Wasteful deals between Alexander Lukashenko and Hugo Chávez


Leaked documents show how Belarusian President Alexander Lukashenko and his Venezuelan counterpart, Hugo Chávez, struck several wasteful deals — including one that allowed Belarus to avoid paying for US$1.4 billion in oil it received from Venezuela. By Ales Yarashevich (Belarusian Investigative Center), Valentina Lares (Armando.info/OCCRP), and David Gonzalez (OCCRP)

When Belarus fell out with Russia over energy supplies in 2010, Belarusian President Alexander Lukashenko looked thousands of miles away, to Venezuela and his fellow autocrat, Hugo Chávez, for help.

Over the previous few years, the two leaders had visited each other regularly, building a friendship on their shared antipathy toward the West, a taste for repressive tactics, and a need for new international allies.

That October, Venezuela’s state oil company, PDVSA, agreed to supply up to 30 million tons of high-quality crude to Belarus between 2011 and 2013.

Belarus agreed to pay most of each shipment’s value shortly after delivery. The rest would be settled later, though the contract didn’t say when or how.

But the ensuing debt, which ended up totaling some $1.4 billion, was never paid back — apparently because Chávez had not insisted on creating a mechanism to seek its repayment.

This was typical of how Chávez did business, said Mercedes de Freitas, executive director of Transparency International’s Venezuela chapter.

“The agreements … were between friends interested in generating opacity, in not saying what was being done, and how much was being paid,” said de Freitas.

The oil deal was among dozens of bilateral agreements the two countries signed between 2006 and 2012, detailed in a leak of Venezuelan government documents obtained by OCCRP, Armando.info, and the Belarusian Investigative Center (BIC).

Reporters spent months trying to find more information on these agreements and finally tracked down a set of confidential Belarusian government documents on the Belarus-Venezuela relationship that provided additional insights and details.

In addition to the unpaid oil money, these deals also resulted in unbuilt housing projects and vehicle factories that have lagged well behind their production targets. Together, the leaked documents offer a rare glimpse into how the friendship between the two countries’ leaders saddled Venezuela with a legacy of waste, debt, and broken promises.

Even basic information about these deals was absent from public records, such as how much was invested, where the money went, or how much of the projects were ultimately completed.

The lack of transparency is common in Venezuela, where researchers often have to perform “archaeology” to find out details of public agreements, said de Freitas.

“[O]ur level of opacity exceeds the great majority of countries,” she said. “To know the contents of agreements … you need to have a friend or someone to filter them to you, to pass them to you under the table.”

Asked about the unpaid $1.4 billion, Mikhail Kostechko, the general director of the Belarusian Oil Company, which was involved in the deal, said he did not know anything about it. Venezuela’s state oil company, Petróleos de Venezuela, S.A. (PDVSA), and the Belarusian Embassy in Caracas did not reply to requests for comment.

‘A Typical Scam’

Chávez first visited Minsk in July 2006, shortly after the United States and European Union sanctioned Lukashenko for stealing Belarus’ presidential election. The trip was a welcome show of solidarity for Lukashenko after his regime was dubbed “the last dictatorship in Europe.”

For Chávez, Lukashenko’s growing isolation gave the two men common cause. “We are in the presence of two peoples that are alike: the Belarusian and the Venezuelan,” he told Lukashenko during the trip to Minsk.

The two men grew close over the years, visiting each other several times. TV cameras caught Lukashenko wiping tears from his eyes as the Belarusian leader arrived for Chávez’s state funeral in 2013.

“Chávez was looking for relationships that could generate links and alliances based on shared views about who was the enemy. They had an affinity regarding repressive authoritarian regimes and the possibility of diversifying businesses,” said Elsa Cardozo, a specialist in Venezuelan diplomacy.

Chávez often used oil money to foster diplomatic ties, and his relationship with Lukashenko was no exception, Cardozo said. Lukashenko, eager to reduce his country’s energy dependence on Russia, offered technology and construction expertise in exchange.

But the cooperation between the two countries “was not only about economic pragmatism or political support in the international arena,” Belarusian analyst Pavel Slunkin said. “It was more about Chávez liking Lukashenko, and Lukashenko liking Chávez.”

The PDVSA deal shows how that personal relationship could lead to dealings that hurt Venezuela’s interests.

Under the deal, PDVSA was to boost its supply of crude to Belarus from 4 million to 10 million tons per year, with up to 30 million tons to be provided in total between 2011 and 2013, according to a Venezuelan government summary of the deal.

Belarus would pay 80 percent of each shipment’s cost after delivery, and the remaining 20 percent at an unspecified later time, a leaked Belarus government memo showed.

