Chavez, Nestle, Exxon; milk and oil politics

Venezuelan President Hugo Chavez visits a rice plant during his weekly Alo Presidente broadcast in Barinas, 525km (326 miles) from Caracas, February 10, 2008.

Photo from Reuters

Last week, Exxon Mobil convinced a British court to freeze about $12 billion of assets belonging to Venezuela’s state-owned oil company Petroleos de Venezuela SA in Exxon’s case against Venezuela for seizing the company’s property. So of, course, because an international company, backed by a British court froze Venezuela’s money in foreign banks, Chavez blames the United States and threatens to cut off oil to the US (Breitbart link);

Chavez has repeatedly threatened to cut off oil shipments to the United States, which is Venezuela’s No. 1 client, if Washington tries to oust him. Chavez’s warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government’s nationalization drive through lawsuits.

“I speak to the U.S. empire, because that’s the master: continue and you will see that we won’t sent one drop of oil to the empire of the United States,” Chavez said Sunday.

“The outlaws of Exxon Mobil will never again rob us,” Chavez said, accusing the Irving, Texas-based oil company of acting in concert with Washington.

Anyone with a bit of common sense, and not suffering from Bush Derangement Syndrome, would recognize that Exxon-Mobil’s moves are purely in their interests. But, Chavez suffers from BDS like no one else. I guess it’s that coca-chewing that makes him a bit paranoid. But Miguel at The Devil’s Excrement writes that this seizure should be no surprise to the chavistas;

The truth is that not only did Chavez illegally take over ExxonMobil’s investment in Venezuela, but has yet to compensate that company. Moreover, the whole thing has been badly handled in the belief that ExxonMobil will simply accept whatever PDVSA offered, like the state controlled oil companies of Norway and France did with their own project.

In fact, Chavez should have known that these injunctions were requested by ExxonMobil as far back as December, a fact that was hidden from the Venezuelan people. At least in the case of the US Court, ExxonMobil introduced the injunction in the Souhern District of New York on December 27th. and that same day Judge Batts ruled on the case, filed under number 07-CV-11590 and ordered PDVSA’s property attached. Moreover, the Judge ratified the measures on January 2nd and again on Jan. 8th. after talking to PDVSA’s lawyers. It was not until January 24th. that PDVSA’s lawyers actually replied to the injunction in the US.

Not learning that messing with an international company has drawbacks, Chevez went on to threaten to seize Parmalat and Nestle milk plants. After freezing milk prices last year, it became more attractive to Venezuelan milk producers to export their milk to Columbia when they began going broke. So to in an attempt to stem the milk shortages in Venezuela, Chavez instead of letting the market make up shortfalls, blames foreign entities (Financial Times/Reuters link);

“If, for example, Nestlé or Parmalat … show that through various economic mechanisms, or through pressure, they are taking the product and leaving state or cooperative plants without the necessary milk … then we have to apply the constitution and we have to intervene and expropriate the plants,” he said.

Mr Chávez frequently issues conditional threats against the private sector without following through on them. But last year, he nationalised swaths of the economy, including the oil and utility sectors, in a drive to build a socialist state.

In an OPEC country flush from an oil price bonanza, even Chávez supporters are angry at bare shelves and long lines in supermarkets. There have been shortages of products like sugar, eggs and meat, but especially milk.

Of course, he has a hard time avoiding hyperbole when Chavez is on a paranoid tear (AP link);

If companies ensure a supply through “blackmail, offering money up front” while leaving state-run plants without enough milk, “that’s called sabotage,” Chavez said. He added that in such cases, “the plants must be taken over and expropriated.”

Sabotage would more closely describe what Chavez has done to the Venezuelan people and what should be a booming economy is light of oil prices. Since Venezuela supplies 12% of our oil, it would certainly impact us in the short term, however, somewhat less than what Chavez implies.

Miguel (The Devil’s Excrement link above), unusually accurate in his predictions about the Venezuelan economy, thinks that it will hurt Venezuelans more than the US;

This will create more financial problems in Venezuela than anywhere else, where shortages are already present and the population is tired of promises and inefficiencies. Thus, if Chavez dared to do it, it will likely become a defining moment in his demise, as people have put up with his rants and ideology because there were unrealized promises attached to them. But somehow it seems this is the wrong time to ask the people to sacrifice in the name of his revolution.

The ExxonMobil injunctions would only become significant if Chavez were to take the “nutty” road, as I suggested the first day I heard about them, such a road will only be bad for us Venezuelans but I still believe there is a very low probability that Chavez will take it.

Albert de la Cruz at Babalu Blog agrees;

I am sure it will be much harder on the US losing it’s 4th oil importer than it will be on Venezuela losing its #1 customer. At least by chimp logic it is.

Category: Foreign Policy, Hugo Chavez, Politics