Analysis: Venezuela's energy influence

By CARMEN J. GENTILE   |   Feb. 21, 2006 at 11:36 AM
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RIO DE JANEIRO, Feb. 21 (UPI) -- With its vast oil supply and Latin America's largest natural gas reserves, Venezuela has quickly become a major energy powerbroker in the region and globally.

It has benefited from inflated oil prices and has used soaring global energy prices to its advantage. Venezuela, the only South American members of the Organization of Petroleum Exporting Countries, is exporting an estimated 3.3 million barrels of oil per day, with prices set at about $50 per barrel.

The spike in oil prices over the last year have put tens of billions of extra dollars in Venezuelan coffers and prompted President Hugo Chavez to expand his vision for an energy-integrated Latin America.

Chavez, who mixes Marxist rhetoric with populist policies, already sends 100,000 barrels of oil per day to communist Cuba, in exchange for which Venezuela receives a cadre of Cuban doctors and other medical personnel to assist the nation's poor.

But by cozying up to the likes of Cuba's Fidel Castro, Chavez has drawn the ire of officials in the Bush administration who accuse him of trying to create a Cuba-style regime at home. It's a criticism Chavez doesn't take lightly. In the past year, he has complained vehemently that Washington is trying to undermine his authority and even accused it of aiding those seeking his ouster.

A short-lived coup in April 2002 saw Chavez briefly removed from office, only to return to power two days later. The Venezuelan president accused the United States of backing the plotters, an allegation the Bush administration denied.

Since then officials in the Bush administration, including Defense Secretary Donald Rumsfeld and Secretary of State Condoleezza Rice, have said Chavez could become a catalyst for unrest in the region.

"If what they want is to break relations with Venezuela, it's up to them," said Chavez during a pro-government rally earlier this month. "It doesn't cost me anything to close our refineries in the United States or sell the oil that goes to the United States to other countries around the world."

It would, however, certainly harm U.S. energy interests considering the 1.5 million barrels of oil it buys from Venezuela every day, fulfilling a major portion of American energy needs. Chavez maintains he doesn't want to shut off Venezuelan oil supplies to the United States. Venezuela is America's fourth-largest supplier of oil behind Canada, Mexico and Saudi Arabia.

"We don't want to go to such extremes," he said. "Let them decide. What we want is to be left in peace, that the imperialist government finally accept that Venezuela is free and is not and never will be a colony of the United States."

He has noted that other countries like China would be more than happy to make up for Venezuela's losses in the oil sector if relations between Caracas and Washington reached a breaking point. In a move considered part-peacemaking, part-propaganda, Chavez sent large quantities of discounted oil to several U.S. cities to ease the burden of rising heating costs for poor and elderly Americans during winter months.

Meanwhile, Chavez has looked to neighbors like Brazil, Cuba and Uruguay to forge new energy partnerships such as oil refineries and has already spent upward of $5 billion on the initiatives.

The idea, according to Chavez, is to become more self-sufficient at home and rely less on the United States as an energy trading partner.

His independence ideal is one echoed by many Latin American leaders, including Brazilian President Luiz Inacio Lula da Silva, who though a more moderate leftist has also espoused the need for greater Latin American integration.

Among the products headlining the Chavez agenda is a proposed gas pipeline running from the Venezuelan north all the way down to the tip of Patagonia, a nearly 5,000-mile conduit for the country's estimated 148 trillion cubic feet of natural gas reserves.

"Oil will gradually run out around the world and more and more countries will turn to gas. Latin America will also have to switch to gas," said Venezuelan Oil Minister Rafael Ramirez recently. "In fact it's much more efficient to generate energy using gas than with oil."

Some analysts simply don't agree with minister's assessment or his ambition to create a continent-long pipeline.

"It doesn't make sense," Frank Verrastro, an energy analyst with the Center for Strategic and International Studies, told United Press International, noting the multibillion project would have to cross over some of South America's most difficult terrain.

Verrastro said it seemed that proposed partners Brazil and Argentina were getting caught up the "political rhetoric" of the plan, namely the quest for greater local integration, rather than considering where it was a profitable scheme for all involved.

"Chavez is willing to subsidize projects that just wouldn't be feasible otherwise," he added, noting the danger of such a move if oil prices fall in the coming years.

Both Brazil and Argentina already import gas from nearby Bolivia, which boasts the continent's second-largest reserves.

"It's geopolitics trumping commerciality," said Verrastro.


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