Archive for September 13th, 2009

Venezuela’s tangled financial and nuclear relations with Iran

September 13, 2009

Iran Venezuela

Chavez came back and he is clearly noticing the criticism of the high expenses of his trip as he spent time defending why these trips are expensive and why they are needed. He never explained why he needs luxurious accommodations, 50 bodyguards or three jet planes to follow him. He also used the reverse logic that he had hoped he did not have to buy weapons, but the US Empire forces him to, as if the weapons he acquired were comparable to what the US has or as if they were designed to defend Venezuela from the US.

Separately, there were a lot of news about Venezuela and Iran and a sort of mixture of news on Venezuela’s nuclear program with Iran. The financial aspects are covered in the widely disseminated Margenthau report and the nuclear aspects by announcements made during Chavez’s trips. To me it is clear that one should separate the two. To begin with Chavez never misses an opportunity to talk about the nuclear program, while the Iranian bank was hailed as an idea only when it was created as a local development bank. Since then, little is said about it and little is known about it. One is a show, the other has a real purpose.

In any collaboration like the Iran-Venezuela collaboration, programs are either done altruistically or they are done because each side will benefit somehow from it. In the financial cooperation between the two countries, it is clear that given the restriction against Iran in the Western banking system, using Venezuela’s State banks as a conduit for transactions which would be banned otherwise is desirable to Iran. What Venezuela gains from that is first of all goodwill with a country that Chavez wants to be close to, but more importantly, there will be charges (and commissions I am sure!) to Iran for channeling money via Venezuela’s banks or even the Government to the US or elsewhere.

If one looks at the financial statements of the Iranian local bank, it is a tiny operation in Venezuela, but one does not know what other operations are handled in, for example, foreign currency, which are not registered locally. Banco Industrial de Venezuela, a fully owned bank of the Venezuelan Government could, for example, be used by the Iranian bank, given that Banco Industrial has offices in New York and Miami, where transactions and payments could be channeled under the guise of being done for Venezuelan companies or even for the Government.

Thus, there are reasons while both countries might want to do it and the financial cooperation is more than just a show.

But in the short or even medium term, I can not take Chavez’ nuclear program very seriously, beyond the exhibitionist aspects of it. There are all sorts of stories that hang around about Uranium exploration and the like, but I just don’t believe it. I don’t think Iran needs Venezuela’s uranium The same way that I do not see any connection between Iran’s nuclear program and Venezuela’s. In fact, it was interesting to hear Chavez talk today about his “peaceful nuclear energy cooperation” with Russia. For the very simple reason that these are the types of agreements that are talk and no action. And so far, that is all they have been. (Funny that Chavez says “we are going to start developing nuclear science”, in the context of modern Venezuela, that was one of the first fields of science to be developed in the 50′ and 60’s. Venezuela owned a small research nuclear reactor the RV-1 built by GE, it shut down and then became obsolete)

To do anything in the nuclear field, you need people and very simply, Venezuela does not have them. It would take years for Venezuela to put together a group of nuclear scientists to perform a small project whether peaceful or not. Unfortunately, educating high level people like that has not been and is not a priority right now and there is no local talent available to even begin doing it locally. The Venezuelan science establishment is getting old and in nuclear physics in particular, the people I know of are mostly retired or in the process of retiring and there are few people coming up below them.

The reasons are multiple, but they go from lack of opportunities,to lack of funding, to better opportunties abroad, to lack of scholarships, to the fact that it was never a terribly important field in Venezuela despite there being a small nuclear reactor (today dismantled) at IVIC.

For the Iranians, this is no big opportunity. They have no equipment to sell and I am sure they have no people to spare in their own nuclear program given how ambitious it is and the pressure to obtain results. The number of Iranians with advanced degrees in Physics are large compared to Venezuela’s, but they can’t be spared.

So to me, this is part of the Chavez show, he knows that using the word nuclear scares others, while it helps his revolutionary aura in Latin America. But a Government that can’t even build homes, or roads, or maintain hospitals, is far from being capable of carrying out a significant nuclear project for a few years.

The only thing that would change my mind on this was to learn that the country was importing huge numbers of experts from other countries for such a project. But even in this case, you would require a team of local experts to coordinate, plan and supervise and even the existence of such a team would require a level of planning and perseverance that has not been the hallmark of Chavismo management.

Thus, follow the Iranian money through Venezuela, but forget about Venezuela’s possible nuclear capabilities unless a large and dedicated human resources program is undertaken by the Chavez administration. As far as I can tell, this does not even exist.