Kremlin money just disappears
by ROBERT BECKHUSEN
It was supposed to be a major Venezuelan weapons factory payed for and built by Russia. Every year, the plant would in theory pump out 25,000 AK-103 battle rifles — a modernized variant of the AK-47 — for the Venezuelan army and exports abroad.
But a Russian businessmen in charge of construction ripped off the Kremlin for millions of dollars, and the plant still isn’t built. In May, the Russian Ministry of Internal Affairs charged the businessman, Sergei Popelniujov, for allegedly misappropriating $18 million for the factory’s construction.
It’s surprising but not exactly shocking. Russia is the world’s second largest arms exporter after the United States. But arms deals with Russia around the world in recent years have been plagued with mismanagement — such as a major stealth fighter project with India.
The Venezuelan rifle factory was one of the Kremlin’s biggest prizes in Latin America — and it helped cement a friendship with the country’s then-Pres. Hugo Chavez. The two governments first signed the deal 14 years ago, finalized the contracts in 2006 and expected to finish work on the factory by 2009.
The factory wasn’t just going to produce AK-103s, but 60 million rounds of ammunition per year and a new Venezuelan sniper rifle known as the Catatumbo — which comes in multiple calibers including .50- caliber.
On top of that, the factory would assemble grenade launchers.
In preparation, Venezuela imported 100,000 AK-103 rifles from Russia to replace its army’s standard battle rifle, the older Belgian-produced FN FAL. The factory would produce the rest of the new AK-103s to outfit the army, and make money selling them to foreign customers.
It would be a boon to Venezuela’s state-owned defense industry, add 800 jobs in the city of Maracay and help modernize the country’s military.
But then things started to go awry.
The contractor, Moscow-based construction firm Stroyinvestinzhiniring SU-848, kept pushing back deadlines. Years flew past. Russian workers at the site complained in letters to Pres. Vladimir Putin that they were laboring for months without pay. Some didn’t have enough money to leave.
Something was up. Russia’s Deputy Prime Minister Dmitry Rogozin blamed “strange inconsistencies” for the delays during a December 2014 visit to Venezuela.
Now we come back to Sergei Popelniujov, the firm’s owner and CEO. According to the Moscow newspaper Kommersant, Popelniujov shuffled money earmarked for the weapons plant — like a piggy bank — into other struggling businesses he owned. Hence why it never got built.
The newspaper suggested that the infuriated workers clued the Kremlin into what was happening.
Besides, building a weapons factory at this scale isn’t easy. Russia would still have to physically build the site, train workers and test the machinery so the weapons and ammunition is safe enough to use. It started to seem like it would never get done.
And it might never will.
Which all looks very bad for Russia. Following Chavez’s 2013 death, Venezuela fell into a major economic and financial crisis. A major hoped-for industry has evaporated, and there’s an election this year.
The ruling socialist coalition — which has held power since 2000 — could lose control of parliament. If that happens, who knows what will come next. A new government might see the country’s friendship with Russia and its badly managed rifle factory to be a liability.