Oil Wars

The title taken as the Venezuelan answer to Gunboat Diplomacy of yesteryear. Hugo Chavez on his recent visit to New York City to address the General Assembly of the United Nations Gave a profound speech addressing all countries on the take heed of the need of the poor. Where most others pay lip service to issues that may present themselves as convenient, the Venezuelan head of state at the request of NY congressman Jose Serrano visited the South Bronx where he was warmly received. Despite the obvious air of propagandistic showmanship, the effects of Chavez’ visit has a very real affect on how his persona is viewed by the general public with respect to the initiatives he has already instituted.

When I see this kind of performance my first instinct is to think of a young Cassius Clay, loud mouthed, eager and sure. Opponents not to be lulled by rhetoric; The left hook is TRUE and STRONG and will knock an opponent on their ass. Now the great Muhammad Ali was floored too. Parallels to the great ones demise need to be taken in comparison to democratic principals absent in the world of pugilism.

Chavez’ impact on mainstream media is a boon to his persona and/or overall message of helping the poor. To this extent he has offered to provide fuel “directly” to the US poor bypassing costly middlemen. This is a an interesting situation, and for those that follows Venezuelan political dealing’s should not go without considering the particulars on how the federal government views such direct dealings with outside interests opposed to federal liking. For some insight here is a clip of an interview conducted by “Democracy Now”:

JUAN GONZALEZ: Mr. President, welcome. Bien venido a los Estados Unidos. Your democratic revolution has a different aspect to it, in that your rich in oil, and the world badly needs oil. What do you do in Latin America to use oil as a weapon to assist the poor. Can you tell us a little more about what you are offering to the communities of the United States who are also suffering from high oil prices.

PRESIDENT HUGO CHAVEZ: This is the result of our awareness, that only through integration we can advance and we can progress among Latin American countries, breaking the paradigm of capitalism, of free trade, and neo-liberalism. In the year 2000, we started a cooperation program especially with the Caribbean and Central American countries, and some of the South American countries, with the Caracas Energy Accord, and there for the first time in history we included Cuba, because Cuba is considered like a country that is not part the Americas, and we think it is part of the Americas; Jamaica, nicaragua, grenada, many countries.

This mechanism includes the sale of oil and oil by-products with a discount of up to 25 percent. This discount becomes in the end a donation we give these countries, however, when the price of oil, starts increases, in the year 2000 we signed the Caracas Accord and the price at that time was 20, 25 dollars a barrel. When we realized that the prices started to increase and it goes beyond 40 and beyond 50, and I doubt very much the price is going to drop any time soon because this is part of the structural crisis, the world has to face it, it is a reality. There is a drop in the oil reserves, there is an increase in consumption and demand. The refining capacity is low.

The consumerism of the world is unbearable. The world of the U.S. people must come to understand, how this country with 5 percent of the world population only, consumes 25 percent of the oil and the energy of the world. I mean that type of consumption is totally unbearable and this planet cannot stand it any more. When we realized that the price of oil went up beyond 50 dollars, we initiated another cooperation scheme. We have created, therefore, Petrocaribe and we are going to start with small Caribbean and Caricom countries, and the larger Antillas such as Cuba, Jamaica, and Dominican Republic.

So we’re now providing, first we’re ensuring the supply of oil, direct supply of oil from state to state, in order to avoid the speculation of multinationals and traders. They buy gasoline in Venezuela and then they go to a Caribbean country, and they charge double so we are selling the products to the states directly. We are not charging for freight, we assume the cost of freight. But apart from that, this discount is not of 25 percent it goes to 40 percent of the total, and this money will be paid back in 25 years time, with 2 years of grace and 1 percent interest rates. So if you make all of the mathematical calculations, the donation percentage is almost 70 percent because it’s a long term adjusted 1 percent. So what Venezuela’s doing is supplying 200,000 barrels of oil to the Caribbean and other Central American and South American countries such as Paraguay, Uruguay and smaller nations in South America. 200, 000 millions of barrels, if you apply calculations, mathematical calculations by 1.5 percent of our GDP, 1.5 percent of the GDP is devoted to this cooperation. It means we are financing these sister nations that next year will reach 1.7 billion dollars a year, in 10 years is 17 billion dollars. It’s a way for us to share, to share our resources with these countries.

