Oil Wars

The hired opposition pen of the Wall Street Journal, May Anastasia O'Grady, was busy yesterday trying to justify her salary by writing a new propoganda piece entitled "Axis of Evo". As it is primarily on Bolivia and just continues with her usual non-sense I won't bother reproducing all of it. But there are a few references in it to Venezuela which are remarkably consistent in their complete disregard for reality or truthfulness. So lets take a look at those.

For starters we have this little gem:

After six years of Chavez, Venezuelans, once esctatic about their Bolivarian Revolution, are sinking deeper into poverty.

Its amazing how many things you can get wrong in just a single sentence. For example, she says Venezuelans were "once" estatic about the Bolivarian Revolution implying they no longer are. Does she have any polling data to back this up? No. In fact all the polls I saw, including one referenced in the proceeding post, show most Venezuelans rather like the Bolivarian government, or at least like it much more than its potential alernatives.

Then we are to believe poverty is going up? Sorry Ms O'Grady but the hard facts show it is going down. I guess she missed this, this, and this. And do you really expect poverty NOT to have gone down when poor peoples income grows so dramatically? Of course Ms. O'Grady knows this. But it doesn't fit with the points she wants to make so she just lies.

Ok, on to the next gem:

To this day, a number of Venezuelan experts believe that the so-called "coup" of April 11, 2002 was a staged event, designed expressly for the purpose of indentifying high-ranking Chavez opponents in uniform so they could be relieved of duty and replaced by less-qualified, loyal soldiers.

Note, given that she knows this is a lie, she tries to hide behind this clause "a number of Venezuelan experts believe". The U.S. propogandists lie as much as their Venezuelan counterparts do but they are at least smart enough to know how to avoid being sued for libel. In any event, Ms. O'Grady apparently didn't ask any hard questions of these "Venezuelan experts" like if the opposition wasn't planning a coup for that day how come they took the trouble to draft the infamous Carmona Decree in advance?

I've always wondered how much Ms. O'Grady gets paid for this column. In any event, if the Wall Street Journal is paying her to write these lies its getting its money's worth - she does seem to pump out a never ending stream of them.
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Via Vheadline I found out about a new poll on who Venezuelans trust. According to a poll by Consultores21, a major Venezuelan polling firm that like most others is opposition minded, 43% trust the government while 29% trust the opposition. So while the opposition polling organizations haven't been releasing polling information lately (maybe they are afraid their supporters can't handle the bad news?) even when they release data that only tangentially speaks to the government's popularity it shows the Venezuelan government fairing better than its opponents.

Its also interesting that the same consulting firm that carried this poll also had an interesting poll on Mexico showing that Andrés Manuel López Obrador has a 9 point lead over his closest rival and is actually pulling further ahead. His lead has widened by 3.3% since December. So hopefully in July we will be celebrating a BIG win by a popular leftist candidate in Mexico.
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I find it useful to define terms before proceeding so we will do just that:

Relative:

1. Having pertinence or relevance; connected or related.
2. Considered in comparison with something else: the relative quiet of the suburbs.
3. Dependent on or interconnected with something else; not absolute.

Democracy

1. Government by the people, exercised either directly or through elected representatives.
2. A political or social unit that has such a government.
3. The common people, considered as the primary source of political power.
4. Majority rule.

It is striking to see the opposition towards the democratic value thought to be a universal. If we are to perceive such acts as the will of the people, the same as has been promoted by the powers that be in other regions, then it follows that either the same values apply everywhere towards the same condition, else, some other criteria makes the same value non-universal. Unfortunately that criteria is unknown, or rather, unspoken.

Democracy has, to its detraction, the obvious effects of creating winners and losers. The losers of which create a minority by default. Beyond that, the perception of what is democratic versus what is not, jeopardizes the meaning of the word, and all that it stands for.

The fact that Hamas has recently won democratic elections to replace the ruling Fatah party as representatives of Palestinian rule, despite being described the world over as a terrorist organization, has managed to rally a population that saw little to no change in its condition, to elect this party as its representative. The repercussions of this democratic success are still being deciphered. Actions by various governments are being taken, as to how democracy can be dealt with when the anticipated favorites do not win.

Enter Venezuela:

Much has been written about the state of Venezuelan democracy. Most of it negative, and produced by journals that seek to discredit the validity of the government, both national and international, and echoed by governments that seek alternatives, that better suit their interests. It is for some reason that news media, and foreign governments alike, see the recent Hamas victory as threatening. It destabilizes; a veritable wrench in the monkey works, it puts into question plans already set forth. Hamas’ democratic victory has identifiable similarities to the government of Hugo Chavez. Most notably is their existence in defiance of the will of those who define what democracy is.

