US embassy cable - 04CARACAS3434

C O N F I D E N T I A L  CARACAS 003434 
 
SIPDIS 
 
 
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). 
 
------- 
Summary 
------- 
 
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. 
 
------------------------- 
Copters  --  Money Issues 
------------------------- 
 
 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. 
 
-------------------------- 
Fighters - Maybe in a Year 
-------------------------- 
 
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. 
 
--------------------------------- 
Bio - A Rising Star at Miraflores 
--------------------------------- 
 
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. 
 
------- 
Comment 
------- 
 
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. 
 
----------- 
DAO Comment 
----------- 
 
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 
 
 
NNNN 
      2004CARACA03434 - CONFIDENTIAL