The Guardian September 4, 2002


Oil battle in Venezuela

The Bush administration has two goals in mind in its crusade to depose 
the democratically elected President Hugo Chavez: cut off the oil to Cuba, 
and guarantee a cheap source of Venezuelan crude so that they can butcher 
civilians in Iraq and improve the geographic positioning to suck the oil 
from the Arabian Peninsula, the TransCaucusus and Central Asia.

Under the 2000 pact, Venezuela sells 53,000 barrels a day of oil to Cuba 
under preferential financial terms. It has similar deals with other 
Caribbean nations.

Venezuela provides one-third of Cuba's oil imports.

Note that when Chavez came to power OPEC oil sold for US$9 a barrel. Under 
the guidance of Chavez (Venezuela currently holds the rotating chair as the 
head of OPEC) OPEC established a "fair trade" policy for oil with a target 
price of US$22-$26 per barrel.

Conceptually this is similar to the fair trade debate for coffee whereby 
the goal is to set both a floor and a ceiling on a commodity price.

In doing so, many members of OPEC are now grateful to Chavez for developing 
a two-fold coherent strategy: to immunise OPEC governments from wild price 
swings and provide a reasonable price for their commodity.

At first this policy was controversial within OPEC and the oil producing 
nations of Norway, Mexico and Russia.

Price "hawks" like Iran, Iraq and Russia (not an OPEC member, but a major 
producer) wanted to extract as high a price as possible for oil and 
certainly wanted to establish intermediate targets of US$35 a barrel.

But Chavez persuaded them that this was not sustainable and the oil markets 
have been much more favourable to the producers since his "managed float" 
type policies were implemented.

However the oil oligarchs, the putrid barons who continue not to pay their 
fair share towards social development costs with their insistence on 
withholding oil proceeds from the government, wanted to lower the price of 
oil and increase market share, a policy that failed for the Saudis during 
the 1980s.

And this was one of the crucial demands of those dissatisfied with Chavez' 
regime. Indeed you will recall that the major demand of the general strike 
which preceded the putsch against him in April was the reinstatement of the 
head of the state oil company.

Now, the lines are drawn in the sand. The oligarchs, emboldened by a recent 
victory in the Supreme Court, are attempting to use it to challenge 
lawfully bartered contracts which Chavez has entered into with Cuba for 
oil.

Venezuela needs more doctors, not more capital for Viagra capitalists only 
seeking to line their own pockets at the expense of Venezuela's poor.

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