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.

21 Responses to “Venezuela’s tangled financial and nuclear relations with Iran”

  1. […] “Econoffs“, exactly what I have said publicly in my blog many times (like, for example, here) that Venezuela does not have the scientific capabilities to do a nuclear program. In fact. I am […]

  2. m_astera Says:

    Thanks for your answer about food irradiation, Miguel.

    What I have seen, from Hawaii, is that it kills the enzymes, which means the pineapples and other fruit don’t ripen as they should. They don’t get sweet after they are picked.


  3. […] Welcome to the Carnival of Latin America and the Caribbean. The big news of the week: Hugo Chavez’s tour and weapons purchases. Read The Economist’s report, Venezuela’s foreign policy: Friends in low places Hugo Chávez dreams of forging a new world order and Venezuela’s tangled financial and nuclear relations with Iran […]

  4. GWEH Says:

    impracticle and obsolete? In 1999 we lost an F-117 “STEALTH” bomber to the Serbs who were using modified 1960’s Russian missile batteries. FYI, the Ruskies make the best air defense missile systems in the world. They also make the best assault rifle of all time: the AK. You may have heard this, Chavez bought a lot of them. The Russians make some of the best helicopters too for the money… they are in civilian and military use throughout all Latam.

    Despite the fact the international arms sales are lopsided in favor of the Americans (by over $70 billion in 2008), the Russian continue to make formidable hardware.

  5. concerned Says:

    I wouldn’t worry about the weapons. They are impracticle and obsolete. What I would worry about is another chunk of Venezuela resources was just given away on the whim of a enlarged ego, bumbling clown. 2.2 billion line of credit to a known credit risk? Another piece of the delta gone to cover the bill. For a government that boasts that now Venezuela is for all Venezuelans, it sure is giving away large chunks to anyone willing to keep this revolution afloat.

  6. Kepler Says:

    I wrote on the weapons here

    I agree with Gweh the main thing are the commissions. Still, the amount is staggering.
    I don’t see how Hugo can use those tanks in Guyana, though.
    It is jungle out there. It would be seen as the attack on a poor neighbour. No way.

    Some people convinced Hugo he can use those weapons against us.
    Their real motivation is the money they get in the deals.

  7. GWEH Says:

    In his last TV show, Chavez announced held up a slide of Russian MLRS (multiple launch rocket system) while giving mismatching info. I don’t know if anyone has picked up on this but what the heck does Venezuela need MLRS for? This is an offensive weapon that launches unguided rockets containing cluster bombs over a large swath 70-90Km away.

    MLRS is a controversial weapon system and US guidelines are to use in open spaces. Israel did otherwise during second Lebanon war raining millions of cluster bomblets on Lebanon and leaving about 500,000 unexploded behind in urban areas creating a nightmare for cleanup crews.

    I cannot see any reasoning for MLRS in Venezuela. Not Colombia nor Guyana.

  8. GWEH Says:

    The buying of new tanks, helicopters, jets, subs, etc is the buying of a new ‘weapons system.’ GeronL is correct in that these new weapon systems will require training, support and maintenance. Today only two of the Sukhois are 100% operational. The Sukhois require significantly more money and manpower to maintain than their General Dynamics F-16 counterparts. The engines in the Sukhois need overhauling after only 1,500 hours… that is poor by modern standards.

    Another example: there has been a high-incident rate involving Russian helicopters in Venezuela with several incidents resulting in complete loss of equipment and personnel. The Ruskies are concerned as they don’t want their flagship export products to get a bad reputation. The most severe incidents have been attributed to pilot errors not knowing how to get out of bad weather situations such as ‘air pockets.’

  9. GWEH Says:

    PS the immidiate bottom line on weapons purchases is commissions. Many Generals will make handsome profit of this … Chavez’s way of buying loyalty.

  10. GWEH Says:

    GeronL, the Guajira penisula is tank country but they would get decimated by anti-tank weapons. The tanks can be used for a future Guyana invasion. Case in point are the Sukhois stationed in Barcelona against the wishes of the Russians (too close to the sea – corrosion) but Chavez wants them within striking distance of Guyana. Hard to say but Chavez will keep the Essequibo option open. He changed the name of the country, the flag, the coat of arms, only the map is left.