How and when that 20 percent would be paid would be “defined between the Bolivarian Republic of Venezuela and the Republic of Belarus in a different agreement,” according to a draft of the contract found among the documents leaked to Armando.info.

Reporters could find no evidence that any such agreement was ever created.

Anatol Kotau, who was working as a foreign policy adviser in Lukashenko’s office at the time, said nothing was ever put down on paper. “It was a verbal agreement between Lukashenko and Chávez,” he told BIC.

Rafael Ramírez, the oil minister under Chávez, told OCCRP that the two governments had signed a contract that was “normal in the oil industry,” but conceded that negotiators had considered letting a portion of the oil money be used towards “projects the Belarusians were doing in Venezuela,” including the construction of a housing development and importing equipment for handling natural gas.

“The idea was to charge that 20 percent in goods and services,” he said.

“At some point the Belarusians failed to comply with that. I believe they took advantage of Chávez’s goodwill. We had many problems with the works they were executing in Venezuela.”

Venezuela’s oil deliveries to Belarus stopped in May 2012, by which time Belarus had resolved its energy supply dispute with Russia. A Belarusian memo said PDVSA ended up delivering a total of over 9.2 million tons of oil to Belarus between 2010 and 2012, worth more than $7 billion. The memo doesn’t specify how much was paid, but it notes that Minsk would continue to owe Venezuela $1.4 billion for the oil delivery.

PDVSA recorded the debt as a “non-current asset” in its 2011 annual report, suggesting the oil company was not sure it would be recovered. Subsequent reports don’t provide additional details about what happened to the amount owed.

Ramírez, who was also the head of PDVSA from 2004 to 2013, said the $1.4 billion had been correctly reflected in the oil company’s accounts, which he said had been carefully audited.

“There is no way, unless you are breaking the law, to hide an amount of that size,” he said.

In a meeting with Belarusian officials in 2011, Chávez appears to have taken a casual attitude towards the missing $1.4 billion, saying he would not insist on monetary repayment, according to details found in the Belarusian government memos obtained.

However, he suggested the debt could be resolved if Belarus would give a share of the Novopolotsk oil refinery to Venezuela so the countries could launch a joint project to process Venezuelan oil there.

That idea never came to fruition. Kotau, the former adviser to Lukashenko, said the Belarusians had not seriously considered giving Venezuela a share in the refinery.

“You dangle a carrot: ‘Give us oil and we give you a piece of the [refinery] plant. Just give us oil now.’ … In general it was all pure scam.”

After Chávez died in 2013, Minsk gave up any pretense of repaying the money. An internal Belarusian government memo from 2015 — by which time Venezuela was in full-fledged economic crisis — said the government considered the $1.4 billion to be “assistance from the Bolivarian Republic of Venezuela” and did not recognize any obligation to pay.

The memo also reveals that Belarus considered repaying Venezuela for its “assistance” by sending its struggling ally “periodic deliveries of unsold consumer goods” like household chemicals and medicines — but emphasized that this should be done “without linking the amount of assistance to the amount of debt.” (It’s unclear whether this idea ever moved forward.)

Ramirez said Belarus had claimed that any agreement that existed was “between Chávez and Lukashenko,” and Chávez’s death meant they did not need to pay.

He called the claim “incredible,” but also noted that Chávez’s hand-picked successor, Nicolás Maduro, did not make strenuous efforts to collect the money.

“In the end they did not collect it,” said Ramirez, who fell out with the Maduro government in the years following Chávez’s death and is now being prosecuted in Venezuela for alleged embezzlement. “But for my purposes, that debt still exists, it is documented and at some point it will have to be collected.”

Belarus does not appear to see it that way.

“For Minsk, there was no problem of debt to Venezuela, because they paid 80 percent of the price and everything else was considered a gift,” said Kotau, the former adviser to Lukashenko, who joined the Belarusian opposition in 2020. “It was a typical scam.”

Mikhail Kostechko, general director of the Belarusian Oil Company, the company involved in the deal, said: “I don’t know at all what kind of debts you are talking about.”

Missing Production Targets

Details of Belarus’ unpaid oil debt had not been reported before now. But other manifestations of the Chávez-Lukashenko partnership have drawn public criticism for years.

In 2012, two factories were opened at the Santa Inés industrial complex in Venezuela’s western Barinas state, both joint ventures between Caracas and Minsk, to build tractors and Belarusian trucks.

Industrial efforts such as these were a key plank in the publicity around the two countries’ partnership. The day the truck factory opened, Lukashenko vowed that Belarus was not in Venezuela “to enrich ourselves, but to transmit technology, build houses, and train Venezuelan specialists.”