Non-recognition by states, who practice and preach the value, and go so far as go to war to promote it, is tantamount to the negation of democracy as a whole, thus making it a non-universal. Relative Democracy, therefore, is a conditional state dependent not on the will of the majority, but on the whims of extra-national interests, whose benefit it is to see a government favorable to them.

Gone are the times when governments could sponsor dictators to serve their interests, while they tout the opposite, on opposite sides of the world. In a twist of fate, technology – the tool of globalization – has seen that information is relayed in near real time, such that information can be given and received to ascertain truth from the fictions told. Relative Democracy is the result .

Relative Democracy is substantive, depending on the condition of the state being judged. Relative Democracy takes into consideration the value of the persons or party taking hold of power. Relative Democracy weighs that persons, or party's characteristics and worthiness to hold power. The question one must ask is: How does Relative Democracy play with the will of the people? To what extent does any population have a choice in the electoral process? How does the will of Extra-nationals affect the will of population?

Such are the questions that the new Palestinian government must face. The Venezuelan Government already knows how extra-nationals feel about that condition. A word of caution to the new Palestinian authority - Beware of the US National Endowment for Democracy - wolves in sheeps clothing.
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This is going a ways off topic but there is something worth mentioning on this blog with respect to the big win for Hamas in the Palistinian elections. And that is it points up why the U.S. has been such a stallwart opponent of democracy in the Middle East - they just don't like the people who will win free elections. And that is why from Egypt, to Saudi Arabia, to Jordan, to Pakistan, to Kuwait the U.S. openly supports and helps prop up undemocratic regimes (and then of course, rubbing salt into the wounds, blames Arabs for not being a democratic people).

This brings us back to Iraq. One of the U.S. lies for going into Iraq was to bring democracy to that country. Of course, if they really wanted to spread democracy in the Middle East they didn't have to invade anyone, they could just stop supporting the respresive regimes they give billions to. And if they are hell bent on invading places why not invade, say, Jordan. Jordan is certainly in desperate need of democracy. But I guess the U.S. and Israel don't like who would likely win elections in Jordan so better to simply never allow them.

So all the bogus and trumped up elections in Iraq aside the one thing in the Middle East the U.S. fears a lot more than any Weapons of Mass Destruction is the simple idea of one person one vote. Which is why the Palistinians, who just had a democratic exercise in one person one vote, are probably going to get all their aid cut off. An example must be made of them before the subversive notion of democracy spreads any further.
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Although I haven't said anything about it previously the governments of Venezuela, Brazil and Argentina have been discussing building a very long pipeline to ship Venezuelan (and maybe Bolivian?) natural gas to the growing markets of Brazil and Argentina. While in principal it may seem like a good idea I've always had questions about it on a cost basis. Its said to cost around $25 billion to build and would all of that expense be recovered? Especially given that both Brazil and Argentina are at best moderate income countries with limited energy markets. Further, the upfront investment in this thing is huge - who will foot that bill? Regional solidarity is good and important but projects still have to make economic sense too. I'm not saying this might not being an excellent project, it may well be. But questions have to be answered first.

And today yet more questions came up, this time regarding possible ecological problems resulting from the pipeline construction:

Environmentalists were caught off guard when South American leaders announced plans to build a massive natural gas pipeline through the Amazon rain forest.

Proponents say the $20 billion project, still in early planning stages, will help satisfy the growing regional demand for gas and help make South America less dependent on outside sources.

But environmentalists say it could damage part of the Amazon — the world's largest wilderness — by polluting waterways, destroying trees and creating roads that could draw ranchers and loggers.

Venezuelan President Hugo Chavez says the pipeline is a central part of his efforts to reduce dependence on the United States and its pressure for free market policies known as the Washington Consensus.

It's "the beginning of the South American consensus," Chavez has said. "This pipeline is vital for us."

At a meeting in Brazil's capital earlier this month, the presidents of Venezuela, Argentina and Brazil promised to come up with the first set of preliminary studies for the 5,000-mile pipeline, stretching from Venezuela to Argentina.

Preliminary plans were promised for a March 10 meeting of the three leaders in Argentina.

Roberto Smeraldi of the Friends of the Earth-Brazil said the short timetable seemed unworkable.

"A government like Brazil's can't do similar studies for projects covering (310 miles) after 10 years of discussion, and now they are going to manage in-depth studies for a (5,000-mile) project in six months?" he said.

Smeraldi said he believed the pipeline theoretically could be built with minimal impact to the environment, but the cost would be prohibitive.

