India and Venezuela To Launch Joint-SWF?

Ashby Monk

How’s this for an interesting nugget of news on your Friday morning: Venezuela wants to partner with India to set up a $100 billion SWF to jointly acquire energy assets around the world. (Cue confused facial expression).

What’s perhaps even more bizarre than Venezuela’s offer is India’s apparent interest in the idea:

“‘India has asked for a draft of the proposal. It will be discussed with concerned ministries and companies dealing in energy sector,’ said an external affairs ministry official, requesting anonymity.”

Apparently, the joint-SWF was first raised back in 2006 by President Hugo Chavez to Prime Minister Manmohan Singh, and the idea has taken root. In fact, the two sides are already talking through some of the details of how this might be organized:

“The fund would be set up with an initial corpus of $10 billion and scaled up over five years. To sweeten the deal and re-launch economic as well as trade relations with India, Venezuela has offered to supply an additional 100,000 barrels crude oil on daily basis at pre-determined rates irrespective of crude markets fluctuations globally.”

I’m not sure what to say about this. India and Venezuela have pretty good relations. But do they want to tie the knot over a $100 billion SWF?

Let’s think about this for a second. On the positive side, combining local knowledge about South Asia and Latin America could be a potent mix for investment returns. However, on the negative side, this joint-fund doesn’t really sound like a commercial endeavor (i.e. it’s not really looking for returns). It sounds more like an overtly strategic / geopolitical tool for picking up energy assets around the world (probably in the developing countries where national security concerns are lower).

Anyway, it’s hard for me to believe this fund will ever materialize. Still, it’s an interesting development…

3 Responses to “India and Venezuela To Launch Joint-SWF?”

  1. 1 Michelle May 11, 2010 at 5:49 pm

    Yes. Your Comments assume that both countries subscribe to the principle that SWFs should be motivated soley by maximizing investment return.

    I am not sure that that is Mr. Chavez’s position on the use of his country’s oil wealth- see PetroCaribe for example.

    I suspect that Mr. Chavez’s position on the use to which Sovereign Wealth is placed may be a bit wider in focus: given his proactive and expansionist foreign policy position and his philosophy of using his country’s oil wealth to help further his strategic goal of making Venezuela an important actor to promote the relations between, and development of developing states.


  2. 2 Ashby Monk May 11, 2010 at 6:54 pm

    Thanks for your comment, Michelle. It’s fair to say that Chavez intends to use Venezuela’s sovereign wealth to advance political objectives. It seems a bit odd, to me at least, that he would seek to bring India in on this policy though…or that India would be keen to participate! Cheers.

  1. 1 Joint India-Venezuela SWF Rejected « Oxford SWF Project Trackback on September 28, 2010 at 11:32 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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