Jul
30
2012
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Does oil giant Chevron want Chavez to win reelection in Venezuela?

Chevron has been in Venezuela since the 1920s when politicians were heavier handed than Chavez. Now, Chevron in Venezuela may be too big to nationalize, writes a guest blogger.

Christian Science Monitor
July 30, 2012
By Steven Bodzin, Guest blogger

0730 world ochevron full 380 300x199 Does oil giant Chevron want Chavez to win reelection in Venezuela?

Courtesy of: Carlos Garcia Rawlins/Reuters

A couple days ago, Raúl Gallegos published a decent little column about how Chevron is, if not betting on a Hugo Chávez reelection, at least setting itself up for a long, happy relationship with the Bolivarian Republic.

Chevron has no illusions about how Venezuela works. It first set up shop there in the 1920s, when strongmen showed heavier hands than Chavez. Scores of populist governments and two oil-industry nationalizations later Chevron is still pumping crude. And when PDVSA asked for a couple of billion to invest in Boscan, a jointly-run field Chevron first came across in the 1940s, the oil major obliged. The 13-year loan is costing PDVSA Libor plus 4.5 percent, far less than the 11 percent that its 2027 bonds pay.

I quibble with a bit of the column, but basically, he’s right. Chevron in Venezuela is now too big to nationalize.

I had thought Repsol fell into the same category. But maybe not. Check out this article from last night.

Venezuela President Hugo Chavez warned Repsol SA (REP) to “think carefully” about taking action against Argentina after it nationalized its YPF SA (YPFD) unit, indicating the Spanish company may face ramifications in Venezuela.

“They have a lot of investment here in Venezuela,” Chavez said on state television after holding a meeting with Argentine Planning Minister Julio De Vido in Caracas. “What happens there in Argentina affects what happens here.”

What jumps out here is that Chávez has never made any similar threats against Chevron over its $18 billion debt to ostensible ally Ecuador. If you haven’t followed that whole story, here’s an article, the plaintiff’s version and the company’s version, but long story short, Chevron was sued in the US for polluting Ecuador. It got the case moved to Ecuador, apparently thinking courts there would be friendlier. Courts there ruled against the company and ordered a huge amount of compensation. Chevron insists that the rulings were flawed by corruption, though I think it’s fair to ask, if they were worried about corruption, why did they get the case moved to Ecuador? The whole thing is a mess.

If Chávez were ideological, you’d think that the anti-Chevron campaigners would find open ears in Venezuela, and would even now be auctioning off the Boscan oilfield to pay the Ecuador debts. Instead, I don’t think Chávez has ever mentioned the case. And Chevron is piling in ever more billions of dollars.

To read this article on Christian Science Monitor, please click here.

 
Jul
12
2012
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Hugo Chávez, golpista

jose r cardenas Hugo Chávez, golpista

José R. Cárdenas

José R. Cárdenas served in several foreign policy positions during the George W. Bush administration (2004-2009), including on the National Security Council staff. He is a consultant with Vision Americas in Washington, DC.

Hugo Chávez’s penchant for labeling anyone who disagrees with him a “golpista” (coup-mongerer) is well-established. This, despite his own history of leading an ill-fated military coup in 1992 against former Venezuelan President Carlos Andres Pérez. But it seems the years since haven’t diminished his ardor for military coups when it suits his purposes — a fact affirmed by recent events in Paraguay.

Paraguay recently saw the sudden impeachment of President Fernando Lugo for “poor performance.” Whatever one thinks of that drastic action, it happened to be consistent with the country’s constitution.

Yet events in Paraguay apparently didn’t pass muster with Hugo Chávez, who ordered his foreign minister, Nicolas Maduro to meet with Paraguay’s military leadership to try and convince them to intervene and forcibly restore President Lugo to office. (In this effort, Maduro, who was in the country as part of a Unasur delegation monitoring the impeachment, was accompanied by Ecuador’s ambassador to Paraguay, who represents another government that routinely identifies opposition as golpistas.)

Infuriated by the meeting, the Paraguayan government withdrew its ambassador from Caracas, citing “the grave evidence of intervention by Venezuelan officials in the internal affairs of Paraguay.” It also ordered a shake-up of the military brass, with new President Federico Franco stating, “We will not tolerate military officers who want to become insubordinate or accept the recommendations of foreign countries.”

