The war of words between Venezuela and the United States reached new heights last month, when Venezuelan President Hugo Chavez called U.S. President George Bush “the devil” and a “world dictator” in an address to the United Nations General Assembly. But, despite escalating diplomatic tensions, the United States remains Venezuela’s Number-One oil customer, a commercial relationship that appears likely to endure.
[...]“During the Arab oil embargo in the ’70s, we [the United States] imported 30 percent of our oil. Today, we import over 60 percent. And that dependence is growing,” commented Anne Korin, who co-directs the Institute for the Analysis of Global Security in Washington. “And it causes us to be dependent on regimes that we do not like, that do not like us, whose values are very different from our own. And it causes us to be forced to make compromises, in terms of how we would like to deal with certain countries.”
Archive for the ‘OPEC’ Category
Forced to make compromises
Thursday, October 12th, 2006Iran: Our Response To Sanctions Will Make the West Shiver With Cold
Tuesday, August 8th, 2006Iranian Supreme National Security Council Secretary Ali Larijani has a message to all those who think “the oil weapon is obsolete”:
“[sanctions against Iran]Â will have many ramifications in the international arena. They will be harmed more than us. We control all aspects of this issue. They must not think we will not respond if they hurt us. They must not force us to make them shiver with cold, and make them face more problems. We don’t want to take this path, but if they do, they will have to bear the consequences. This is not immediate, but if they do so, we will respond in a manner that will be sufficiently painful to them.”
What free market?
Wednesday, August 2nd, 2006Anyone who thinks the oil market is free should read the following Wall Street Journal article very carefully. Does Venezuela’s national oil company PDVSA, now run by foaming-at-the-mouth dictator Hugo Chavez,  sound like a company run according to free market principles?Â
“Since Mr. Chávez took power in 1999, he has become PDVSA’s de facto CEO, steering the oil company into political, economic and philanthropic ventures that have distracted it from its core business of finding and producing more oil. The consequences for PDVSA are stark: Output has fallen to an estimated 1.6 million barrels a day from nearly 3 million barrels in 1998.
“The oil company, the world’s third-biggest by most measures, is run along social and political guidelines as much as business tenets. As a result, much of the decision-making involves figuring out new ways to fund Mr. Chávez’s pet projects. One of the latest ventures was paying to televise soccer’s World Cup for free in Bolivia, a Chávez ally.
“Mr. Chávez’s geopolitical considerations, and his anti-American bent, also influence the way the company does business. PDVSA has turned away from traditional partners like U.S. major Exxon Mobil Corp. and is doing much more business with state companies from Iran, China and India. This weekend, during a visit to Tehran by Mr. Chávez, Iran pledged to invest $4 billion in two Venezuelan oil fields. The two nations also unveiled a raft of joint ventures, including a refinery in Indonesia.
“[...] Nowhere has the company’s decay turned up faster than at PDVSA’s massive 1.3 million-barrel-a-day domestic refining network, which suffered more than a dozen plant outages in 2005. In March, two workers died in a blast at the Amuay refinery, the nation’s largest. Last month, another explosion and subsequent fire caused extensive damage at a 190,000-barrel-a-day unit at Amuay, sending spot gasoline prices higher in the U.S. Gulf Coast where Amuay ships much of its production.”
The consequences to the global market are not at all trivial:Â “The company’s diminished production has cut world output by more than 1%. That may not sound like a lot, but in a global oil market stretched tight by growing demand, political volatility and hard-to-expand supply, the company’s production shortfall has contributed to the run-up in oil prices during the past few years, and is likely to continue to do so.”
Guess who’s going to Shanghai?
Tuesday, June 13th, 2006This is a clear illustration of Sec. Rice’s comments about how energy has warped foreign policy:
Iran’s president, Mahmoud Ahmadinejad, will not be just toasting the leaders of the [Shanghai Cooperative Organization's] six members – China, Russia and four Central Asian nations – Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan – as an observer to the summit to be held in Shanghai. The Iranian leader, whose country defies the free world by developing nuclear weapons and tops the list of nations supporting terrorism, will also be pushing for full membership in the SCO.
It’s “passing strange” for the SCO – which highlights the “fight on terrorism” as one of its three prime objectives (the other two being separatism and extremism) – to have invited Mr. Ahmadinejad and considered membership for Iran, Defense Secretary Rumsfeld said recently at the Shangri-La Dialogue, an annual Asian-Pacific conference which took place in Singapore in early June and was organized by the London-based International Institute for Strategic Studies.
