Spain cancels $620m Venezuela defence deal

Venezuela is likely to accelerate its arms procurement plans from Russia and China, defence experts predicted on Wednesday, in response to tightening US efforts to block countries such as Spain from selling military equipment to Caracas.

Miguel Angel Moratinos, Spain’s foreign minister, said on Wednesday that EADS-Casa, a subsidiary of the European aerospace company, had cancelled a contract to sell 12 transport aircraft to Venezuela because of US pressure.

Signed a year ago and worth about $620m, the deal had to be suspended, he said, because Washington’s refusal to licence the inclusion of US parts had rendered it commercially unviable.

“The financial effort needed to adapt to the technological requirements of the US was not worth it,” Mr Moratinos said. The original contract, which included the construction of eight naval ships, was worth $2.2bn and at the time was touted as Spain’s biggest-ever defence deal.

A Spanish government spokesman said on Wednesday that José Vicente Rangel, Venezuela’s vice-president, had told Mr Moratinos the deal would not be possible during a visit to Madrid on Tuesday. EADS-Casa on Wednesday declined to comment on any aspect of the contract.

Madrid, whose amicable relations with populist leaders in Latin America has irked Washington, defied strong US opposition in November last year to sign the lucrative military deal.

US officials have sought to curb arms sales to Caracas on the grounds that President Hugo Chávez’s arms procurement programme – so far with at least $3bn of announced purchases – is “a threat to regional stability”.

This year Washington has blocked a plan by Venezuela to buy training aircraft from Brazil, stopped a deal to modernise F-16 fighters in Israel, and in August persuaded Sweden’s Bofors to cease sales of anti-aircraft devices.

Tom Baranauskas, Latin America defence analyst at Forecast International, a US defence industry consultancy, said that the US’s tightening noose on arms sales to Venezuela from allied third countries will force Mr Chávez to step up arms procurement plans from countries such as Russia and China.

“It does look like the lobbying effort by the US is having success but it’s just going to make the Venezuelans more dependent on a more limited supplier base,” said Mr Baranauskas. “

Venezuela has in recent months already pledged to buy dozens of helicopters, 24 Sukhoi fighter jets and 100,000 Kalashnikov rifles from Russia, a major radar system from China, and an unspecified defence system from Ukraine.