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Are Russia's Arms Deals to Venezuela Destablizing Central America? 
 
Yesterday afternoon, Russia's RIA Novosti Spanish wire service reported on the arrival of the Deputy 
Prime Minister and Rosneft Chairman Igor Sechin to Caracas, Venezuela. The reason for the trip of 
Russia's energy czar (and leader of the "siloviki" network of former KGB officers), according to the 
Kremlin news outlet, was to prepare for Hugo Chávez's upcoming visit to Moscow and a high-level inter-
governmental commission to be held in St. Petersburg. 
By the end of the day, Sechin had already inked many deals, conveniently for himself and for Russia, 
with the Venezuelan government -- Bloomberg reports that Russia and Venezuela signed wide-ranging 
cooperation accords on energy, military, and agricultural cooperation, including the formation of a joint 
venture between PDVSA-Services and Gazprom's Latin America division. What does Sechin personally 
get out of the trip? He took a trip with his PDVSA counterpart Rafael Ramirez out to the Orinoco Belt to 
see an oil field which was once owned by U.S. firm ConocoPhillips before expropriation, announcing 
plans to unveil another joint venture to develop it with with Rosneft in September. 
Joint ventures and big-sounding cooperation agreements are a familiar sight to observers of Russia-
Venezuela relations, and the two countries have even formed a $4 billion development bank. But other 
than arms purchases, the trade volume hasn't yet caught up. Venezuela still exports some 60% of its oil 
to the United States, comprising 11% of U.S. supply. The U.S. is by far their largest trade partner, and 
Russia's volumes don't even yet compete with China's business with Venezuela. 
The reason for all this fuss, of course, is that the relationship is highly political. For the Russians, there is 
a clear desire to poke Washington in the eye after Vice President Joseph Biden's visit to the Ukraine and 
Georgia -- Sechin seems dead-set on proving Hillary Clinton right that no spheres of influence exist. 
More than just the immense enjoyment that Chávez must feel in passing an oil field taken directly from 
an American company into the hands of a Russian company, there is also a strong and growing military 
dimension to the relationship to the tune of $4.4 billion. A Swedish think tank estimates a 900% growth in 
arms purchases in the last five-year period, making Venezuela the #1 buyer of Russian arms in the 
world. 
Hugo Chávez should be honored to have such a high ranking official from the Kremlin to help him 
"prepare" for his next visit to Moscow -- Sechin is estimated by many Kremlinologists to have much more 
clout, and many more billions, than President Dmitry Medvedev himself. Sechin is the main figure 
running Russia's Latin America policy, as he is rumored to be fluent in both Spanish and Portuguese 
from his KGB days in Africa.  
Controversy seems to follow the man wherever he goes. Many point to him as being the main 
conspirator and beneficiary behind the Kremlin's takeover of the Yukos oil company - a multi-billion dollar 
daylight robbery. The Rosneft chairman has also come under fire for what many believe to be a non-
sensical deal with the Chinese, passing them control of the future of Russian oil. The economist 
Konstantin Sonin has written that "Sechin's contract with China might go down in history like the 
notorious privatization auctions of the early 1990s." 
The timing of his visit -- along with the high tensions over Honduras following the coup -- raises some 
concerns over the uptick in military hardware transfers between Moscow and Caracas. The Venezuelan 
President recently made several comments about doubling his orders of T-90 battle tanks from Russia. 
The Kremlin recently sent the battleship Peter the Great to carry out war games with Venezuela in the 
Caribbean. Venezuela is the only country in Latin America with a license to manufacture their own 
Kalashnikovs, a fact which is very worrying to the Colombian government when so many of these small 
arms seem to go missing. A Colombian newspaper also ran a report this month about a Venezuelan 
contact attempting to sell 20 Russian-made surface-to-air missiles on the black market. 
What the United States may be worried about with this visit is Russia's potential acquiescence to 
Chávez's apparent plan to disrupt the attempts to broker a deal on behalf of former Costa Rican 
President Oscar Arias. Under instructions from Chávez, Zelaya has ignored all advice from Arias, and 
made many high risk stunts, including crossing over the border for a few minutes amid teeming crowds 
this past weekend (Christopher Sabatini from the Council of the Americas describes Zelaya's actions as 
"tragic silliness"). Many observers believe that Chávez and Zelaya "need more dead Hondurans" to 
produce the outcome they are looking for. 
There can be no doubt of two facts: this level of arms purchases by Chávez defeats the narrative that he 
is about protecting the interests of the poor and underprivileged of Venezuela, and secondly, there are 
individuals seeking improper personal enrichment through their powers of office. The grotesque level of 
corruption in both Russia and Venezuela should stimulate the discussion as to whether the predatory 
nature of both states constitutes not only an international crime, but as well a breach of fundamental 
human rights for which there may indeed be remedies under international law. 
Robert Amsterdam 
International Lawyer on emerging markets, politics of business, and rule of law 
Posted: July 28, 2009 05:57 AM  
http://www.huffingtonpost.com/robert-amsterdam/are-russias-arms-deals-to_b_245993.html 


English

Are Russia's arms deals to Venezuela destablizing Central America?

