Venezuela's Oil Reform and Chavismo

...President" Pedro Carmona was able to announce very few appointments and never even got to complete his cabinet...

...The day after the coup, the International Monetary Fund swiftly recognized the de facto government and world oil prices fell, precipitating a weakening of OPEC...

...There are four basic characteristics of Chivez's oil reform that we want to highlight in this essay...

...new exploration and drilling...

...When Chivez took office, international oil prices were the lowest they had been in years...

...But among the de facto president's few appointments was Guacaipuro Lameda as president of PDVSA...

...government...

...Venezuelan oil would be hard for the United States to replace and the U.S...

...It has long been one of the principal sources of supply for the United States, and other countries in the hemisphere...

...The political buttressing of OPEC and its members can only be a cause of concern for the U.S...

...These changes have been publicly accepted, for now, by the management of the industry...

...Fourthly, the reform puts the brakes on the trend towards privatization of PDVSA that had been developing in the previous years, without blocking private investment in the sector...

...Further, during the three years of his administration, President Chavez has designated five different presidents of PDVSA, including the one named in mid-April...

...With all its shortcomings and ambiguities, improvisations, indefinitions and for all its concern that there not be any radical ruptures in the industry, it is a project that aims to construct an alternative to the models prescribed under neoliberal globalization...

...This is a key point for favorably positioning Venezuela in the current globalization process...

...The total collected through royalties depends on the volume produced and on international prices, while assessments of taxes have to go through complicated accounting processes...

...A U.S...

...He did not, however, reinstate the controversial board he had named in February...

...As many have pointed out, the company has become a "state within a state" and the reform explicitly seeks to reverse this...

...Under the Opening, control over the industry has been ambiguous, and to guarantee profitability to the transnationals, the state's fiscal sovereignty-its ability to tax the transnationals-has largely been sacrificed...

...A week after his return to power, he named a new board, making important changes...

...Upon his return to the presidency, Chavez accepted the resignation of the board of directors of PDVSA that had been installed by the April 11 coup...

...Further, it's no secret to anyone that the interests of the oil industry are well represented in the Bush government, and it doesn't appear that Washington will push for policies aimed at dramatically lowering prices...

...Oil issues, then, had a major place on the agenda of the ephemeral de facto government established by the coup...

...5. El Universal (Caracas), April 13, 2002 and El Nacional (Caracas), April 13, 2002...

...3 First, through the Energy Ministry (MEM), the reform seeks to recover the leading role for the executive branch in the design and implementation of public policies relating to the industry...

...1, January-March 1998, pp...

...This conflict is illustrated by the power struggle over oil policy that has ensued between the state, through the Ministry of Energy and Mines (MEM), and privatized interests within PDVSA...

...3. Revista Venezolana de Economia y Ciencias Sociales publishes its second edition of this year (May-August 2002), which focuses on the Chavez government's oil reform...

...While these changes confirm the return of "meritocracy" to oil executives, we must remember that PDVSA's new president, Alf Rodrfguez has been, and continues to be, one of the leading promoters and protagonists of the reform that they have opposed...

...Also, the Venezuelan policy that aims to stabilize prices within OPEC's established range also benefits the United States as a producer of hydrocarbons...

...This procedure removed the content of the bills, and the reform itself, from public debate...

...These last two points are a source of friction with the U.S...

...4, No...

...One must keep all this in mind as we evaluate the impact that oil may have had in the April 11 failed coup attempt...

...The cordial relations between Venezuela and Iraq do not go down well with the Bush government...

...On being appointed, Lameda announced that he would initiate an aggresive recovery of markets, something that any petroleum sector analyst would view as leading to an inexorable confrontation with OPEC, an inevitable weakening of that organization and a drop in oil prices...

...Venezuela has never stopped being a reliable and stable supplier to the United States, and this is where the interests of both countries perfectly coincide...

...4. In his column in the weekly Quinto Dia, the current Finance Minister, economist Tobias N6brega, has written repeatedly on this issue...

...After all, countries the United States considers its "enemies," Iraq, Libya, and Iran, form part of OPEC...

...The oil reform is a key part of President Chivez's political project...

...The top management is reticent to renounce the share of power they had acquired during the Opening...

...government and international capital...

...The reform privileges royalties on sales over taxes on profits for this reason...

...For that month, the average price of Venezuela's holdings of crude and derivatives had fallen to $8.43 per barrel...

...4 The conflict within PDVSA served as a platform from which to launch the 24-hour, then 48-hour, then indefinite national strike in April that led to Chivez's brief ousting from office...

...PDVSA managers do not seem inclined to accept that MEM has been handed back the leading role in public oil policy...

...market would be equally hard for Venezuela to replace...

...Margarita L6pez - Maya is a historian at the Center for Development Studies of the Central University of Venezuela...

...Beginning with nationalization in 1976, however, and with more force than even under the Oil Opening of the 1990s, the directors of PDVSA have succeeded in displacing MEM in carrying out the crucial role of political leadership of the sector...

...The Chdvez government has designed and defined this reform with clarity and coherence but there have been more than few errors in its implementation...

...Further, the Chdvez government's categorical commitment to OPEC has become a divisive issue between the two countries...

...They are frequent contributors to NACLA...

...Venezuela's Oil Reform and Chavismo 1. Luis E. Lander, "Venezuela's Balancing Act," NACLA Report, XXXIV No...

...Available at http://vw.nacla.org/artdisplay.php?art=94 2. For an analysis of oil policy before the Chavez government, see Luis E. Lander "La Apertura Petrolera en Venezuela: de la nacionalizaci6n a la privatizaci6n," Revista Venezolana de Economia y Ciencias Sociales, Vol...

