Chavez win won't disrupt oil flow


WASHINGTON, Aug. 12 (UPI) -- A victory for Venzuela's current president in the Aug. 15 referendum could continue to strain the country's ties with the United States politically but oil will continue to flow, according to some analysts.

The referendum will ultimately be a vote on whether President Hugo Chavez should be booted out of his job two years before the six-year term is up. Chavez has been a controversial figure to those outside the country since he assumed office in 1998, and some Washington insiders fret that a Chavez victory could escalate tensions in U.S.-Venezuelan oil relations.


"A Chavez win could mean a continuation of what we already have today, not a programmatic modus vivendi between the U.S. and Venezuela. U.S. options are limited," said Michael Shifter, policy vice president at the Washington-based Inter-American Dialogue. "On the political side, relations would remain tense. Oil would keep flowing. So far, there has been no significant change in economic relations between the U.S. and Venezuela. There are concerns on the political side, a lot of strain and friction. Chavez believes the U.S. will continue to deal with him," Shifter added.


A great deal is at stake at the upcoming referendum. As a major supplier to the United States, Venezuela plays a role in hemispheric geopolitics. If he wins, Chavez has the power to turn off the oil spigot to the United States. He who wins the Aug. 15 referendum will also gain control over the national petroleum industry.

"Chavez will continue his political rhetoric of saying the U.S. is the bad guy. It will not mean that Venezuelan exports will stop. Shutting oil exports is only rhetoric. Chavez tells U.S. refiners meanwhile that oil exports will continue. It's an electoral game," said Senior Analyst Jaime Brito of PFC Energy.

Chavez, a retired lieutenant colonel who spent two years in prison for leading a failed military coup in 1992, is leading a campaign to defeat the referendum. According to opinion polls, the race will be close and many of the 14 million registered are undecided on how they will vote.

In order to remove Chavez from office, the opposition must gather more votes than the 3.7 million that were cast in his favor in the 2000 election. Despite the possibility of losing, Chavez could still run for president in the new polls that would be called one month after the referendum. The opposition wants a recall that will permanently remove Chavez from power not one that can run again after losing the vote. When asked in an interview by El Pais on July 25 what happens of Chavez loses the referendum, Venezuelan Foreign Minister Jesus Arnaldo Perez, who was also a former Venezuelan president twice, said, "The hypothesis is denied."


The United States complains of Chavez's totalitarian intentions, while Venezuela alleges that the United State meddles in Venezuela domestic affairs. The Venezuelan president refers to the United States under the Bush Administration as "the demonic empire" and a proponent of Chavez opposition. Chavez threatened the United States that if Washington intervenes in Venezuelan dmestic affairs, the United States will not see "a single drop of Venezuelan oil."

In an interview with El Universal on Aug. 6, Democratic Coordinating Board Leader and Miranda Governor Enrique Mendoza said, "We found attacks against President Bush funny. No (common) man or woman in Venezuela knows who Bush is, and they do not care. But the pro-government leaders are immersed in a radical anti-U.S. attitude, and they give excessive importance to these issues because they believe people think like them. I hope they continue to believe that."

Perez said relations "were hostile from the start. They want to force a sovereign country such as Venezuela not to have relations with Cuba, altering all the rules. That was one of the last straws. We take a sovereign decision, to sell oil to Cuba, and everything comes down on our heads...we do not want to Cubanize Venezuela; we are very Venezuelan. Cuba is a country, which needs us. We are against political embargoes. We will not ask for anybody's permission to trade with a country, which every one it may be."


Chavez also accuses the Bush administration of allegedly being involved in the coup d'etat that temporarily toppled his regime in April 2002. Perez said, "We do not need the Americans to defend democracy. On 12 April (2002) democracy was defended by the people and the armed forces. If there is democracy in Venezuela now it is thanks to President Chavez and to the people."

Moreover, Chavez blames the United State of what he calls "petroleum sabotage" in regards to the opposition strike between December 2002 and February 2003 to attempt to force his resignation. According to Venezuelan finance ministry figures, the strikes are estimated to have cost the Venezuelan petroleum industry more than $12 billion with the Venezuelan economy shrinking approximately 20 percent. In 2004, soaring oil prices supposedly helped the government to begin reaping profits for a recovery.

Referring to the referendum, Chavez said: "That is the epicenter of this battle. That is where we are determined to make this nation a dignified, freer, egalitarian, and prosperous fatherland, against those who want to turn this country into a colony. If there is one sector that understands this clearly, it is the oil industry workers." According to Chavez, the real heroes are oil industry workers because they restored the industry immediately following the late 2002, early 2003 general strike and "showed that they have what it takes to be liberators." Chavez emphasized that oil industry workers are leading the renationalization of Venezuela's oil sector. There are still some oil agreements pending review, which "continue to hinder a profound nationalization from taking off, although we have made very significant progress."


American oil companies meanwhile currently have projects under way in Venezuela. Chavez announced ChevronTexaco's offshore gas exploration 3-year $200 million project in eastern territorial waters. ChevronTexaco intends to explore and develop block 3 of the Deltana platform, a 579-square-mile region in Venezuela's Caribbean waters that contains some 37 billion cubic yards of gas.

According to the Energy and Mines Ministry, the $6.3 billion project includes five exploratory blocks and construction of a liquefied natural gas plant. Chavez said ChevronTexaco "plans to invest $107 million this year and create 723 jobs." Chavez added that ChevronTexaco's gas production will "be used to supply both domestic and foreign markets." ChevronTexaco in Latin America Head Ali Moshiri said his company intends to "invest more than $200 million in the first three years of the exploratory phase." Venezuela has a proven natural gas reserve capacity of 5.6 trillion cubic yards, the world's eight largest.

Venezuela is the world's fifth largest exporter; fourth largest U.S. supplier along with Canada, Mexico and Saudi Arabia; and an OPEC founding member. The country has assigned a maximum export ceiling of 2.6 million barrels per day, a 10 percent decrease year-on year. Venezuela has earmarked 1.39 million barrels for the United States. Crude oil and petroleum products exports to the United States peaked in 1997.


Chavez blames high oil prices on the global market as a result of the outcome of the war in Iraq. Over the past several years, Chavez said that his administration had contributed to increased international crude prices. Chavez said, "Even if the reference crude index is $43 per barrel, Venezuela's basket (basic petroleum basket) costs approximately $36. Basic cause: the attacks on Iraq and the Middle East. Texas crude closed on August 11 at above $44."

Regardless of whether Chavez wins, Venezuela will still have to deal with unemployment standing at three million people and the cultural changes Chavez attempted to impose throughout his tenure. Perez said, "Unfortunately, it has been proven that the referendum is a failure, that it will never be a solution in Venezuela. Nothing will be resolved in Venezuela on 15 August. The people who still have hope in the recall referendum still believe, mistakenly, that Chavez is capable of opening up a way. No. We are the ones who have to open it."

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