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The cold war over oil involves Chavez, China and Russia
By Irwin Greenstein
Americans like to believe that the 40-odd-year Cold War drew to a close in the late 1980s and the early 1990s. That's when Ronald Reagan was president, the Berlin Wall came tumbling down and the Soviet Union collapsed. (That led Dick Cheney to also tout Reagan's famous fiscal theory that deficits don't matter.)
With the demise of the Soviet Union in 1991, the history books like to tell us that the US emerged as the sole superpower. Any investor who now believes that hogwash will soon be standing in a soup-kitchen line.
When it comes to the Cold War, our own economic collapse (yes, I've said it) is exacerbated by the new presence of Russia and China in Venezuela.
As history often demonstrates, oil and gunpowder often go together. In conjunction with its oil deal with Venezuela, Russia sent two Tu-160 bombers to Venezuela and the navies of both countries are conducting exercises off the coast of Venezuela.
Big Media reports that this new relationship harkens back to the Cold War as Russia moves into the Western Hemisphere for the first time since it left Cuba. This type of coverage implies that the US still has a fighting chance.
It doesn't take a genius to see that America is fiscal mess. But it may take a massive dose of ginkgo biloba to fully realize that we are the big Cold War losers.
After all, Venezuela is the fourth-largest oil supplier to the US, accounting for than 10% of our imports. Each and every day, we rely on Chavez for 1.3 million barrels of crude.
Now it seems that all we have left is bravado.
The Russian-Venezuelan alliance was ridiculed on Thursday by US Secretary of State Condoleeza Rice.
The United States is confident that its own relations with Western Hemisphere countries "will in no way be diminished by a few aging Blackjack bombers visiting one of Latin America's few autocracies," she said.
Clearly, Rice is whistling in the dark. Venezuela isn't the only Latin American leftist government that could host Russia and China.
On the same day, Bolivia announced it would sign an oil and natural gas exploration deal with Russian state energy giant Gazprom.
Five of Russia's biggest oil national companies are looking to form a consortium to increase Latin American operations.
As these negotiations are ironed out, Chavez will meet with Chinese President Hu Jintao starting tomorrow.
Chavez has bragged he wants to ship China 1 million barrels per day of oil by around 2011 or about 13% of its current oil demand.
Venezuela supplied China with 5.17 million tonnes of crude - just 177,000 bpd - in the first seven months of 2008. That's a 94% increase over the same period last year.
In May, the Venezuelan state oil company PDVSA and the largest Chinese oil and gas company PetroChina agreed to build a refinery in China's far southern Guangdong province.
China this year lent $4 billion to Venezuela, which the South American country will repay in fuel, to create an investment fund for development projects.
Investors take heed: We are entering an age of ideological investing. To succeed in this new world order it's imperative you remember that history will prove we lost the Cold War. Invest accordingly.
Irwin Greenstein is a contributor to various media. He writes about finance. Prior, he specialized in worldwide marketing and media outreach for small high-tech companies. Irwin was formerly a contributing author to the Emerging Markets blog, from the Taipan Publishing Group. Petroleumworld does not necessarily share these views.
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Petroleumworld News 10/04/08
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