The plants were meant to churn out thousands of vehicles each year, but production lagged from the start. From their opening until 2015, the factories produced less than a third of the more than 13,700 vehicles that had been planned for the same period. No production figures were reported after that year.

Belarus estimated the two factories would cost $55 million to build, with Venezuela taking a 60 percent share, and Belarus the rest. It is not clear how much each country ultimately invested in the project. In 2016 and 2017, the pro-Chávez media outlet Aporrea reported Venezuela had not paid Belarus an agreed-upon $33 million to import raw materials for the factories, so Belarus stopped sending them, nearly paralyzing production.

Venezuela’s Ministry of Industry, which is responsible for the factories, did not respond to a request for comment.

Today, tall grass lines the edges of the potholed asphalt road to the complex. At the complex itself, there were few signs of activity when a reporter visited in December.

A worker at Veneminsk, who asked not to be named to protect his job, said production was at a standstill. “What they do is maintenance,” he said.

Housing Project Failure

The deals between the two countries, and the associated problems, went well beyond the oil debt.

Last June, President Maduro inaugurated 120 new apartments at the Fuerte Tiuna military base in Caracas to great fanfare.

Venezuelan and Belarusian flags hung from one of the buildings as a band played traditional Venezuelan music. After fist-bumping the 12-year-old singer, Maduro handed out keys to a group of children, who ran inside to their new homes.

The apartments were among at least 11,000 meant to be built by a state-controlled Belarusian construction company, Belzarubezhstroy, under another deal struck between Lukashenko and Chávez.

But though the equivalent of tens of millions of dollars were paid out to Belzarubezhtroy, the company only built a total of 912 homes in the Fuerte Tiuna project, as well as 20 modest child-care centers and 40 small premises for shops.

Documents obtained by reporters show the housing project originally had a budget of $756 million.

Ramirez, the former oil minister, suggested that Venezuela had expected Belarus to fund some or all of the Fuerte Tiuna work, given the unpaid $1.4 billion in oil money. However, reporters could find no documents setting such a barter deal out in writing.

And a document obtained by BIC shows that the Venezuelan government paid Belzarubezhtroy about 525 million bolivars — roughly $120 million at the official exchange rate at the time — for the first phase of construction.

Belzarubezhstroy then stopped work in November 2011 because it hadn’t received another agreed-upon payment from Venezuela in U.S. dollars, according to a Belarusian government briefing for Lukashenko ahead of a meeting with Chávez in June 2012.

When reporters from Armando.info visited in December, the newly opened buildings appeared to be vacant. The unfinished skeletons of a dozen others stood nearby.

A lack of transparency around the project makes it hard to point to a specific reason why it fell so short of its targets.

However, not only did Belzarubezhtroy fail to build most of the housing it was supposed to, but it appears the construction it did complete was done at a price above what experts say it should have cost.

A 2018 report by the Venezuelan Chamber of Construction estimated that a single apartment in a social housing complex should cost no more than $45,000 to build. The chamber’s president, Enrique Madureri, estimates that each Fuerte Tiuna unit should have cost even less, around $30,000.

But each unit at Fuerte Tiuna would have cost at least twice this amount, given that the company was paid the equivalent of around $120 million and only built 912 apartments and a few dozen shops and day-care centers.

Kotau, the Belarussian official who was working in Lukashenko’s office at the time of the deals, said Belzarubezhtroy had charged Venezuela more than double what the housing should have cost. (In addition to the Fuerte Tiuna development, Belzarubezhtroy was contracted to build roughly 9,000 other apartments in Venezuela in two additional agreements. The terms of the contracts are not clear, but they appear to have been mostly completed).

Belzarubezhtroy’s head, Viktor Chevtsov, was detained in 2011, along with “a number of other persons,” on charges of embezzling some $10 million, according to Belarusian state media. Lukashenko was quoted as saying the embezzlement was related to construction projects in Venezuela. Chevtsov was released the following year, and it is not clear if any funds were embezzled from the Fuerte Tiuna development.

Chevtsov declined to comment. Neither Belazrubezhtroy nor the Venezuelan Housing Ministry responded to a request for comment.

Waste and overspending in Gran Misión Vivienda Venezuela — Chávez’s signature social housing program, which Fuerte Tiuna was part of — helped contribute to the country’s current economic crisis, said de Freitas from Transparency Venezuela, calling the amounts spent an “extraordinary thing.” More than 7 million people have fled Venezuela since 2015, escaping runaway inflation, shortages of food and medicine, political persecution, and a collapse in public services.

Isayén Herrera contributed reporting.


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