Chavez has said he wants the continent's state-owned oil companies to build and oversee the pipeline.

He said Venezuela and Bolivia "have gas for 200 years" and can supply fuel to Brazil and Argentina, where there is increasing demand for power generation, cooking gas and cars.

The Venezuelan leader estimated the pipeline would cost $20 billion to $25 billion, but Smeraldi said strict adherence to Brazil's tough environmental laws would double the cost.

Brazil's Environment Ministry referred Associated Press calls for comment to the country's environmental protection agency, which would oversee licensing of the project. However, press officer Sandra Sato declined to comment, saying "We can't take a position until there is a request for licensing."

Glenn Switkes of the International Rivers Network said if the pipeline were ever built, it would inevitably foul the environment.

"There are a lot of issues involved: direct construction, the question of drainage, all the roads that need to be built," Switkes said.

Roads are particularly devastating to the Amazon rain forest. They allow ranchers, loggers and miners to flood into areas that previously were inaccessible.

Environmentalists estimate that each road cut into the rain forest causes destruction of the forest for 30 miles on each side of the road within a few years.

"They always say they're going to fly in the pipes and not build roads, but they never do that," Switkes said. "Then they say that the pipeline will go around important ecological areas, but they never do that either because it gets too expensive."

Brazil's rain forest is as big as Western Europe and is thought to contain at least 30 percent of all plant and animal species on the planet. Experts say as much as 20 percent of its 1.6 million square miles has already been destroyed by development, logging and farming.

Analysts also questioned the economic wisdom of the plan, especially after Brazil's government-run oil company announced it would invest $18 billion to develop the country's natural gas fields.

"Both Brazil and Argentina have gas fields large enough to cover their own domestic demands. I don't see why they would like to undertake this hugely costly project, with money they don't have, not to mention environment costs," said Norman Gall, executive director of the Fernand Braudel Institute of World Economy.

The plan also seems to conflict with other projects proposed for the region.

"If the government goes ahead with this pipeline, it will have no money for any other type of investment," Smeraldi said.

These definitely look like the kind of very legitimate concerns that should be thoroughly examined BEFORE anything is built.
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You have to love this:

"We need to bring our troops home immediately," Sheehan told the crowd to a rousing applause. "We need to hold someone responsible for all the death and destruction in the world. We need to see George Bush and the rest of them tried for crimes against humanity."

Just like Harry Belafonte she is not afraid to speak the truth even of she knows she will be attacked for it. That is what you call being a stand up person.
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Today the New York Times published a front page detailing how U.S. oil and gas companies have been carrying out various fraudulent activities to minimize the amount of taxes and royalties paid to the U.S. government. Although this is somewhat off topic for this blog I found the article to be both stunning and fascinating for one reason. And that is that these transgressions carried out in the United States by oil companies almost exactly matched a lot of the accused wrongdoings of oil companies in Venezuela.

I recently finished reading the speach by Venezuelan energy minister Rafael Ramirez before the National Assembly. In that speech he talked a great deal about the various mechanisms that the foreign oil companies operating in Venezuela, and even the former management of PDVSA, used to cheat the Venezuelan government out revenue it was entitled to. Of course, although Mr. Ramirez's accusations were quite serious and seemed plausible there was no independent corroboration of them. Although past events have made me inclined to believe Venezuelan government officials there was no way to know if maybe these accusations weren't being embellished.

So today when I read the very detailed and corraborated accusations against the U.S. oil companies I was literally stunned - virtually all the things the oil companies did in the U.S. to avoid royalty payments were the exact same things that Rafael Ramirez accused the oil companies of doing in Venezuela. In the not too distant future I hope to publish some extended exerpts from Ramirez's speech. And when I do try to keep in mind the following from the NYT article:

As Profits Soar, Companies Pay U.S. Less for Gas Rights
By EDMUND L. ANDREWS

WASHINGTON, Jan. 22 - At a time when energy prices and industry profits are soaring, the federal government collected little more money last year than it did five years ago from the companies that extracted more than $60 billion in oil and gas from publicly owned lands and coastal waters.

If royalty payments in fiscal 2005 for natural gas had risen in step with market prices, the government would have received about $700 million more than it actually did, a three-month investigation by The New York Times has found.

But an often byzantine set of federal regulations, largely shaped and fiercely defended by the energy industry itself, allowed companies producing natural gas to provide the Interior Department with much lower sale prices - the crucial determinant for calculating government royalties - than they reported to their shareholders.

As a result, the nation's taxpayers, collectively, the biggest owner of American oil and gas reserves, have missed much of the recent energy bonanza.

