Oil Billions Fuel Venezuela’s 'Petro Power' Socialist Dream
New America Media, Commentary, Louis E.V. Nevaer Posted: Nov 30, 2007
Editor's Note: As the fifth largest oil producer in the world, Venezuela has become a powerful world player and President Hugo Chavez wants to utilize the resources for the people and to stay in office for decades to come. Louis E.V. Nevaer is a contributor to New America Media.
MEXICO CITY – The surging price of oil in world markets has resulted in an unprecedented windfall for oil exporting nations, and nowhere has this sudden oil wealth created such excitement – almost bordering on delirium – as it has in Venezuela.
This weekend, Venezuelans will go to the polls to vote on radical changes to their Constitution, changes that could launch Venezuela on a grand social experiment financed by its “Petro Power.”
“Venezuela is free,” President Hugo Chávez declared to the cheering crowd at a ceremony on May Day, when he nationalized the operations of two recalcitrant foreign companies working at the Orinoco fields. “Our oil is ours.”
Fueled by the some $75 billion that Venezuela has earned in oil this year alone, Chávez is emboldened and determined to change his nation’s Constitution to ensure that he will remain president for decades to come.
Chávez’s dream of “socialism for the 21st century” was bolstered this summer when Venezuela drew rave reviews from other Latin American nations when hosting the Copa América soccer tournament. More than 300 million people throughout the hemisphere followed the soccer matches, and were awed by the shiny new stadiums Chávez built for the tournament. Reports by journalists who covered the tournament also focused on the socialist achievements of Chávez’s Venezuela.
That national pride evolved into exuberance when the price of oil began to soar. Suddenly, “Petro Power” became the code phrase for pressing forward with Chávez’s socialist ambition.
“Chávez has the chance to be this century’s Fidel Castro – with one difference – Chávez has oil wealth to bankroll his vision, and no U.S. embargo can undermine him,” Luis Pazos, a Mexican journalist and economist, noted.
When, in May, Chávez nationalized the operations of ExxonMobil and ConocoPhillips, there was apprehension in Caracas. Even Chávez supporters feared that nationalizing the assets of two large international oil companies would lay the groundwork for U.S. economic – or military – retaliation against Venezuela. More worrisome, Chávez's government officials had grown alarmed at the activities of Citibank, which some accused of attempting to destabilize the Chávez government by facilitating capital flight through its private bank division.
These fears, however, soon faded as the price of oil began to set record after record.
The oil industry – and the world’s economy itself – changed. While ExxonMobil and ConocoPhilips scoffed at Chávez, and preferred to have their interests seized rather than work in “socialist” Venezuela, four other foreign oil companies decided to remain as minority partners: France’s Total, Norway’s Statoil, the United Kingdom’s BP and Chevron.
“The era of easy oil is over. There are no easy barrels for companies like Chevron and Exxon and BP and Shell,” said Robin West, head of PFC Energy, a consulting firm based in Washington, D.C. “They have to work in partnership with the countries that have the oil.”
“Petro Power” has emboldened Chávez’s ambition for his nation, and for himself.
If approved on December 2 – and polls indicate there is overwhelming support for these reforms – Venezuela will be the first nation to provide government-financed pensions to housewives, guarantee free education to everyone for life, and lay the foundation for dismantling capitalism. It will also end term limits for the presidency, ensuring that Chávez will become president-for-life.
“We are witnessing a seizure and redirection of power through legitimate means,” Alberto Barrera Tyszka, who co-authored a biography of Chávez, told reporters. “This is not a dictatorship but something more complex: the tyranny of popularity.”
What is fueled by oil, however, can also be undone by oil. Although Venezuela’s coffers are bursting with petro-dollars, and Venezuela today provides foreign aid to every country in the hemisphere – except Chile and Mexico – there are limits. Since coming to power, oil production in Venezuela has continued to decline. Independent analysts confirm internal OPEC documents that show Venezuela’s oil production has fallen by almost 25 percent over the past decade. The departure of sophisticated foreign companies accounts for a portion of that loss in production capability, but the real reason for the decline is Chávez’s politicization of the oil industry.
Now staffed by “revolutionaries” and inexperienced engineers just out of school, along with the systematic sacking of the previous generation of administrators, Petróleos de Venezuela (PDVSA), is at risk of failing to meet the needs of an ever-growing list of social demands. Those pensions for housewives, after all, will come from money generated by the oil fields.
For the immediate future, Venezuela is enjoying a “Petro Power” bonanza. It is secure in its position as the world’s fifth largest oil producer – after Saudi Arabia, Russia, the United States and Mexico. It has a highly politicized electorate, one that supports Chávez, an unconventional, ambitious and incorrigible populist.
As tension in the Middle East and the continuing devaluation of the U.S. dollar on world markets converge to put pressure on the oil – OPEC governments are daunted by the possibility of oil trading for $200 by 2010 – Chávez is relishing the limelight. For now, at least, the world’s relentless hunger for oil is giving him a better shot at creating a Socialist Utopia in Latin America.
“This man is luckier than Castro ever could have been,” an official at the State Department said. “Castro only had sugarcane and cigars to work with; Chávez is king of South America’s largest oil field.”
The question Venezuela confronts is whether there is enough oil in the whole world to bankroll their charismatic leader’s ambition for a Socialist Petro Power Future.
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