: —oil price that is needed for...

Jonathan Ferro: —Then, minister, let me get to the question...

Maxim Oreshkin: —Now its is $45...

Jonathan Ferro: —Let me get to the question first and talk about the relationship with OPEC. Clearly it is a relationship that is built up over the last year. Is it a relationship that you see working in the future as well? Something that we can solidify in the coming years?

Maxim Oreshkin: —It is definitely a long term relationship. We always pursue long term relationships with any partner that we have with different agenda. So our pick is not something unique. So we will be doing term relations with OPEC.

Jonathan Ferro (Min. 11:48): —So I want to talk about you relations with another big oil producer, Venezuela. The United States no longer recognizes Maduro as the leader of that country. Some reports this morning suggesting that the Europeans are moving towards doing the same thing. Russia has said to the United States not to intervene in this situation with Venezuela. What is the economic relationship with Venezuela at the moment? How much money do they owe you?

Maxim Oreshkin: —So you actually ask the question that should not be asked to the ministry of economy but more to the ministry of foreign affairs. Of course there are some relations in terms of... especially the oil industry, between Russia and Venezuela. So that is the only thing...

Jonathan Ferro: —I am asking the economy minister what the economic relationship is with Venezuela.

Maxim Oreshkin: —Well, in terms of what impact it will have on Russia’s growth. Close to zero.

Jonathan Ferro: —Yeah. And the oil price, what could happen there if Venezuela, ultimately if Maduro gets toppled?

Maxim Oreshkin: —Well, a lot of factors which are impacting the dynamics of the oil market. What we expect is that oil prices will of course not go up, but unlikely they will go dramatically lower than what we see these days. But for us it is not a … more because the oil price that is needed for the Russian economy is around $40-$45 per barrel.

Jonathan Ferro: —And the relationship, the economic relationship seemingly not important either, from what you have just said?

Maxim Oreshkin: —Well, relations with Europe, of course, with China, with Japan, with India, there is a big list of countries ahead of Venezuela.

Jonathan Ferro: —The Russian economy minister there, Maxim Oreshkin, joining us from Davos, Switzerland. Sir, thank you very much. Guys, back to you.

Tom Keene, Bloomberg Surveillance Podcast (Min. 13:15): —Jon Ferro, thank you so much to you. We appreciate that, this morning speaking with the economy minister of Russia.

Tom Keene, Bloomberg Surveillance Podcast (Min. 13:30): — Connection to our interview of the day for days ago, it is the interview of the day for the United States of America, for Canada, for North America and for all of South America as Venezuela unwinds. Ricardo Hausmann is our definitive Latin American economist of his Venezuela, the former Venezuelan minister of planning, former head of the presidential office on coordination and planning and on short notice the gentleman that founded the phrase “Original Sin”with Barry Eichengreen, joins us. What was Mr. Maduro’s “Original Sin”?

Ricardo Hausmann: —Well, he has many but his latest one and the one that is most significant for the present is the fact that he stole the election in May of this year [2018] for a second term which was supposed to start on January 10th [2019]. Because no country, no decent country recognizes that election, as of January 10th he is no longer perceived as the legitimate president of Venezuela. And according to the Constitution, if there is no president...

Tom Keene: — Right.

Ricardo Hausmann: —...the president of the National Assembly has to take over on an interim basis to organize a transition back to an electoral solution.

Tom Keene: — You are wired into this as no one I know. Let me get the score right now. Mr. Maduro has the support of the generals, the senior generals, and the gentleman taking over has the support of America, Canada, but does he have the support of the military?

Ricardo Hausmann: —So the president who is taking over, has the legitimacy, the institutional legitimacy of having been elected by the National Assembly that was popularly elected as original legitimacy. So first he has that support. He has the institutional support as the only elected power in the country right now. Number two, he has massive popular support. We have seen these enormous demonstrations on January 23rd...

Tom Keene: —Even the military away from the generals?

Ricardo Hausmann: —One second, ha has massive international support. I just heard a few minutes ago that EU decided to recognize Guaidó as the president of the country, that follows on Canada, the U.S., Costa Rica, Panama, Colombia, Ecuador, Peru, Chile, Argentina, Brazil...

Tom Keene: — Yeah.

Ricardo Hausmann: —Even Albania has come out in support of Guaidó. So, he has massive international support. The only support that he is lacking at the present is military support. And the military are several hundred thousand people. They live in Venezuela, they on average think like Venezuelans, so this is the attempt of Maduro and his top clique to maintain to power because it essentially a criminal organization.





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