The disparities in gas prices parallel those uncovered just five years ago in a wave of scandals involving royalty payments for oil. From 1998 to 2001, a dozen major companies, while admitting no wrongdoing, paid a total of $438 million to settle charges that they had fraudulently understated their sale prices for oil.

...........................................


Royalties for natural gas have climbed sharply in the last three years. But while prices nearly doubled from 2001 to 2005, the $5.15 billion in gas royalties for 2005 was less than the $5.35 billion in 2001. When oil and gas are combined, royalties were about $8 billion in 2005, almost the same as in 2001.

Because much of the information about specific transactions is kept secret, it remains unclear to what extent, if at all, the weakness in royalty payments stems from deliberate cheating or from issues with the rules themselves.

But one major producer, Burlington Resources, admitted to shareholders last year that it might have underpaid about $76 million in gas royalties in the 1990's. And in Alabama, a jury ruled in 2003 that Exxon had cheated on $63.6 million worth of royalties from gas wells in state-owned waters. The jury awarded $11.9 billion in punitive damages, which a judge later reduced to $3.5 billion. Exxon disputes the charges and is appealing the verdict.

.............................................

Johnnie M. Burton, director of the Interior Department's Minerals Management Service, said the disparities were mostly the result of deductions that the regulations let companies take, reducing the sale prices they report to the government.

But Ms. Burton said she had not known and could not explain why companies were reporting higher sale prices to their shareholders and to the Securities and Exchange Commission than to her office.

"I can't answer because I don't know," she said in an interview. "We don't look at S.E.C. filings. We don't have enough staff to do all of that. If we were to do that, then we would have to have more staff and more budget. You know, there is such a thing as budget constraint, and it's been real tough, let me tell you." The contrasts between what companies are telling the government and what they are telling shareholders is stark.

The Interior Department, using the numbers given by companies paying royalties, said the average sale price of natural gas on federal leases was $5.62 per thousand cubic feet in fiscal 2005, which ended Sept. 30.

By contrast, Exxon told shareholders that it received about $6.88 per thousand cubic feet in the nine months that ended Sept. 30. Chevron said its average price in that period was $6.49. Kerr-McGee, which suffered huge losses from hedging against a drop in prices, nonetheless said it still received an average price of $6.59.

"There's no reason why what the companies report to their shareholders should be higher than what they report" to the Minerals Management Service, said Lee Helfrich, a lawyer who has represented California in many battles with the industry over royalties. "The ultimate goals or mission of the S.E.C. and the M.M.S. are different, but the information reported to each should be the same."

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In the scandals over oil royalties in the 1990's, government investigators, aided by industry whistle-blowers and investigation by the Project on Government Oversight, found that companies were using a host of tricks to understate their sale prices.

These included buy-sell agreements in which producers swapped oil with each other at artificially low prices and then resold it at higher prices. Companies also sold oil at below-market prices to their own affiliates, classified high-priced "sweet" oil as much cheaper "sour" oil and padded their deductions for transportation costs.

....................................

The Bush administration also took a much more relaxed approach to auditing and fraud prevention. In 2003, the Interior Department's inspector general declared that the auditing process was "ineffective" and "lacked accountability" and that many of the auditors were unqualified.

In one instance, inspectors discovered that auditors had lost the working papers for an important audit and tried to cover up their blunder by creating and back-dating false documents. Rather than punish anybody, the inspector general recounted, the minerals service gave the employee who produced the new documents a financial bonus for "creativity."

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Perhaps the most striking example of sluggish auditing is the government's effort to collect back royalties from companies that blatantly ignored one of the government's basic rules.

Under current rules aimed at promoting energy production in deep waters, companies can produce large volumes of oil and gas without paying royalties at all. But the rules also require companies to start paying royalties if market prices climb above certain "threshold" levels.

As it happens, market prices have been above those levels since the 2003 fiscal year. But even though dozens of companies never bothered to start paying, Ms. Burton said earlier this month that the government had yet to demand repayment three months into the 2006 fiscal year.

So just a few of the tricks to avoid paying the government money were underreporting the sale prices, selling to affiliates at phoney prices, and taking dozens of deductions no matter how absurd many of them were. And a pliant government colludes in this fraud by allowing absurd deductions, cutting back on audits and oversight, and by simply refusing to enforce laws.

And PDVSA and foriegn oil companies, with the collusion of the Venezuelan government, did precisely the same things before Chavez showed up and cleaned house. To give an example, recall the article showed how the Bush administration has cut back on the auditing of oil companies. Well under the Carlos Andres Perez administration PDVSA successfully lobbied the government to have the tax authorities, who had always had offices directly in PDVSA headquarters to carry out ongoing oversite and audits, removed from the building. And the Perez administration gladly complied and had the tax agency office closed. PDVSA also bought a number number of overseas affiliates to which it sold oil at discounted prices as a way of avoiding having to pay royalties to the Venezuelan government. According to the Times article that is straight out of the Exxon-Mobil play book.

