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The Economist: National sovereignty doesn't fill the tank

Introductory comments in brackets from Stuart Munckton on the Green Left discussion list

[Well it doesn't fill the tanks of Big Oil... Interestingly The Economist claims that the corporate media's famous "some analysts", ie: whomever can be roped in for a quote to give the editorial line an "objective" fig leaf - and even then in an editorial apparently they don't even have to be named - are split on whether or not the decision of Exxon and Conoco to walk from Venezuela (unhappy with such outrageous restrictions on their ability to plunder the nations oil as ensuring the Venezuelan state-run industry has controlling interest, that they obey Venezuela's tax laws - which previous governments never had the temerity to do - and that they should may be pay a royalty rate a little higher than the less than 1% they had to in the pre-Chavez glory days of the great oil "opening" in the 90s) will adversely affect Venezuela's industry. This strongly suggests it wont, that PDVSA is strong enough to take it over and make it work.


Publications like the Economist have been predicting PDVSA's imminent collapse ever since the defeat of the bosses lockout when the government tossed the out the management clique that were "opening" the industry up to be plundered by Exxon et al. (Not the publications themselves, of course, no, "some experts" have been predicting it, The Economist has merely been reporting their opinions.) If they are breaking from this ceaseless line and having "some experts" suggest the opposite, there must be an objective basis for it in reality that they can't deny.

The reason Venezuela is signing joint ventures, giving themselves controlling interest, which is crucial, rather than simply booting out the multinationals, as some of the more ultraleft positions would have them do, is the need to exploit the technology controlled by those corporations, and enable PDVSA to take advantage of the expertise - while still retaining control via majority holdings. The fact that Venezuela is not worried about this, and not making concessions to keep the companies onboard, suggests a position of strength, if only because, while "some analysts" reckon this will cause a problem, "others" are not so sure, because actually there are plenty of other corporations who are probably likely to step in.

While "some experts" are still clinging bravely to the party line that the idea that the Venezuelans could possible make the oil industry work themselves, without the enlightened direction of imperialist corporations, "some experts" are now doubting whether this is the case.

I also like the way they keep insisting that Venezuela's reduction in daily oil production is due to problems since the government threw the corrupt pro-imperialists out of the industry and brought it under direct government control, completely ignoring OPEC-directed quota restrictions that direct member countries to cut their production. As part of Venezuela's anti-imperialist leadership, they have been central to the push to ensure OPEC member countries obey the quota system to ensure a fair price is paid for oil.]
It's our oil
Jun 28th 2007 | CARACAS
From *The Economist* print edition
Exeunt Exxon and Conoco

WHEN Venezuela's government announced this week that two American oil giants, Exxon Mobil and ConocoPhilips, would walk away from their large investment in the Orinoco heavy-oil belt rather than accept tough new contract terms, officials presented it as the recovery of sovereignty over
another slice of the country's all-important oil industry. Some other Venezuelans saw a government blunder that could accelerate the decline of the state oil company, Petróleos de Venezuela (PDVSA). Either way, the impact of the walkout may not be immediate.

The companies were among those attracted to Venezuela in the 1990s, under the terms of an oil "opening" that the leftist government of President Hugo Chávez has now pronounced shut. In common with other big oil producers,Venezuela has substantially raised its tax take from private oil producers as its bargaining power has risen along with the oil price. Now it has also completed the process of obliging all foreign companies to accept minority
shares in joint ventures with PDVSA.

Seven of the 11 companies operating in the Orinoco belt, including Chevron of the United States, Britain's BP and France's Total, agreed to the new terms. Along with Exxon and Conoco, Petro-Canada and Opic, a Taiwanese company, did not. Venezuela will pay compensation, possibly running into billions of dollars. Conoco said it had "preserved all legal rights
including international arbitration".

"For us, there is no cost," insisted Rafael Ramírez, the oil minister who also acts as chairman of PDVSA. "There is an important gain: national sovereignty."

Venezuelan officials claim that the Orinoco belt contains some 250 billion barrels of oil—an amount similar to Saudi Arabia's reserves. But extracting it is expensive and complicated. Private companies were originally invited in, on favourable terms, because PDVSA had neither the technology nor the capital to turn what was once considered bitumen into synthetic crude. Some
500,000 barrels per day now come from the Orinoco.

Oil industry sources say that Venezuela's total output has fallen to 2.3mb/d (though the government claims it is 3.2m b/d). That is mainly because of the shortcomings of PDVSA, which sacked most of its qualified staff after a two-month strike in 2002-03 and whose investment budget has been used as a cash-cow for social programmes by Mr Chávez.

Will Exxon and Conoco's departure cause a further fall in output? Some industry analysts reckon it will. Others are not so sure. Such is the hunger of oil companies for access to reserves that others may step in on thegovernment's terms. Even if they do not, PDVSA can buy the necessary
expertise from specialist service companies, argues Mazar al-Shereidah, an economist at the Central University of Venezuela.

Nevertheless, some Venezuelans worry that their country's oil industry is going the same way as that of Iran, whose government is one of Mr Chávez's closest allies. This week, as Venezuela's president was due to visit Tehran on a tour that also takes him to Russia and Belarus, Iran imposed petrol rationing. Admittedly, Iran faces sanctions, and Venezuela does not. But
national sovereignty does not automatically fill the tank.

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