Atamanov, Aziz

Mogilevsky, Roman

        3/2009                                             April 2009   
www.case-research.eu
CASE Network E-briefs
During the last two decades the countries that make up the 
Commonwealth of Independent States (CIS) have received 
billions of dollars in development aid from a multitude of in-
ternational development organizations and bilateral donors. 
Over $1 billion per year has come in the form of technical as-
sistance (TA).  While technical assistance projects have played 
a positive and important role in the economic transformation 
of the CIS, there is growing concern that problems have accu-
mulated in the area of technical cooperation (TC) between do-
nors, providers and recipients in the host countries.  In order 
to improve the effectiveness of technical cooperation in the 
CIS, an increase in communication and understanding, recog-
nition and coordination of interests between all TC stakehold-
ers, and a reduction in the substantial information gap that 
exists between the various participants, is called for. Address-
ing these issues could have a crucial impact on the success of 
future development assistance projects.    
Dynamics of Technical cooperaTion flows To cis 
counTries
Technical assistance is provided by a variety of bilateral and 
multilateral donor agencies, includes recipients within both 
government entities and civil society, and contains multiple 
management models. As a result, it is very difficult to draw 
a comprehensive picture on the overall effectiveness of tech-
nical cooperation within the CIS. Nevertheless, available data 
does allow some insight into TC patterns in the region.
According to the Organization for Economic Co-operation and 
Development (OECD), between 1992 and 2004 CIS countries 
received as much as $14.6 billion dollars in TC from all of its 
donors. The overall contribution of the European Commis-
sion and EU member states (on a bilateral basis) constituted 
$5.6 billion, or almost 40% of total TC received. The peak of 
these flows came during the late 1990’s, when donors began 
to fully understand the extent of the development problems 
facing CIS countries as well as target high priority areas.  By 
the 2000’s the need for TC in the CIS gradually diminished due 
to the completion of several transition projects and decrease 
in demand for TC flows into Russia.
Among donor countries, the United States tops the list of pro-
viders of TA resources for the CIS, contributing almost 60% of 
total TA supplied. Germany follows in second position, having 
provided more funding than all other European Union coun-
tries combined. This reflects Germany’s continued interest in 
developing strong ties with the EU’s “Eastern Neighborhood” 
and Central Asian countries. Turkey, although not a major 
global donor, is the third largest TA contributor to the CIS. 
Turkey has strategic interests in the region, specifically build-
ing stronger relations with Azerbaijan and other resource rich 
countries in Central Asia.  
Analysis of sector distribution of TA to the CIS shows that the 
majority of TA (57%) has gone to support and develop CIS so-
cial sectors.  Large inflows of TA into social sectors stem from 
Technical Assistance to CIS Countries
by Roman Mogilevsky and Aziz Atamanov
Figure 1: Differences in TA supply per capita between CIS countries in 2006
0
10
20
30
40
50
60
70
80
Armenia Georgia Kyrgyz Republic Turkmenistan Belarus Uzbekistan
Three CIS countries receiving largest TA Three CIS countries receiving smallest TA
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
TA per capita, USD (2006, lhs) HF economic freedom score (2007, lhs) Average EBRD transition index (2007, rhs)
Sources: OECD, EBRD, Heritage Foundation, authors’ calculations
       3/2009                                             April 2009   
www.case-research.eu
the fact that as former Soviet republics, the CIS had already a 
well developed and resource-consuming social infrastructure. 
As a result, the CIS faced an acute necessity to reform and 
modernize their social systems in order to make them more 
manageable and affordable given the region’s new economic 
and social environment.
Distribution of TA by recipient country is highly uneven. By 
far the two largest TA recipients have been Russia (50%) and 
Ukraine (24%). Among smaller CIS countries, in per capita 
terms, Armenia received 11 times more TA than Uzbekistan. 
Per capita TA amounts are thought to be correlated to various 
transition indicators including those identified by the Europe-
an Bank for Reconstruction and Development (EBRD) and the 
Heritage Foundation’s rankings on economic freedom.  Based 
on these indicators, the willingness of recipient country gov-
ernments to implement market-oriented and democratic re-
forms has been a key factor influencing the relative size of TA 
received by individual CIS countries. The amount of TA funds 
can be quite large. In some smaller CIS countries such as Ar-
menia and Georgia the annual amount of TA is comparable to 
or even exceeds government budget allocations for the entire 
public administration system.  
main criTicisms of Technical cooperaTion 
While there is little doubt that technical assistance from in-
ternational donors has made a positive contribution to the 
political, economic, and social development of the CIS, many 
