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Chavez,
Oil and American anxiety
The
Economist
By
Abid Mustafa
Once
again tensions have surfaced between Hugo Chavez, the leader of
Venezuela, and the Bush administration. Amid rumours of a planned
US coup against the Venezuelan government, Chavez has again come
out to publicly deride the US. On Jan.10, 2006, President Hugo
Chavez said that the US administration is the principal threat
for Venezuela today. He also noted that should a US invasion occur,
"it would be crazy, they would certainly be defeated."
Such bellicose statements have come to define the deteriorating
relationship between the Chavez and the Bush administration.
At the heart
of the dispute between the two countries is Venezuelan oil, which
Chavez has used as a weapon to seek greater autonomy from the
US and chart a new course for Venezuela's relations with Latin
America and the rest of the world.
America has
always sought to control Venezuelan oil which contributes to 14%
of American oil imports. This equates 1.5 million barrels of oil
per day, and makes Venezuela the fourth largest oil exporter to
the US. The dependency on Venezuelan oil has prompted successive
US administrations to repeatedly interfere in the politics of
the country to ensure that American oil companies have access
to a steady supply of cheap oil.
However, Hugo
Chavez's ascendancy to power in 1999 via the ballot box began
to threaten America's oil interests. He gained the presidency
by opposing trade liberalism and US economic imperialism. A trend
that would become the hallmark of his term in office. He would
even balk at the slightest offer of American assistance. In 1999,
he rebuffed US bulldozers and aid workers, for recovery efforts
from the fatal floods. He confessed openly that his refusal was
due to fears of ulterior US motives. In the same year he rewrote
the country's constitution to prevent further privatisation of
state oil company Petroleos de Venezuela SA (PDVSA) and increased
royalties from US companies to pay for much needed social programs.
In a bid to
exert greater control over Venezuelan oil assets, Chavez passed
the Hydrocarbon Law in 2001. This almost doubled the royalties
on foreign companies from 16.7 percent to 30 percent. With the
exception of Exxon Mobil Corp. which protested the increase, other
oil companies most notably Shell kept quiet. "We've been
in Venezuela for 90 years, and we'll be here another 90 years,"
said Sean Rooney, Shell Oil Co.'s new president for Venezuela
operations.
The law also
required oil production to be carried out by companies in which
the government held the majority share. The deadline for the oil
companies to convert their operations to joint ventures in which
the state oil company PDVSA has the controlling stake expired
at midnight on Dec. 31, 2005.
On Jan. 1
2006, Venezuelan Oil Minister Rafael Ramirez announced that 32
privately operated oil fields had come under state control. These
oil fields could produce about 500,000 of Venezuela's declared
production of 3.2 million barrels a day. Now the Venezuelan government
could own as much as 90 percent in some of the new ventures, depending
on how much the private companies had invested in the field.
Despite being
briefly ousted from power in 2002, Chavez has consistently endeavoured
to reduce American influence over the nation's oil and economic
affairs. The revenues from high oil prices and taxes collected
have helped the government run a budget surplus while maintaining
a high level of social spending. Currency controls imposed in
2003 have also stemmed capital flight, and now by approving the
use of the euro, Chavez is taking one more step toward asserting
the independence and sovereignty Venezuela seeks and deserves.
As a result of these efforts, the nation's public and foreign
debt are moderate, and over $30 billion of reserves have been
accumulated, and are likely to rise.
By undertaking
such measures Chavez has not only managed to claw back some control
over the country's oil but has also ploughed back billions of
dollars into social welfare initiatives thereby increasing his
popularity amongst the masses. In the 28 years before Chavez was
elected, Venezuelan per capita income fell 35%, the worst decline
in the region and one of the worst in the world. Since the Chavez
government took office in 1999, the decline has been halted and
per capita income has been flat through early 2004
While Chavez's
domestic policies have irked US policy makers, his regional policies
have proved to be equally nauseating to America's political establishment.
Here too, Chavez has tried to decouple Venezuela's foreign policy
from America's policy for Latin America. With America preoccupied
by the war on terrorism and Venezuela benefiting from increased
royalties and high oil prices, Chavez set about exporting his
Bolivarian Revolution to the rest of the region.
He calls this
ALBA an alternative to the likes of WTO & NAFTA. ALBA's goal
is to achieve a process of comprehensive integration among Latin
American nations with the aim of developing "the social state"
to benefit ordinary people, not the privileged elite. At its center
is respect for each nation's sovereignty free from the control
of other nations and large corporations.
To realise
ALBA, Chavez has used Venezuela's oil to assist several countries
in the region. His country provides some 200,000 barrels a day
of subsidized oil to Cuba and 12 other nations in Central America
and the Caribbean Basin. Chavez is also trying to win over Bolivia
to his vision. On Jan. 4 2006 at a joint news conference, Chavez
said Venezuela would supply 150,000 barrels of diesel monthly
to Bolivia to supplant the impoverished country's imports. "I
won't accept you paying us a cent, you are going to pay us in
agricultural products," said Chavez, adding that the offer
was worth $180 million a year. It appears that Chavez has succeeded
in persuading Evo Morales the President of Bolivia to adopt some
of his policies. On Jan 11 2006 Evo Morales told reporters that
his government plans to seize oil and gas reserves owned by international
companies, leaving other assets such as pipelines and refineries
in the hands of foreign operators. Morales said, "The state
will exercise its right of ownership, and that means it will decide
on the use of those resources."