  11. moctavio Says:

    There has been a department of “Food Irradiation” (Irradiacion de Alimentos) at IVIC for many years, where people study the effects of irradiation on such things as ripening of fruits, decay, steriization and the like. I dont know if the laboratory still exists, but it did from the 60’s until the 80’s or 90’s. They mostly use Co-60 sourcs and irradiation chambers to see the effects on tropical fruits. This was a popular reasearch subject in the 60’s and 70’s havent followed it since (Did not follow it then, except it was done in the same building I worked)

  12. m_astera Says:


    Food irradiation, in Venezuela? My work is in food. This is the first I have heard of irradiation here. Please explain.

    Michael A

  13. […] much identical ro that of the metropolitan centers, is really annoyed at Hugo. Miguel Octavio irately points out that He never explained why he needs luxurious accommodations, 50 bodyguards or three jet […]

  14. concerned Says:

    The reserves of oil and gas along with the immense capacity for hydroelectric power are more than adequate to negate the need for nuclear power generation. Don’t be fooled by this as an argument for “peaceful” nuclear. Chavez just wants to be able to sit at the big boys table. He is way to combative to be allowed to get to that level. The current incompetence throughout all forms of government run electrical and oil / gas production should serve as a warning that any attempt to operate a nuclear reactor would be similar to Homer Simpson resulting in another Chernoble or the much feared China Syndrome. How about that for a carbon footprint?

  15. Gerry Says:

    Never mind about the carbon footprint, it is the disposal of spent fuel.
    Where do we put it safely? Dirty bomb material?
    What is the quantity and the half life?

  16. Luigi Says:

    Just wondering if anyone knows the general cost of a kw of peaceful nuclear power? Mining and refining fuel can’t be cheep, how much oil is used in that process? What is the carbon foot print of a kw of clean nuclear power anyway? It is pretty clear that if the byproduct is weapons the cost if offset by the arms sellers? Ever wonder if that is the real reason that the west gets all excited when some one starts up a peaceful nuclear program? They know it is actually cheeper and about as green to use coal, gas, or oil. What do you think?

  17. Kepler Says:

    I was doing some maths. A T-72 costs 1 to 2 million dollars.
    Let’s put it at 2.
    2 x 92 = 184.
    184 million euros. Imagine spare parts and service duplicates the price (no idea, but). That would go for 400 million at most. OK, there are some “little rockets”. I haven’t found out the price but all in all I think the boliburgueses are getting the biggest chunk.

  18. Deanna Says:

    Miguel, I agree that there are not enough people in Venezuela who are specialized in nuclear physics. The only one I really know about is my husband’s uncle and he has been retired for some time now. In the meantime, he got another degree in a completely different field and is doing academic writing.

  19. Kepler Says:

    I wrote on that in my English blog:

    I simply think some Boliburgueses convinced Hugo there would be a revolt inside and those tanks would be handy and those people got some euros from the Ruskiye and the threat of the US or Swiss or whatever is Hugo’s inconsistent explanation to the world, as he has already said what he needs is an asymmetrical war (and he has his Kalashnikovs for that)

  20. GeronL Says:

    I read somewhere that Venezuela is going to buy weapons from Russia, including 92 tanks. The only neighbor I can see him attacking is Colombia. But the border region is not very nice for tanks is it?

    Maintaining these tanks will require parts and training crews to use them will probably require “advisors”. In the end these tanks are probably going to be used for Caracas May Day Parades and probably used for a Presidential Guard type mini-army.

    Just my thought. Yours?

  21. GWEH Says:

    Miguel, I think most know Bolivarian Venezuela is not capable of mounting any type of nuclear program but this does not eliminate the possibility of nuclear weapon proliferation.

    All it takes is Chavez with one bomb and all bets are off. It’s the best anti-military action insurance policy on earth. Chavez does not need to advertise the bomb. We will know he has it and nobody will know how many and where.

    The stories of nuclear tipped missiles in Venezuela… this is fiction right now. Iranian missiles of any kind much less future nuclear tipped models will never see Venezuela as that is cause for war.

    What you may see is the covert transfer of components or finished warhead among all the cargo travelling back and forth. Impossible for the US and allies to stop.

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