One has to wonder how these scams could have been so simliar. Could it be that the fired PDVSA executives got jobs at big U.S. oil companies and started this? No, Big Oil in the U.S. was doing this long before the PDVSA executives came onto the market. Or could it be that the PDVSA executives were largely culled from the ranks of big foreign oil companies so they just continued with all the same tricks of the trade they had learned while working for them? I think that is probably it. They were good students who learned from true pros.

In fact this turns on its head one of the main arguements that has always been advanced in favor of the former PDVSA "meritocracy". That is, that these were highly trained professionals and managers who had learned from the best and brightest and ran a world class oil company. What we see is that the oil executives from whom they would have learned were no paradigm of morality and ethics. Rather, in spite of their fancy atire and polished presentation, they are lieing, theiving, crooks. And if Exxon and Shell were the parents of PDVSA then all we can say is that the apple didn't fall far from the tree.
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Today from the New York Times we got yet more information on the true, and well hidden cost of the U.S. war in Iraq. The article was quite long but I give a couple of exerpts:

It has taken hundreds of hours of therapy, but Jason Poole, a 23-year old Marine corporal, has learned all over again to speak and to walk. At times, though, words still elude him. He can read barely 16 words a minute. His memory can be fickle, his thinking delayed. Injured by a roadside bomb in Iraq, he is blind in his left eye, deaf in his left ear, weak on his right side and still getting used to his new face, which was rebuilt with skin and bone grafts and 75 to 100 titanium screws and plates.

.................................

Men and women like Corporal Poole, with multiple devastating injuries, are the new face of the wounded, a singular legacy of the war in Iraq. Many suffered wounds that would have been fatal in earlier wars but were saved by helmets, body armor, advances in battlefield medicine and swift evacuation to hospitals. As a result, the survival rate among Americans hurt in Iraq is higher than in any previous war - seven to eight survivors for every death, compared with just two per death in World War II.

....................................

So many who survive explosions - more than half - sustain head injuries that doctors say anyone exposed to a blast should be checked for neurological problems. Brain damage, sometimes caused by skull-penetrating fragments, sometimes by shock waves or blows to the head, is a recurring theme.

More than 1,700 of those wounded in Iraq are known to have brain injuries, half of which are severe enough that they may permanently impair thinking, memory, mood, behavior and the ability to work.

Medical treatment for brain injuries from the Iraq war will cost the government at least $14 billion over the next 20 years, according to a recent study by researchers at Harvard and Columbia.

Jill Gandolfi, a co-director of the Brain Injury Rehabilitation Unit of the Veterans Affairs Palo Alto Health Care System, where Corporal Poole is being treated, said, "We are looking at an epidemic of brain injuries."

The consequences of brain injury are enormous. Penetrating injuries can knock out specific functions like vision and speech, and may eventually cause epilepsy and increase the risk of dementia. What doctors call "closed-head injuries," from blows to the head or blasts, are more likely to have diffuse effects throughout the brain, particularly on the frontal lobes, which control the ability to pay attention, make plans, manage time and solve problems.

This is indeed well hidden. Don't expect to find any news reports about this on FOX, ABC, CBS, CNN or any of the other war cheerleading "news" outlets. From their point of view these people are better left out of sight and out of mind. After all, they've been thoroughly used by the U.S. military so there is no point talking about them anymore. Actually, though, they probably will be talked about 10 or 20 years from now when the government decides to start cutting their "overly generous" veterans benefits.
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The Eastern Caracas elite, instead of going to their usual Sunday morning baila-aerobics (dance aerebics), decided to have a little march and rally today. They got to vent about Chavez and burn some calories at the same time.



This time they managed to avoid completely embarrassing themselves and actually got maybe 30,000 people to show up. What I thought was funny though was they still have the "Gente de Petroleo" walking around with their dumb t-shirts and people carrying posters of Carlos Ortega. One of these days they'll probably figure out they are not winning any friends by doing that.

Anyways, is it just me or does anyone else notice they hold rallies when they are sure there aren't going to be any elections anytime soon to burst the balloon of their absurd numbers? After all, they'll probably be claiming a million people showed up and it would be pretty silly to claim that and then a month later have to pull out of an election because you know hardly anyone will vote for you. Fortunately for them there are no more votes until December. So maybe they'll even have some more rallies. Lucky Caracas.
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