The new agenda in relations between Russia and Argentina

President Dmitri Medvedev will hold talks today with President Cristina Fernandez de Kirchner of Argentina. In Moscow, Kirchner’s visit is regarded as another opportunity for Russia to get a foothold in Latin America. There are a number of trade issues on the agenda for the talks.

President Dmitri Medvedev will hold talks today with President Cristina Fernandez de Kirchner of Argentina, who arrived in Moscow yesterday and has already met with Prime Minister Vladimir Putin.

In Moscow, Kirchner’s visit is regarded as another opportunity for Russia to get a foothold in Latin America. Russia stepped up its foreign policy in that part of the world in mid-2008, after relations with the West soured due to the war in the Caucasus.

Alexei Yermakov, deputy head of the Latin America Department at the Russian Foreign Ministry, is responsible for Argentina. Yermakov told us: “President Medvedev visited Latin America in November, but his itinerary didn’t include Argentina. Moscow and Buenos Aires hold very similar views on many issues – especially promoting a multipolar world, reforming the UN Security Council, and countering the global financial crisis.”

Indeed, the Argentine government shares Moscow’s suspicious attitude to the United States. For example, “Queen Kristina’s” first month in office after being elected president in December 2007 started with a scandal in relations with Washington: the US Justice Department accused Kirchner of obtaining almost $800,000 in campaign funding unlawfully. In response, Kirchner and Venezuelan President Hugo Chavez accused Washington of attempting an act of provocation. The scandal died down by early 2008, and relations were re-established; but Kirchner still maintains close contacts with Latin America’s left-wing leaders, headed by Chavez.

In the course of the current visit, Russia intends to lay a substantial business foundation for relations with Argentina. One of the first friendly gestures may entail abolishing visa requirements between the two countries. According to a source in the Argentine delegation, Kirchner intends to ask Medvedev for visa-free travel. Yermakov told us: “We are very likely to respond favorably to such a request in the near future.”

Russia’s trade turnover with Argentina is around $1.5 billion a year; it has almost quintupled in the last four years. But Russian exports make up no more than 30% of trade turnover, while agricultural produce from Argentina accounts for most of it. Russia mostly exports fuel and mineral fertilizers to Argentina. Machine-building products make up only 7% or so of exports to Argentina, and there are hardly any major projects.

But this time, according to our sources, the Kremlin plans to offer Argentina a number of mega-projects. These may include deliveries of Russian arms and military hardware. Foreign Ministry sources told us that Security Council Secretary Nikolai Patrushev visited Argentina in September to discuss these matters. A source from the Russian defense sector said: “The Russian-Argentine Military Technology Cooperation Commission met for the first time on November 17-18. They signed a memorandum on cooperation, in which Argentina indicated interest in a broad range of hardware: multi-role warplanes, unpiloted aerial vehicles, helicopters, and transport planes. The Argentinians weren’t asking about prices for any specific hardware. Their decisions will be made after the president’s visit.” However, our defense sector sources also note that Argentina’s arms market has always been more focused on US companies, so competition there won’t be easy for Russia.

The energy sector may produce another mega-project in Russian-Argentine relations. Shortly before Kirchner’s visit, Argentina’s deputy minister for foreign trade said that LUKoil is showing interest in working on Argentina’s shelf. According to the deputy minister, this Russian company may sign a cooperation memorandum with the state-owned Energia Argentina S.A.

But sources at LUKoil report that the company’s interest in operating in Argentina has faded noticeably. Our sources note that LUKoil attaches far more importance to acquiring a stake in Repsol YPF, the Spanish-Argentine oil giant. Given the current financial conditions, however, the purchase would be fairly problematic.

Another cooperation area which Russia is sure to promote is the participation of Russian Railways (RZD) in modernizing Argentina’s transport infrastructure. But experts have doubts about whether RZD can handle several international projects simultaneously; RZD has already landed a major contract in Libya and is negotiating in Latin America and the Middle East.

More generally, experts maintain that the financial markets situation will prevent Russia from establishing a presence in Argentina quickly. The current conditions make it extremely difficult to come up with the money for major projects. There are more likely to be some opportunities for this several years from now, once the crisis is over. But Kirchner may no longer be president by then.

Thus, any agreements reached during this week’s visit may have to be discussed again by the Russian president in three years’ time, with a new president of Argentina.