A VIEW OF VENEZUELAN ARMS PURCHASES FROM RUSSIA

C O N F I D E N T I A L CARACAS 003434

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NSC FOR BARTON
SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 11/03/2014
TAGS: PARM PREL ETRD VE RU
SUBJECT: A VIEW OF VENEZUELAN ARMS PURCHASES FROM RUSSIA

REF: A. CARACAS 3230

B. CARACAS 3031

Classified By: ECONOMIC COUNSELOR RICHARD M. SANDERS. REASONS 1.4(B) AN
D (D).

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Summary
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1. (C) According to Jose Rafael Gomez, a former
Presidential staffer who participated in Vice President
Rangel's recent trip to Moscow, the Venezuelan-Russian deal
for MI-17 helicopters is not yet final because of financial
issues, and might go forward initially at least with a
limited number. He thought that the eventual sale of MIG-29
fighters might go forward in one year. Gomez also advised
that he was returning in a senior capacity to Chavez's staff.
End summary.

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Copters -- Money Issues
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2. (C) In a November 2 conversation, Jose Rafael Gomez
(see bio below) discussed with econcouns Vice President Jose
Vicente Rangel's October 2-6 trip to Moscow (ref A). Gomez,
who participated in the trip, said that arms sales were the
only matter of substance considered during the visit. He
said that the deal to purchase MI-17 helicopters was not,
despite news reports to the contrary, finalized. The
problem, he went on, was the fact that the Russians wanted
immediate cash payment, while the GOV was seeking softer
terms.


3. (C) Asked about the published accounts that the deal
could entail counter-trade, i.e. payment of oil from state
petroleum enterprise PDVSA or aluminum from state industrial
enterprise CVG, Gomez was skeptical. He said that these
state enterprises were strongly resisting the idea that they
take a hit to their bottom line by giving up assets belonging
to them in exchange for equipment which would benefit the
Defense Ministry. Gomez's bottom line: the GOV would find
"a hundred and some odd" million dollars and buy the first
ten helicopters. Others would have to wait. (Note: This is
consistent with Rangel's public remarks which spoke of ten
helicopters. End note.) He was doubtful whether any legally
binding contract would be signed during Chavez's short trip
to Moscow in December.

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Fighters - Maybe in a Year
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4. (C) However, Gomez refused to conclude from the
difficulties with the helicopter sale that a sale of MIG-29
fighters (see ref B) was not in the cards. Paradoxically, he
suggested, financing was likely to be easier for a big ticket
fighter purchase than for the helicopters. He suggested that
the USG's restrictions on upgrades as part of a refit of
Venezuela's existing fleet of F-16's and the absence of
Eximbank financing for arms purchases were pushing the GOV in
this direction. Also, the Army, Navy, and National Guard
were being given funding for equipment purchases and the Air
Force could not be left behind. He admitted to some desire
at the political level to diversify Venezuela's defense
purchasing away from it traditional U.S. orientation, but
said that there was a strong desire to maintain the range of
existing U.S. equipment in operable condition. He thought
that the MIG-29 initial contract could go forward as quickly
as within one year.

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Bio - A Rising Star at Miraflores
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5. (C) Gomez, told econcouns that he had been named as
President Chavez's senior staffer ("jefe del despacho") for
inter-institutional affairs, a position, he said in which
protocol, scheduling, and substantive follow-up with
ministries would come under his authority. Earlier in the
Chavez administration, he had served as a lower ranking
staffer ("commisionado") in the Presidency where he had had
some contact with the Embassy. More recently he has been in
the private sector as a "consultant," while retaining

informal ties to the GOV. (He showed econcouns a Defense
Ministry identification badge, in which he had the title of
"ambassador.") It has been suggested to us that Gomez,
while in the private sector, was involved in the emerging
Russian helicopter deal, and may yet profit from it. Gomez,
a former Army cadet, said that Chavez had been his
instructor. He is 38, and separated from his wife and
children who live in Miami. He has a valid U.S. B1/B2 visa.
He advised that he has studied at Harvard's Kennedy School,
and that his father had worked for the United Nations,
including at the Economic Commission for Latin America and
the Caribbean (CEPAL/ECLAC) in Chile.

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Comment
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6. (C) Gomez, whom econcouns met through a business
contact, repeatedly stressed the need for the U.S. to resume
Eximbank programs as a way to maintain relations with the
Armed Forces and to signal the USG's desire for improved
relations. He appeared a bit surprised at the suggestion
that the USG might want to see some signals from the
Venezuelan side. Career, money, and personal ties appear to
bind him to Chavez's "revolution" rather than ideology.

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DAO Comment
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7. (C) If Venezuela immediately starts the acquisition
process for the MIGs, we believe it would take at a minimum
one year before an actual contract is signed and at least two
more years before Venezuela receives the MIGs and up to three
years before the full fleet is delivered and personnel are
trained to a minimum level of competence.

Brownfield


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2004CARACA03434 - CONFIDENTIAL