On a continent with a long, tortuous history of military involvement in politics, Paraguay stands out. It was not until 1989 that the 35-year reign of General Alfredo Stroessner ended. As a result, there is great sensitivity towards the matter in the country and is why a senior foreign official meeting with the military to encourage their intervention in Paraguayan politics constitutes an outrageously reckless act that threatens not only the internal stability of the country, but has wider regional implications as well.

Yet not only has the regional silence been deafening on Maduro’s meeting, but countries like Brazil and Argentina turned around and effectively rewarded Chávez by granting Venezuela full-membership in Mercosur, the political and economic pact among Argentina, Brazil, Paraguay and Uruguay. This fulfilled a key foreign policy objective of Chávez for years that had previously been blocked, ironically, by the Paraguayan Congress. But with Paraguay suspended from the customs union because of the Lugo impeachment, Brazil and Argentina moved instantly to grant Chávez membership. It’s not that Mercosur will bring Venezuela any measurable economic benefits, but to Chávez it is one more key symbol of the legitimacy of his political project and one more instance of Venezuela’s integration with Latin American countries in a union that excludes the United States.

As Brazilian diplomat and former Mercosur representative José Botafogo Goncalves told the Brazilian newspaper O Globo, “Venezuela doesn’t meet the basic requirements to enter Mercosur. Venezuela’s problem is Chávez, who doesn’t like free trade and wants to transform the bloc into a political platform.”

But degrading their own multilateral institutions is one thing; Chávez’s encouraging a military coup in Paraguay is quite another. Lamentably, the continued regional indulgence of Hugo Chávez’s provocations appears to know no bounds. Apparently, there is no action he can take, no matter how reckless or interventionist, that will bring rebuke. Instead, he is rewarded. It is indeed a sad commentary on the current state of Latin American regional leadership.

 
Jan
17
2012
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ICYMI: Venezuela Tightens Control of Oil Industry

Venezuela tightens control of oil industry

Financial Times

By Benedict Mander in Caracas and Sylvia Pfeifer in London

Venezuela has made another push to increase control over its oil industry, announcing plans to leave the World Bank’s international arbitration body and potentially putting billions of dollars of foreign investment at risk.

Rafael Ramírez, the country’s oil minister, at the weekend confirmed plans to settle disputes with foreign companies within its own judicial system. The decision would affect more than 20 foreign companies that have unsettled disputes after private sector assets were expropriated by Venezuela’s socialist government as part of a drive to increase its control over so-called “strategic” industries that began in 2006. Analysts have estimated the outstanding compensation claims, largely by industrial groups including oil, could add up to as much as $40bn.

The decision could also undermine investor confidence in the country whose natural assets have attracted some of the world’s leading oil and gas groups, including Europe’s Repsol, ENI, and Statoil, as well as Chevron of the US. Despite tax increases and contract changes many companies have remained eager to invest in the country’s Orinoco extra heavy oil belt.

“The common sense approach would probably be one of wariness,” said an executive at one European energy group about the decision, declining to be identified.

“What is already a fairly complex process, looks like it will get even more so,” said Peter Hutton, analyst at RBC Capital Markets.

“We do not accept impositions and we are going to rescue our national sovereignty,” Mr Ramirez had said in a televised interview on Sunday, adding that Venezuela would seek to renegotiate dozens of international investment-related agreements.

The decision to withdraw from the International Centre for Settlement of Investment Disputes (ICSID), based in Washington, means that disputes with foreign companies, including an unsettled disagreement with ExxonMobil, will be heard by Venezuelan judges.

The news follows the announcement on January 1 of a settlement at the Paris-based International Chamber of Commerce (ICC) which awarded Exxon a net payment of only $747m, substantially less than the $6.5-7bn it was said to be seeking, after its assets in Venezuela were expropriated in 2007.

Venezuela appears to have accepted the ruling by the ICC, where only the contract was in dispute, but has said it will not respect any decision at the ICSID, where it is the violation of a bilateral investment treaty that is being disputed, which is far broader in scope.

At stake for Venezuela is the appetite of foreign oil companies to invest in extracting the extra-heavy crude from the Orinoco Belt. Venezuela’s proved oil reserves exceed 200bn barrels but it produces fewer than 3m barrels per day. With the help of foreign investment, Venezuela hopes to double production in the coming years. Exxon declined to comment on Monday. So did Total, Repsol and ENI.

Venezuela’s allies Bolivia and Ecuador also recently withdrew from the organisation. Argentina has so far remained within it, although industry-watchers pointed out that this has not prevented the country from disagreeing with ICSID rulings.