And what about the us population? Well after many meetings with the U.S. citizens, we decided to propose a scheme for poor populations and low-income populations in the us. We’ve seen that poverty in the us is growing everywhere. It’s close to 11 percent poverty according to some estimates and instead of the figures you have to go deeper into it because if you see Katrina, and you saw what’s happened, 100,000 people were abandoned and they are abandoned, and they’re just surviving.

So here we have CITGO, this oil company. We have the CITGO company here in the United States. This is a Venezuelan company, so let’s have a look at the U.S. map the distribution area of CITGO in the U.S. We are present in 14,000 gas stations in the U.S., and here we have a different refineries, asphalt refineries, eight refineries that we have in the U.S., the plants for filling units, the third, refineries, terminals, and so on.

We want to use these infrastructures to help the poor populations. We have made some progress. We have given instructions to the president of CITGO, Felix Rodriguez. We want that up to 10 percent we refine here. We supply every day to the us 1.5 million barrels of oil, crude and product and we refine, here, close to 800,000 barrels a day refined here in the us. So we would like to take 10 percent of what we refine those products and to offer these products in several modalities to the poor populations. And the pilot project will be starting in Chicago we are already operating in Chicago. Well let’s hope that there’s not going to be any obstacle by the government opposed to this project being implemented, but we will be working in those poor populations. We have some allies, local partners and we have a number of communities, and we are going to donate some heating oil, because the winter is close, and for the school transportation to school, for the Mexican neighborhood which is the largest in Chicago, La Villita, is the name of this neighborhood with close to 900,000 inhabitants, and so there are other neighborhoods with Hispanics and Latinos. October, the 14th we’re going to start with these pilot projects with small communities and schools, but there are other pilot projects that will start in November in Boston, and here in New York.

So different modalities, with local authorities, mayors, organized communities, religious groups. So we are very pleased to announce this. And to help just with a drop, and a grain of contribution to help these low-income populations, Blacks or Hispanics or also White population so we’re just starting with this project.

AMY GOODMAN: Venezuelan President Hugo Chavez speaking in his first interview in the United States.

Taking into consideration the obvious benefits afforded by reduced fuel, it comes as no surprise that third world countries would seek a better deal on this valuable commodity. What is surprising is how independent states within countries whose governments are opposed to socialist values, can survive in this atmosphere. But! I think I know why. Economic principals state the where there is a lack in supply the demand will be greater felt. Venezuela with a lions share of the supply in this equation cannot be denied even by its most critical opponents. A testimony to how the Ven. government has a handle on capitalistic market driven commodity trading. Take for example the little island of Puerto Rico, a commonwealth of the United States. In the energy crunch felt by the world, this stepchild of US vestigial imperialism feels the crunch as much if not more so than the average Pepe.


What does this say for the allure of the Bolivarian plan. There is no doubt that we are all brothers as Caribbean’s, Chavez echoed those sentiments with regards to Puerto Rico. Now how will this play out with the federal government? It is true that states have rights to do what they will. For instance Alabama and other red states share a common economic interest in seeing the Cuban embargo end so that they will be free to do business with Cuba on non “cash up front” terms when trying to sell agricultural goods. So then if that sets a precedent then PR doing business with the Ven Gov. should be easy as cake, No? Internal politics will decide that one. But the fact that it is an issue contested within a US territory is significant enough to mention. One can speculate if the outcome is positive, meaning the deal goes through and PR receives the preferential deal other countries receives, what would other states in the union say about that? Would states then seek independent agreements like those offered by the Venezuelan Government to organizations who represent the poor, for themselves for their own purposes? What precedent would that set for the federal gov. to contend with?

What then is Tanker Diplomacy? Does it extend to nations or portions of nations? And what does that say about Venezuelan Foreign Policy - to recognize good solid supply and demand principls as mandated by good old fashioned capitalism? I mean really is it that hard to understand - if you got it and you dont need all of it for yourself what do you do with it?

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