Not at all, according to the SCO’s secretary-general, Zhang Deguang. “We would not have invited them if we believed they sponsored terror,” he responded to an inquiry about Iran’s participation. Mr. Zhang hoped that other nations, once improving their ties with Iran, would have better opinions of that country. As for the pressing issue of nuclear non-proliferation, all he could say was, “We do not yet have legal documents on the issue.” How reassuring to those who view the SCO increasingly as an attempt by China and Russia to undermine America’s influence in their backyard and beyond.
“By letting Iran enter the SCO, Russia and China would clearly demonstrate that they side with Iran and its nuclear program and would embark on a collision course with the West,” a Moscow-based think tanker said, according to Radio Free Europe.
Iran is China’s third largest oil supplier, amounting to 13% of China’s total crude imports. For Washington to expect that Beijing, which relies on rapid economic development to maintain its rule, would exert pressure on Tehran to halt its nuclear ambitions is more than wishful thinking. I hope Secretary of State Rice proves me wrong in her decision to negotiate with the mullahs. But I’m afraid that the country the Bush administration has so desperately tried to turn into a “responsible stakeholder” would once again prove disappointing. As Ms. Rice’s deputy, Robert Zoellick, admitted to a House International Relations Committee hearing last month, when he confronted the Chinese about their dealings with Iran, he was told, “Look, we got our own interests there, we got energy security concerns.”
“An extended SCO would control a large part of the world’s oil and gas reserves and nuclear arsenal. It would essentially be an OPEC with bombs,” a professor at the University of Cambridge’s East Asia Institute, David Hall, told the Washington Times, referring to the Organization of Petroleum Exporting Countries.
(emphasis added)
Read the whole thing.
UPDATE: This article by Dr. Ariel Cohen of the Heritage Foundation on the subject is excellent: Bear and Dragon summit.
Victor Davis Hanson: How oil lubricates our enemies
Monday, June 12th, 2006“Take away the $300-500 billion in windfall profits piled up in the coffers of the oil-exporting nations recently, and Hugo Chavez becomes just another spluttering Castro, hardly able to pay for his bankrupt populism in Venezuela, much less export it beyond his borders. Without petroleum largesse, Iran’s Mohammed Ahmadinejad could afford neither a multi-billion-dollar nuclear weapons program nor costly subsidies for terrorist groups like Hezbollah and Hamas. Vladimir Putin’s crackdown on capitalists, political freedom, and further Russian reforms comes only because he controls energy exports vital to the world economy.
“And huge petroleum profits don’t just empower dictators, subsidize nuclear proliferation, and curtail economic reform. They also have pernicious psychological effects. Americans hit with gasoline price hikes of nearly a dollar a gallon have fallen to despairing over our economy. Try telling furious motorists that the extra cost for most drivers amounts only to about $500-700 per year–a pittance compared to sky-high housing prices that leap tens of thousands of dollars annually. No matter: people see the numbers on the gas pump, and less cash in their wallets, and figure the U.S. is teetering on the brink.
“Foreign policy is warped as well. Because of its dependency on Middle East gas and oil, Europe’s high talk about human rights doesn’t apply much to Arab extremists with energy-rich patrons in the Gulf. America is in a war against Islamic fascism, yet treads carefully around Saudi Arabia, despite the kingdomͳ subsidies to America-hating madrasahs. When poor oil-importing countries in Africa and Latin America make sacrifices to enact tough market reforms, their hard work only helps to enrich failed states like Iran, Libya, and Venezuela lucky enough to have an accidental resource beneath their feet that was found, exploited, and mostly purchased by the Westerners they demonize.”
Mark Steyn says it like it is
Sunday, June 11th, 2006Exactly: “half a decade on from Sept. 11, the Saudis are still allowed to bankroll schools and mosques and think tanks and fast-track imam chaplaincy programs in prisons and armed forces around the world. Oil isn’t the principal Saudi export, ideology is; petroleum merely bankrolls it.”
For more on Saudi oil fueled bankrolling of radical Islam, an excellent Washington Post article by Nina Shea.
Nigeria: 800,000 oil barrels/day shut in
Friday, June 9th, 2006Attacks against oil infrastructure have shut in 800,000 barrels of oil per day in Nigeria. Tony Chukwueke, director of Nigeria’s Department of Petroleum Resources, said “This is a huge loss to Nigeria and we don’t know what to do about it.”
Meanwhile, another top Iraqi oil industry official was kidnapped yesterday.