believe there is room for improvement.  For one, several de-
velopment experts think that technical assistance is imposed 
from the donors’ side without conducting an adequate needs 
assessment of project design and implementation from the 
beneficiary’s perspective. Second, many technical assistance 
projects have unrealistic timeframes and too often focus on 
short-term goals.  These projects also tend to have an over-
reliance on external consultants from donor country suppliers, 
thus limiting the development and weakening the capacity of 
domestic experts.  It also results in the establishment of paral-
lel pay structures within government bodies. Finally, some de-
velopment professionals feel that many donors ignore cultural 
differences and social norms which lead to the breakdown of 
technical cooperation between them and aid recipients.  
performance of Technical cooperaTion wiTh cis 
counTries
The assessment of TC performance and its impact on the de-
velopment of CIS countries can be difficult, especially since it 
is not the only factor determining successful transition poli-
cies.  According to the EBRD the progress of transition in CIS 
countries appears to be much more modest compared with 
new EU member states and other developing economies. Al-
though there are numerous examples of TC supporting human 
capacity and institution building, developing legislation, and 
creating centers of excellence within various segments of gov-
ernment and civil society, serious problems and imperfections 
do exist. In particular, TC is exposed to several challenges with 
regards to project design, implementation, and outcome.
--Design--
One major TC challenge is project design.   Too often the po-
litical interests of donor organizations or their consultants re-
sulted in the implementation of projects that, from the benefi-
ciary’s point of view, were a low priority. Some examples are 
projects on e-governance where very basic issues in govern-
ment effectiveness and accountability were yet to be resolved. 
Recently, however, there have been modest improvements, as 
stronger capacity on behalf of beneficiaries has enabled them 
to better identify existing knowledge gaps and articulate their 
preferences.  TC beneficiaries also need to enhance their stra-
tegic planning process and strengthen the formulation of de-
velopment priorities. Many times the TC that beneficiaries ac-
tually require (e.g., capacity building in engineering) is in short 
supply due to a lack of domestic capabilities.
--implementation--
Another TC challenge surrounds implementation, specifically 
ensuring a project’s effectiveness.  This entails developing 
the beneficiaries’ capacity to absorb technical expertise, the 
donors’ capacity to supply quality expertise and the manage-
ment of TC implementation.      
The capacity to absorb technical expertise in the CIS is hin-
dered if the beneficiary government’s staff is burdened with 
too many projects. In general, there is an over-concentration 
of TC at the central level of government at the expense of local 
governments and civil society. On the one hand, donors ben-
efit from closer relations with top central policymakers and 
the capacity of staff to absorb sophisticated expertise. On the 
other hand, the success of a project’s implementation rests 
within the local government, which many times has weak 
capacity and requires a lot of support. This uneven distribu-
tion reduces the capacity of local authorities and civil society 
to maintain informed dialogue with the central government 
and weakens the development of democratic decision-making 
processes.
Another problem consists of frequent attempts to push the 
experience of developed countries as models to be copied by 
recipient countries, without considering differences in the lev-
el of economic development, political economy, government 
infrastructure and culture. For example, introducing income 
based social benefit schemes in countries with large informal 
sectors or using complicated tax and customs administration 
systems without a well-trained and well-paid civil service. 
These mistakes demonstrate the benefits of having greater 
reliance on local experts.  They not only improve TC effective-
ness but also lower unnecessary operational costs, such as 
overseas travel and higher foreign consultant fees.  
Finally, improved TC management is also critical to project im-
plementation. Complicated and burdensome TC preparation 
procedures, implementation and reporting, lack of collabora-
tive project planning, fragmentation of TC activities, overly 
formal M&E systems, and lack of transparent TC documents 
and outputs all hinder project effectiveness. Greater commu-
       3/2009                                             April 2009   
www.case-research.eu
The opinions expressed in this publication are solely the authors’; they do not necessarily reflect the views of CASE - Center for Social and 
Economic Research, nor any of its partner organizations in the CASE Network.  CASE E-Brief Editor: Ewa Błaszczynska
nication, transparency and publication of TC outputs serve as 
important quality checks for both donors and beneficiaries.
--outcome--
A TC project’s outcome is closely linked to its efficiency, spe-
cifically the ability of donors to coordinate and prevent dupli-