Chavez has
also proposed the idea of establishing a South American development
bank to break the stranglehold of the American led IMF over the
economies of Latin American countries. Chavez recently said that
South American countries should disinvest from rich countries
that "manipulate, lend and make a lot of money off our resources."
Furthermore, he has encouraged countries in the region to become
more independent of the IMF. "Venezuela has been supporting
Argentina in freeing it from International Monetary Fund debt,
and we will continue, as much as we can, to help Argentina end
its dependence on the IMF," Chavez said. In 2005, Venezuela
purchased more than $1 billion in bonds from Argentina, and may
buy as much as $2 billion more. The Venezuelan investment allowed
Argentina's President Nestor Kirchner to completely pay off its
$9.8 billion debt to the IMF.
Chavez grandiose
vision of liberating Latin America from American hegemony includes
Pterosaur- a confederation of the region's state-owned petroleum
companies as well as the formation of a regional nuclear energy
club.
On the world
stage, Chavez has used oil to cultivate relationships with China
and other emerging powers. To curb Venezuela's dependence on the
U.S., which absorbs 60% of the country's oil exports, Chavez signed
a deal to sell 120,000 barrels a month of fuel oil to China and
is exploring ways to ferry larger amounts of crude to Pacific
ports. A deal signed on July 14, 2004, to build oil and gas pipelines
between the Maracaibo Basin in Venezuela and the Caribbean and
Pacific coasts in Colombia may seem innocuous, but it would enable
Venezuela to ship petroleum to China without using the Panama
Canal.
In 2000, Chavez
became the first Latin American head of state to visit Iraq since
the end of the first Persian Gulf War. He has publicly backed
Iran's nuclear ambitions and has taken a firm stance against America
at the IAEA meeting last autumn, when his country voted against
Iran's referral to the UN Security Council.
Chavez's vehement
opposition to American interest both at home and abroad has spurred
the Bush administration to enact measures to remove him from power.
Thereafter,
the administration plans to privatise PDVSA, increase royalties
for its companies and overturn many of Chavez's foreign policy
decisions. At stake for America is not just the loss of Venezuela,
but the eventual loss of Latin America. Chavez's vision for the
region, the widespread anti-Americanism, and reluctance among
Latin American countries to counter Chavez poses a grave danger
to America's interests in the region.
Even before
Bush's election in 2000 the Republican Party was planning to ouster
Chavez from power. According to a report published in the New
York Times on December 28 2000, republicans were becoming anxious
about the growing influence of Chavez and were planning to target
him. Citing "Republican officials and foreign policy analysts,"
the Times reported "a growing belief in Republican circles
that Mr. Chávez is undercutting American foreign policy
by providing oil to Cuba, by opposing 'Plan Colombia,' which includes
$1.3 billion in United States counternarcotics aid for South America,
and by giving political support to guerrillas and anti-government
forces in neighboring Andean nations.The next administration is
also expected to solidify contacts within the Venezuelan military,
which is increasingly uncomfortable with Mr. Chávez, the
Republican experts say. Unlike Mr. Chávez, many Venezuelan
officers studied and trained in the United States and do not share
his suspicions, they said." Finally in April 2002, America
removed Chavez from power. But the coup was so poorly planned
that it lasted for only 48 hours, after which Chavez was returned
to power.
Ever since
then, Chavez and his acolytes have been publicly talking about
American efforts to oust Chavez and his government. America tried
again in 2004 to remove Chavez through extending support to the
opposition but failed. And recently Venezuelan Vice President
Jose Vicente Rangel accused US Ambassador to Caracas William Brownfield,
of participating in anti-government conspiracy plans.
In summary,
Chavez from the very outset of assuming power has been opposing
American interests tooth and nail. With America reeling from the
wars in Afghanistan and Iraq, its preoccupation with the war on
terror, the failure to remove Chavez from power has become a source
of consternation amongst US politicians. No doubt America will
try to over throw him but he has so far proved extremely resilient
and has survived a number of coups attempts. This in itself suggests
that Chavez's grip on power is strong and extensive.
Chavez's escapades
against the most powerful nation on earth contain important lessons
for the Muslim world. Muslims countries, especially those that
have abundance of oil and gas reserves should start using these
resources as weapons
If a single
country like Venezuela can have a huge impact on American foreign
policy then a collection of Muslim countries pooling their resources
together are likely to have devastating affect on America's standing
in the world.
Indeed it
is this very reality that the Bush administration is clambering
to prevent. Warnings about the re-establishment of the Caliphate
are now part of the official parlance of the American government.
So much so that dealing with Chavez's resistance to US policy
in Latin America has become a low priority for the Bush administration.
Could it be that America is on the verge of loosing both the Muslim
world, as well as Latin America? No one would have entertained
such a notion five years ago, but now such a prospect seems more
and more feasible.
Abid Mustafa
is a political analyst who specialises in affairs of Islamic countries
and organizations. Petroleumworld not necessarily share these
views.
Editor's
Note: This article was first publish by Global Politician, 1/17/2005,
Volume 011, Issue 1. Petroleumworld reprint this article in the
interest of the readers.
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Petroleumworld 02/04/ 06
Copyright©2006
Abid Mustafa, All rights reserved
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