Viewpoint by David Boyd/reporter
Venezuelan president Hugo Chavez has openly opposed America for years. Venezuela sends subsidized oil to Cuba and other nations it courts while threatening to cut off scheduled oil shipments to the U.S.
In the 1990s Venezuela had oil reserves but little capital with which to build refineries and the infrastructure to develop the natural resources. The government lured foreign oil companies, including ConocoPhillips and Exxon Mobile, to invest billions to extract Venezuela’s heavy crude.
After Chavez gained power, the contracts remained because the nation’s economy relies on oil export. Good relationships with trading partners are important because of the country’s demand for imports, including food. Last year, however, with the flow of oil well under way and the infrastructure in place thanks to multinational oil companies, he took the assets back, forcing a new deal that favored state-owned Petroleos de Venezuela (PDVSA).
Chavez has lost some momentum when his political reforms bill failed. He had hoped to revise the constitution to consolidate power and allow his government to continue without term limits, but got no support, and his decision to break his nation’s pact with the big oil companies may be his undoing. While some oil companies gave in, Exxon and ConocoPhillips fought back.
After Exxon sued in international court, $12 billion in PDVSA assets in U.S. and Europe were frozen to ensure available funds if the oil company wins a settlement. Exxon and ConocoPhillips requested arbitration in their suit for damages and lost property against the Venezuelan oil company. Chavez accused the U.S. of intimidation and economic warfare, then repeated his threat to cut off our oil imports.
Maybe we should call his bluff. If he wants to cry about economic warfare, perhaps we should give it to him. We would win a short battle with Chavez without firing a shot or stepping foot on Venezuelan soil. PDVSA has asked for loaner rigs from Iran among others. Keeping Iranian assets out of this hemisphere should be motivation to justify an embargo. We could tap our own reserves to substitute for the temporary loss of Venezuelan imports. An effective patrol that prevents shipments of oil going out or supplies going in could quickly cripple Venezuela’s economy and further erode Chavez’s dwindling support.
Chavez seems destined to meet a successful coup at some time in the near future. Our economic warfare could hasten his fall and usher in a democracy that respects international contracts and U.S. role as a consumer, leader and economic ally.