cation of projects. Although the situation in the CIS has been 
getting better, beneficiaries still encounter many problems. 
One is the oversupply of TC in relation to the absorption ca-
pacity of beneficiary countries, thus lowering the return on 
TC resources spent. Another is the undersupply of TC which 
leads to fragmentation and creates unsustainable capacity for 
beneficiaries. Both are caused when political considerations 
rather than host countries preferences dominate project fund-
ing and coordination.  Insufficient flexibility of the TC process, 
rigid financial controls, and lack of resource optimization result 
in significant efficiency losses and contribute to inappropriate 
incentive structures among various stakeholders.
The success of TC in the CIS rests on the sustainability of 
government civil servants and their ability to retain training. 
Keeping qualified government employees has proved labori-
ous due to low civil servant salaries and their frequent rota-
tion on official positions. According to experts, the salary level 
of a beneficiary agency is considered a good predictor of long-
term achievements in capacity building, although this prob-
lem can only really be solved by the beneficiary government. 
One solution is to encourage capacity building, both within 
government and NGO sectors, through the development of 
local consulting industries. 
Finally, winning TC projects can be assessed on their develop-
ment impact. Overall, TC’s influence on the capacity building of 
CIS governments has had mixed results.  Positive impressions 
are made when there is a commitment from the beneficiary 
agency’s leadership to utilize provided advice and the agency’s 
demand for specialized and politically neutral expertise (e.g. 
central banks). In contrast, TC’s effect is substantially lowered 
in the absence of the above factors in addition to an exodus 
of trained professionals. The impact of TC and its influence on 
government policy is thought to be higher when it is linked to 
other forms of aid (e.g., budget support). In the CIS, TC has 
been a positive force on the capacity development of non-
governmental stakeholders and local consulting industries. 
However, it is difficult to assess whether the impacts made on 
individual TC projects justify the enormous resources spent.
ways To sTrengThen Tc effecTiveness
Policies that aim to bolster TC effectiveness in the CIS must 
center on improving the “principal-agent” relationship be-
tween donor government and donor society.  In addition, both 
donors and CIS governments, despite varying methods and de-
velopment values, should focus on achieving key development 
goals such as minimizing welfare loss, reducing information 
asymmetry between stakeholders, and establishing proper 
incentive structures.  In order to achieve these goals, stake-
holders’ interests should be explicitly accounted for in the TC 
program design.  This includes encouraging the co-financing 
of recipients in TC activities. Secondly, information asymmetry 
between stakeholders has to be reduced. The best way to ac-
complish this is to strengthen TC monitoring and performance 
systems by disclosing TC flow data and products to the public. 
Giving third parties the ability to view, monitor, and evaluate 
TC flows enables projects to gain legitimacy and reduces the 
chances for corruption.  Finally, in order to establish healthy 
incentive structures both donors and recipients have to main-
tain competitive supplier selection through diversified TC de-
livery channels, provide greater support to local governments, 
and encourage stronger civil society and private sector partici-
pation in capacity building programs.  Despite many positive 
accomplishments over the last decade, technical assistance to 
the CIS, especially in the form of technical cooperation, still 
has a way to go. By promoting stronger communication and 
understanding, encouraging better coordination, and increas-
ing information dissemination among all stakeholders, the 
countries of the CIS will not only stand to advance the per-
formance of TC projects, but will also build-up the long-term 
capacity of its entire development assistance programs.   
    
Roman Mogilevsky is Executive Director of the Center for So-
cial and Economic Research, CASE-Kyrgyzstan. He has worked 
on several development topics in the CIS, including fiscal and 
social policy, international trade and foreign aid, macroeco-
nomics, labor market and labor migration. He has extensive 
experience in providing advice and training to governments 
and civil society organizations in countries of the CIS.
Aziz Atamanov is an economist at CASE-Kyrgyzstan. His re-
search interests are centered on public policy, including issues 
of social protection, fiscal decentralization, public expenditure 
management, macroeconomics, international trade, remit-
tances and the financial sector. Currently, he is a Ph.D. student 
at the Maastricht Graduate School of Governance.  
This e-brief is based on CASE Network Study and Analysis No.369 prepared under Workpackage 12 of ENEPO (EU Eastern Neighborhood: 
Economic Potential and Future Development), a project coordinated by CASE and financed within the Sixth Framework Programme of the 
European Commission. 


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