Venezuela extends its oil influence

(ISN Security Watch) - 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 the world.

South America’s only member of the Organization of Petroleum Exporting Countries (OPEC) has benefited hand over fist from inflated oil prices and utilized soaring global energy prices to its advantage. Venezuela is exporting an estimated 3.3 million barrels of oil per day, with prices set at about US$50 per barrel.

The spike in oil prices over the last year has 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 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 less fortunate.

But by cozying up to Cuba’s Fidel Castro, Chavez has drawn the ire of officials in Washington, who accuse the Venezuelan leader of trying to create a Cuba-style regime at home - a criticism Chavez does not take lightly. The outspoken leftist has complained vehemently in the last year that Washington was trying to undermine his authority and even aided 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 US of aiding the coup plotters - an allegation the administration of George W. Bush has denied.

Since then, US officials, including Defense Secretary Donald Rumsfeld and Secretary of State Condoleezza Rice, have cast aspersions about Chavez and warned he could become a catalyst for unrest in the region.

“If what they [the US] want is to break relations with Venezuela, it’s up to them,” said Chavez during a pro-government rally last 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 US energy interests, considering the 1.5 million barrels of oil it receives from Venezuela every day, fulfilling a major portion of American energy needs.

Chavez maintains he does not want to cut off Venezuelan oil supplies to the US, either. Venezuela is the fourth largest supplier of oil to the US, 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 accepts 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 has sent large quantities of discounted oil shipped to several US cities to ease the burden of rising heating costs for poor and elderly US citizens during winter months.

Last week, the US state of Connecticut joined the Bronx borough of New York City, along with Delaware, Massachusetts, Maine, Rhode Island, Pennsylvania, and Vermont in receiving 4.8 million gallons of heating oil at a 40 per cent discount for poor households. Chavez has also ordered that free fuel be given to homeless shelters in those states.

The recipients of the gesture must quality for state assistance in heating their homes this winter in order to be eligible for a share of the Chavez-mandated shipment.

Leaders in Connecticut, like many in the other states where poor Americans otherwise might suffer the bitter cold this winter, praised Venezuela for its generosity and made a point of stressing its necessity and compliance with US laws.

“This heating oil assistance fills an unfortunate, profoundly important need for our citizens - and is consistent with our laws,” Connecticut Attorney General Richard Blumenthal said in a statement this week.

But other US officials took a different view.

Republican Congressman Joe Barton from Texas has publicly questioned whether the donations are “part of an unfriendly government's increasingly belligerent and hostile foreign policy”.

Barton has ordered an investigation into Venezuelan-owned oil company Citgo, which is based in Houston, and demanded that the company hand over all paperwork, emails, and other material related to the donation program to US officials for inspection.

A letter drafted by Barton’s office asks Citgo to answer numerous questions relating to the donations, including “how and why were the particular beneficiaries of this program selected” and if the program “runs afoul of any US laws, including but not limited to, antitrust laws”.

“The bellicose Venezuelan [Chavez] decided to meddle in American energy policy, and we think it might prove instructive to know how,” said Larry Neal, deputy staff director for Barton’s committee.

Lawmakers in favor of the donations questioned Barton’s motivation for condemning the oil shipments, as the Texas Republican congressman has been a beneficiary of large campaign contributions from US energy companies.

“The Republicans are on another planet when it comes to energy policy,” said Massachusetts Democratic Congressmen Markey, the New York Daily News reported last week.

Markey also stressed his disbelief that Barton and other Republicans would investigate “a charitable donation of heating oil to relieve the suffering of a few thousand American families”.

Some Venezuelan experts said the oil donations were a “public relations gesture to guild the Chavez image” and were indeed an effort to embarrass the Bush administration.

“Chavez says he likes the United States, but doesn’t like the [Bush] administration,” an analyst and former deputy assistant secretary of state for Western Hemisphere affairs told ISN Security Watch.
Chavez forging new energy relations

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

The idea, according to Chavez, is to become more self-sufficient and home and rely less on the US 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 regional 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 8,000-kilometer 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,” Venezuelan Oil Minister Rafael Ramirez recently told reporters. “In fact it's much more efficient to generate energy using gas than with oil.”

Some analysts simply do not agree with that assessment or Chavez’s 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 ISN Security Watch, noting that the multi-billion project would have to cross over some of South America’s most difficult terrain.

Verrastro said it seemed that potential partners Brazil and Argentina were getting caught up the “political rhetoric” of the plan, namely the quest for greater local integration, rather than considering whether it was a profitable scheme for all involved. “Chavez is willing to subsidize projects that just wouldn’t be feasible otherwise,” he said, 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.

Ramirez said during last week’s pipeline talks among Venezuelan, Brazilian, and Argentine officials that the decision to move ahead with the project already had been made.

“We’ve already taken the political decision to build this pipeline. Now we're discussing the technicalities,” he told the BBC.

It does remain unclear just how the three nations would divide the cost of the project.