...The major importance of this organization and its re-emergence on the world scene has to undoubtedly be credited to Chavez and his oil policy...

...The U.S...

...When Chavez named a new board of directors, headed by professor Gast6n Parra last February, a significant part of PDVSA's management entered into direct confrontation with the government...

...This made it difficult for the common citizen to identify the competing interests involved...

...This is not the area where major tensions exist between the two countries...

...Oil production in the United States is more costly than in other regions of the world, and if prices dropped too low, many of its reserves would be uncompetitive...

...The directors of PDVSA have always prioritized the interests of the company over those of the nation, and the leading promoter of the so-called Oil Opening, exPDVSA president Luis Giusti, is today one of the oil advisors to the Bush administration...

...4 Jan/Feb 2001...

...Since Hugo Chivez took office in February 1999, he began to reform the oil policy that had dominated the last decade, the so-called "Oil Opening...

...government's position regarding the oil reform underway in Venezuela has been, at best, contradictory...

...Despite Venezuela's critical need for foreign capital, the Opening conflicts with the country's desire to exercise sovereignty over its principal natural resource...

...5 Latin America and the world's progessive sectors continue to follow the situation attentively...

...Ali Rodriguez, the current secretary general of OPEC, now heads the board...

...The company's productive costs have also steadily increased in the last few years...

...government...

...Second, the oil reform seeks to reach appropriate fiscal levels of income from oil...

...The world's most powerful nation, however, can only view the current state of affairs unfavorably...

...As a result of the new government's leading role in the enforcement of production quotas, prices immediately began to rise and OPEC began to strengthen...

...attack on Iraq would require the reliable supply of Venezuelan oil...

...Arguing that the traditional criteria for naming the members of PDVSA's board of directors had been violated by not respecting "meritocracy," they instigated the April strike that was backed by the federations of labor (CTV) and business (Fedecioneras...

...The company has also been called a "black box" for being difficult to audit and having systematically denied its owner, the Venezuelan state, knowledge of NACLA REPORT ON THE AMERICAS S a S 22CRISIS IN VENEZUELA how its finances are administered...

...It should be noted that government oil income is the way in which non-oil sectors of the economy benefit from the main natural resource of the country...

...government's relations with the executive board of PDVSA have been far more cordial than with Chdvez government officials...

...It is in this heated context that Chivez's nationalist reform policy recovers essential aspects of Venezuela's long oil tradition of holding the industry accountable to the nation...

...Before nationalization, the minister of the sector had progressively increased MEM's technical capacity and policies of supervision and control over the transnational energy corporations that operated in the country...

...government was quick to applaud the short-lived military coup of April...

...Chavez had fired Lameda last February for opposing the justdecreed Organic Law of Hydrocarbons...

...Nevertheless, other conflicts lie behind the conflict over appointments...

...The reform aims to reverse a process that had been developing in the context of economic liberalization: There has been a consistent and alarming decline of fiscal income from oil as that income began taking the form of taxes rather than royalties...

...I In the early 1990s, the state oil company, Petr6leos de Venezuela (PDVSA), invited transnational oil companies to invest in the industry arguing that it would help to offset the costly and technologically challenging processes of Luis E. Lander is a researcher at the Economics and Social Science Faculty of the Central University of Venezuela...

...It has not only achieved the recovery of oil prices on the world market but it has also strengthened OPEC and its member countries...

...Translated from Spanish by NACLA...

...The two legal pillars of the reform, the Law of Gaseous Hydrocarbons and the Law of Liquid Hydrocarbons, passed in 1999 and 2001 respectively, were approved by Chivez after the legislature granted him the authority to do so...

...Collecting royalties is much simpler than charging taxes and is more transparent...

...role in this process, OPEC members chose Caracas as the host city for the second conference of heads of state of the organization's member countries...

...In September 2000, in recognition of Venezuela's active Vol XXXVI, No 1 July/August 200221 Vol XXXVI, No 1 July/August 2002 21CRISIS IN VENEZUELA OPEC Secretary-general and president of PDVSA Ali Rodriguez...

...Sectors of the upper-echelons of management led the conflict...

...Thirdly, the reform also aims to strengthen OPEC and commits Venezuela to respect agreements freely made with that organization...

...So the directors of the company feel insecure, unstable and ill-at-ease, and with some reason...

...Above all, it is one of the founding members of the Organization of Petroleum Exporting Countries (OPEC), and hence has frequently been at odds with U.S...

...It is understood as such by both the U.S...

...153-182...

...On the other hand, the U.S...

...For their part, the PDVSA executives who met on April 12, in the midst of a festive climate that celebrated the prospect of the company regaining its leadership over Venezuela's oil policy, announced there would not even be "one more barrel of oil for Cuba:' a violation of Venezuela's international agreements...

...They also proceeded to make appointments within the company, misappropriating the powers of the President of the Republic and the legal consituency of PDVSA's board of directors...

...2 The Chivez administration took very early steps to regain OPEC's role as regulator of the international market...

...In addition, Chivez's first Minister of Energy and Mines, Ali Rodriguez, was designated president of OPEC and then the organization's secretary general...

...The country is one of the world's main producers of petroleum products, and it plays a crucial role in the international energy market...

...Another director, Hugo Herndndez Rafalli, was the former president of the Venezuelan Oil Chamber, the institution that represents private business interests in the sector...

...Nor does management seem open to transparency in its accounting...

...In the context of the "war against terrorism," the U.S...

...oil policies...