14 February 2008 14:22 [Source: ICIS news]
By Joe Kamalick
That is not to suggest that the
In recent testimony on Capitol Hill, top
“While Chavez’s policies are damaging the Venezuelan oil industry and its economy,” McConnell told the US Senate Intelligence Committee in his annual threat assessment, “over the next year or so high oil prices are likely to enable Chavez to retain the support of his constituents through well-funded social programmes.”
Supported by the high price of oil, McConnell said, Chavez “continues to co-opt some members of the economic elite who are profiting from the consumer-led boom”. However, McConnell said, Chavez can only postpone “the eventual consequences of his financial mismanagement”.
“Adverse economic trends are increasingly evident,” McConnell noted, “including food shortages, rising inflation and an overvalued currency.”
“Without question, policies being pursued by President Chavez have
Despite the fact that PDVSA commands the largest hydrocarbon reserves in
Noting that 70% of its proven reserves are heavy and extra-heavy crude, Fitch said: “There is some concern over PDVSA’s technological and financial ability to extract extra-heavy crude, given its high production decline rates”.
Lacking the technical and financial ability to monetise much of its hydrocarbon wealth, Fitch said PDVSA and Chavez would remain critically dependent on foreign energy majors for development. But, waving his nationalist flag, Chavez has already driven off ExxonMobil, Conoco Philips and others by demanding renegotiation - some would say abrogation - of previously contracted development deals, most notably in the Orinoco heavy oil belt in eastern Venezuela.
As has been widely reported, ExxonMobil has won court actions in the
Enraged, Chavez has cut oil shipments to ExxonMobil, a fit of pique that will do no harm to that energy major but which must give pause to current and potential PDVSA partners.
Chavez has also boasted that he will cut off all oil sales to the
Fitch reported that in 2006 approximately $32bn of PDVSA’s revenues were spent on taxes and Chavez’s social programmes, an increase of almost $12bn from 2005.
As a result, said Fitch Ratings, PDVSA’s net income in 2006 actually fell by $1bn to $5.4bn from the $6.4bn in net income for 2005 - and this despite a 20% increase in PDVSA revenues in 2006.
PDVSA’s 2007 financials are not yet out but a hint of what might be more bad news came when, according to Fitch, PDVSA recently borrowed $1bn from its
“This event is of considerable concern,” Fitch said.
For McConnell, who as director of national intelligence has purview over all
In detailing his threat assessment to the Senate, McConnell said that
Chavez, said McConnell, was seeking to export an agenda that subverted checks and balances on presidential power, weakened media and civil liberties and imposed economic nationalism at the expense of market-based approaches.
However, despite his chequebook socialism at home and his bid to sway other Latin American countries to his authoritarian style, McConnell suggested Chavez’s ruinous economic policies would prove his undoing.
Amid his frequent fist-shaking accusations of plots by US imperialists, Chavez would probably do well to keep looking over his shoulder at erstwhile backers who may soon see that the Bolivian Revolution is killing the golden goose.
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