Chavez, Oil and American anxiety

Abid Mustafa

Posted Jan 17, 2006      •Permalink      • Printer-Friendly Version
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Chavez, Oil and American anxiety

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 1.5million 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 oust 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.