WW4 report: Venezuela - Chávez, Exxon play oil-price brinkmanship - Chávez on the short end of the stick

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Venezuela - Chávez, Exxon play oil-price brinkmanship - Chávez on the short end of the stick

Just two weeks after saying he hoped oil prices would "stabilize" at under $100 a barrel, Venezuelan President Hugo Chávez this week threatened to send them soaring to $200 a barrel in response to his growing dispute with Exxon. Chávez called Exxon's threat to freeze the assets of Venezuela's state oil company PDVSA part of Washington's "economic war" against his government, and vowed that Venezuela would not be intimidated. "They will never rob us again, those bandits of ExxonMobil, they are imperialist bandits, white collar criminals, corruptors of governments, over-throwers of governments, who supported the invasion and bombing of Iraq and continue supporting the genocide in Iraq," he said on his weekly TV show "Aló Presidente" Feb. 11. Last week, Exxon won temporary court orders in the UK, Netherlands, and Dutch Antilles to freeze PDVSA assets worth up to $12 billion, in a dispute over compensation for a 41.7% stake (worth $750 million) in Venezuela's Cerro Negro exploration project, which was nationalized last May. Other companies, including Chevron, BP, Total and Norway's Statoil, negotiated deals with Venezuela to remain on as minority partners in the Orinoco oil belt projects. But ExxonMobil and ConocoPhillips rejected the changed terms and have been in compensation talks with PDVSA. Venezuela is the USA's fourth largest oil supplier after Canada, Saudi Arabia and Mexico. According to the latest figures from the US Energy Department, Venezuela accounted for 12% of crude imports in November, supplying some 1.23 million barrels a day.

Note EU-Digest: "Mr.Chávez might have picked on a bone which is too big to chew. Exxon's financial reserves are several times larger than that of the entire budget of Venezuela. There are also many signs that the once-mighty Venezuela Oil Industry PDVSA may be running short of cash. Since January 8th, for instance, its customers have been required to settle their bills eight days after shipment, rather than 30 days after receipt, as is customary. By the end of the month it was offering eight super-tanker loads of fuel oil at below market price for cash. PDVSA is also no longer is just an oil producer. Mr Chávez has made it into what Elie Habalian, a former Venezuelan governor of the Organisation of Petroleum Exporting Countries (OPEC), calls a “parallel state”. The company has transferred billions of dollars to funds controlled by the president, and directly finances and runs a range of social projects. “There's a ministry of education—but PDVSA educates too,” says Mr Habalian. “There's a housing ministry, but PDVSA builds houses, and so on.” In response to shortages of basic foodstuffs, last month, Mr Chávez ordered PDVSA to create a new subsidiary to distribute food, most of it imported. At the same time, PDVSA's investment spending has been slashed, leading to a decline in oil output, the motor of the economy, for ten consecutive quarters, according to José Guerra, a former Central Bank director. The only major weapon left in Mr. Chávez his arsenal is to cut off all the supplies of oil to the US, that is if he has another customer to pick up the slack, and one who is willing to defy the wrath of "Uncle Sam"."