Reidblog [The Reid Report blog]

CARACAS, Venezuela (AP) — President Hugo Chavez announced Monday he would formally pull Venezuela out of the World Bank and the International Monetary Fund, a largely symbolic move because the nation has already paid off its debts to the lending institutions.
"We will no longer have to go to Washington nor to the IMF nor to the World Bank, not to anyone," said the leftist leader, who has long railed against the Washington-based lending institutions.

Chavez said he wanted to formalize Venezuela's exit from the two bodies "tonight and ask them to return what they owe us."

Venezuela recently repaid its debts to the World Bank five years ahead of schedule, saving $8 million. It paid off all its debts to the IMF shortly after Chavez first took office in 1999. The IMF closed its offices in Venezuela late last year.

Chavez made the announcement a day after telling a meeting of allied leaders that Latin America overall would be better off without the U.S.-backed World Bank or IMF. He has often blamed their lending policies for perpetuating poverty.

The leftist president also has repeatedly criticized past Venezuelan governments for signing structural adjustment agreements with the IMF that were blamed for contributing to racing inflation.

Under former Venezuelan President Carlos Andres Perez in 1989, violent protests broke out in Caracas in response to IMF austerity measures that brought a hike in subsidized gasoline prices and public transport fares.

Newly bought Russian-made fighter jets streaked through the sky as Chavez shouted "Down with the U.S. empire!" to thousands of red-clad oil workers, calling the state takeover a historic victory for Venezuela after years of U.S.-backed corporate exploitation.

Chavez accused foreign oil companies of bad drilling practices due to their hunger for quick profits and said Venezuela could sue them for causing lasting damage to oil fields.

BP PLC, ConocoPhillips, Exxon Mobil Corp., Chevron Corp., France's Total SA and Norway's Statoil ASA remain locked in a struggle with the Chavez government over the terms and conditions under which they will be allowed to stay on as minority partners.

All but ConocoPhillips signed agreements last week agreeing in principle to state control, and ConocoPhillips said Tuesday that it, too, was cooperating.

... the truth — one that both Chavez and his archfoe, the Bush Administration, would prefer you not know — is that when it comes to oil nationalization, Hugo is hardly the most radical of his global peers. In fact, even after today's petro-theatrics, Chavez is just catching up with the rest of the pack.

From Mexico to China, more than 75% of the world's oil reserves are controlled by national oil companies today. Of the world's top 20 oil-producing firms, 14 are state-run. And even though Chavez has now stripped foreign oil companies like Exxon Mobil of any majority stakes they had in Venezuelan oil production projects — mandating that his state-run company, Petroleos de Venezuela (PDVSA), have at least 60% ownership from here on out — he's at least allowing those private multinationals to continue taking part in the drilling. Not so, for example, in Mexico or the world's largest oil producer, Saudi Arabia. Washington touts those two countries as model energy allies, despite the fact that for more than half a century their national oil companies have barred U.S. and other foreign oil businesses from production ventures.

Apart from his fiery rhetoric, what makes Chavez's move seem more jarring is the fact that, until he came to power in 1999, Venezuela had been a trend-bucking oasis for Big Oil. Venezuela did nationalize its oil industry in 1976, but in the 1990s it had steadily re-opened its fields to foreign investment — in some cases handing the multinationals deals that even conservative Venezuelans considered too sweet. Chavez has just as steadily, and stridently, reversed that policy, paring down the multinationals' ownership while ratcheting up their taxes and royalties. And because Venezuela is America's fourth-largest foreign crude supplier — providing the U.S. with almost 15% of its oil imports — each turn of his nationalization screw tends to provoke outsized alarm.

That, perhaps, is the real cause for concern — how deeply the nationalization trend affects the quantity of oil that not only Venezuela but other countries can export, and hence the price we pay for it.

Labels: China, Hugo Chavez, oil, Venezuela