Analysis: Venezuela, Iran team up on oil

MIAMI, July 17 (UPI) -- Venezuela and Iran are forging closer oil ties in hopes of reducing their dependence on the United States, inking a $4 billion deal to develop a block of the lucrative Orinoco Reserve in Venezuela.

According to Venezuelan Oil and Energy Minister Rafael Ramirez, production at the Ayacucho 7 block should begin in two years.

The block is believed to hold more than 30 billion barrels of oil, making it one of the largest in the country.

A recent statement by Venezuela's state-run oil firm PDVSA said Iran will build four oil rigs offshore Venezuela by the end of the year.

Venezuelan President Hugo Chavez has sought closer ties with Tehran in recent years, including during a trip to Iran earlier this month.

Over the last two years Chavez and Iranian President Mahmoud Ahmadinejad have met on numerous occasions and expressed their mutual desire to reduce their dependence on the United States as a petroleum customer.

Both nations have poor ties with Washington, though by varying degrees.

While the Bush administration considers Iran a state sponsor of terror and a member of the "axis of evil," relations between Washington and Caracas have also deteriorated in recent years.

Chavez has accused the White House of sponsoring opposition groups trying to topple him, an accusation the White House denies.

In an effort to wean themselves and other nations off U.S. petrodollars and its aid, Venezuela and Iran announced at the beginning of the year they would create a multibillion-dollar fund to help finance projects in countries that traditionally rely mainly on U.S. funding.

Ahmadinejad and Chavez -- speaking during the Iranian leader's visit to Venezuela -- said they would together help smaller, poorer nations escape the "imperialist yoke" of the United States.

The new agreement between Venezuela and Iran comes on the heels of the Chavez administration's decision to seize full control of the Orinoco Reserve, where two of the leading foreign oil firms announced earlier this month they were pulling out due to new conditions as mandated by PDVSA.

Both ConocoPhillips and Exxon Mobil Corp. failed to reach new contract agreements with the administration and announced they were leaving Venezuela.

"They won't be missed," Chavez said.

Their pullout followed a protracted tussle between PDVSA and private foreign companies after the Chavez administration announced it would acquire a majority stake in every operation in Orinoco.

Making good on his word, Venezuela on May 1 assumed majority control over the oil-rich Orinoco Belt.

The takeover stipulated that PDVSA have at least a 60 percent share of the projects pumping heavy crude. Foreign firms operating there would be given fair market value for controlling interest of the projects, Chavez said.

Some warn Venezuela isn't financially equipped to pay the market share it promised. Others expressed concerns bureaucracy will devastate the industry.

Peter DeShazo, a former U.S. deputy assistant secretary of state for Western Hemisphere affairs and now Americas program director at the Center for Strategic & International Studies, noted that PDVSA's workforce was depleted by the nationwide general strike of 2002-2003.

"Certainly PDVSA's overall capabilities are not what they used to be," DeShazo told United Press International.

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