Posted on 04/10/2002 2:47:49 AM PDT by Cincinatus' Wife
CARACAS, Venezuela -- Venezuela's political crisis threatened Tuesday to bring the country to its knees economically and to interrupt the flow of oil from the United States' third-largest supplier.
A general strike by a broad coalition of business groups and labor unions brought activity to a standstill in much of the country. That came on top of a bitter six-week dispute between the government and managers at Venezuela's state-owned oil company, Petroleos de Venezuela, known as PDVSA.
The degree of disruption to oil production and exports remained unclear due to wildly varying claims. Government officials insisted everything was running smoothly, repeatedly interrupting normal television and radio programs to issue antistrike messages.
"PDVSA is working at 100 percent of its capacity," President Hugo Chavez said during one broadcast. "We are exploring, producing, refining and sending crude oil and refined products to the whole world."
But reports from across the country presented a different picture, with state oil company representatives claiming several important refineries all but shut down and port facilities effectively out of operation.
With the largest oil reserves outside the Middle East, Venezuela is the fourth largest oil exporter in the world. It is a major source of U.S. imported oil, supplying about 1.75-million barrels a day of crude and other oil products. The PDVSA subsidiary Citgo owns over 13,000 gas stations in the United States.
According to Humberto Calderon Berti, former energy minister and PDVSA president, production in eastern Venezuela has been reduced by 400,000 barrels per day, almost half the region's normal output.
"I believe there could be serious problems (in terms of fuel supplies to the domestic market) within four or five days," Calderon said. "In terms of the export of crude oil and oil products, the effects are already being felt."
He added, however, that the existence of offshore facilities in the Netherlands Antilles and the Bahamas meant supplies "can be guaranteed for some days more."
Energy industry experts said Venezuela's political crisis combined with tension in the Middle East had created an unusual situation that could disrupt world markets. On Monday, Iraq announced a one-month suspension of oil exports to protest Israel's military operation in the West Bank.
Although OPEC, the Organization of Petroleum Exporting Countries, quickly reassured markets there were enough supplies worldwide to fill the Iraqi shortfall, the situation was different with Venezuela.
"Iraq is using oil as a political weapon," said John Lichtblau, chairman of the Petroleum Industry Research Foundation, a consulting group in New York. "The loss of Venezuelan oil isn't the same. It's not directed at the U.S."
While OPEC was traditionally willing to step up production to protect world supply from political attack, it was less clear whether it would respond in the case of an internal political dispute in a member state.
If Venezuela's crisis worsened and other producers were not willing to make up for the loss, Lichtblau predicted the United States might have to take action on its own. That could involve dipping into the Strategic Petroleum Reserve, a 560-million-barrel storage facility in Texas.
Industry experts said the current crisis clearly represents the sternest challenge yet to Chavez's increasingly unpopular government.
Oil is the mainstay of the Venezuelan economy. Traditionally it supplies some 80 percent of foreign earnings and almost half of government revenues.
The strike was called as part of a campaign against Chavez's left-wing political and economic reforms. Opponents of the reforms believe they are undermining the country's democratic system. The government's efforts to take over political control of PDVSA, an autonomous state entity, provided the latest catalyst.
"The central issue is no longer just about the oil industry," said Berti, the former energy minister. "It's about the way the country is being run."
In February, Chavez fired PDVSA president Guaicaipuro Lameda, a military officer recognized for his efficient running of the company. He was replaced by a radical left-wing academic, Gaston Parra, who is a longstanding opponent of PDVSA's autonomy.
Chavez also appointed five new members to the PDVSA board, all close to his own political party. In an unprecedented move, the company's top management demanded the resignation of the five, under the slogan "no to politicization."
After weeks of fruitless attempts to negotiate an agreement, management last week began a "progressive, indefinite" withdrawal of labor in an attempt to force the government's hand.
Karl Mazeika, one of the PDVSA dissidents and a former vice president of the company, said the management had bent over backward to avoid the strike, but government intransigence had left no alternative.
Chavez seems in no mood to back down, accusing the management of being an overpaid elite defending its privileges. In his regular Sunday radio and TV show, Hello Mr. President, he announced the dismissal of seven of PDVSA's most senior executives, all of whom had acted as spokesmen for the management dissenters.
"If I have to, I'll fire them all," he said Sunday. "There's a long list of people prepared to substitute for those who leave PDVSA."
One way or another, energy analysts say, the situation has to be resolved soon.
"Venezuela must export oil or go bankrupt," said Lichtblau. "This is something that can't last very long."
-- Phil Gunson is a Times correspondent based in Caracas, Venezuela. David Adams is the Times' Latin America correspondent.
``That crude will come straight to the United States, and directly challenge light Saudi Arabian crude at a time when the market is going to be looking hard for incremental barrels,'' said Jay Saunders, oil analyst for Deutsche Banc.
The Sincor project comes as analysts worry that OPEC's strict supply caps on low-cost oil could hike energy prices and possible U.S. military action against oil exporter Iraq as part of its war on terrorism might disrupt global oil flows. ........
The first shipment of Sincor will go to TotalFinaElf's refinery in Port Arthur, Texas, this month. Sincor is expected to hit full production by the end of the year.
U.S. refiner Ultramar Diamond Shamrock Corp., a unit of Valero Energy Corp. has signed a three-year contract to take 45,000 bpd of the new ``Zuata Sweet'' crude to its Three Rivers refinery near Corpus Christi, Texas.
While analysts and oil companies warn that new oil terms put in place under Venezuela's new hydrocarbon's law may prevent further heavy oil investment, the Ministry of Energy and Mines said the tar belt would provide stable supply for decades.
``We have oil in the Orinoco to last for the next 35 to 40 years,'' said a Ministry spokesman. [End Excerpt]
Chavez Vows to Fight Oil Strike***He urged thousands of followers not to be provoked into violence by the opposition and to be alert to conspiracies against his 3-year-old government…..Bands of Chavez supporters known as "Bolivarian Circles" clashed with strikers outside PDVSA headquarters, and at least 18 people were injured, many of them Chavez supporters, police officers at the scene said.***
I wondered how long it would be before they got something "hopping" in South America... here it is.
Did you see Jimmy Carter is going to Cuba?
Very interesting.
Yes he's trying to counter Bush's tough stance against a communist dictator. I wonder if Lott is still willing to fight against Castro? Lott vows to fight Cuba trade legislation****"I oppose both, and if I can find a way to kill them, I will," Lott said. The legislation is "not just about Cuba" but also about getting food and medicine to Libya, Iran and other countries "that are tyrannical, do horrible things to their people and in some cases are even a threat to world peace," he said.
...... The Clinton administration decided a year ago to allow sales of food and medicine to Iran, Libya and Sudan but was barred by law from easing the embargo on Cuba. Direct sales of medicine to Cuba have been allowed since 1992 under restrictions similar to those that would be imposed on food shipments under the House agreement: Cuba must pay cash for the goods or obtain credit from a third country. ****
EX-president of Venezuelan state oil company accuses government of eroding morale ***Other bones of contention were the central government's demand that the company hand over $4.4 billion in dividends last year, forcing PDVSA to borrow $500 million to pay the bill; and the oil sales to Cuba, whose leader, Fidel Castro, is Chavez's longtime mentor. · Chavez has insisted that oil sales continue to Cuba, despite an unpaid $97 million bill for past sales. ***
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