GBRV ANNOUNCES FORMATION OF JOINT DEVELOPMENT BANK

C O N F I D E N T I A L CARACAS 001562 SIPDIS HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR RJARPE NSC FOR JSHRIER COMMERCE FOR 4431/MAC/WH/MCAMERON E.O. 12958: DECL: 11/10/2018 TAGS: ECON EFIN VE SUBJECT: GBRV ANNOUNCES FORMATION OF JOINT DEVELOPMENT BANK WITH RUSSIA Classified By: Economic Counselor Darnall Steuart for reasons 1.4 (b) and (d). ¶1. (U) The Government of the Bolivarian Republic of Venezuela (GBRV) announced November 8 that Russia and Venezuela had agreed to create a binational bank and that Finance Minister Ali Rodriguez would travel to Russia the following week to finalize details. Rodriguez and an official from Russia's Ministry of Finance signed a memorandum of understanding for the bank's establishment during the conclusion of the fifth meeting of the Russia-Venezuela High-Level Intergovernmental Commission. A GBRV press release said the bank would have an initial capital of USD 4 billion but did not specify the amount of each country's contribution. It appears the bank would finance development projects in Venezuela. ¶2. (C) Comment: While this announcement reflects the GBRV's desire to establish closer ties with Russia, it is unlikely that this proposed bank will be operational in the near future. The GBRV has inked agreements creating, or intending to create, a number of banks and funds in line with its international diplomacy, including Banco del Sur, ALBA (Bolivarian Alternative for the Americas) bank, a binational Venezuelan-Iranian bank, and the China-Venezuela joint fund. These initiatives have not yet shown tangible results in Venezuela, although the GBRV has received a USD 4 billion loan from China for the latter fund. If oil prices remain where they currently are, the GBRV will need hard currency to prop up the Venezuelan economy in the coming year and will have only limited access to international financial markets. It will be interesting to see whether the Russians are willing to help finance the GBRV and, if so, on what terms. End comment. GENNATIEMPO