Category Archives: Venezuela diplomacy

PDVSA ships fuel to Syrian regime: Chavez risks sanctions?

[Edited Tues  630 EDT] The Negra Hipólita, a tanker operated by an affiliate of PDVSA, should be arriving at the Syrian port of Banias after a 15-17 day voyage from the Venezuelan refinery at Puerto La Cruz (El Universal, 17Feb12).

Syrian tanks are seen in Bab Amro near the city of Homs,12Feb12. Photo Reuters

Puerto La Cruz produces about 187k bbl/day and, the Negra Hipólito, if fully loaded, will deliver 47,000 (47k) tonnes of diesel fuel to alleviate reported widespread shortages of fuel in Syria. That’s about 330k barrels of fuel usable as home heating oil, or as fuel for Assad’s Russian tanks “indiscriminately” shelling neighborhoods, as in the city of Homs.  Note:

In Vienna, the U.N. chief demanded the Syrian regime stop using indiscriminate force against civilians caught up in fighting between government troops and Assad’s opponents. “We see neighborhoods shelled indiscriminately,” Ban told reporters. “Hospitals used as torture centers. Children as young as ten years old jailed and abused. We see almost certain crimes against humanity.” (Time World, Syrian Troops Shell Central City with Tanks. 17Feb12).

What, however, is the geopolitical significance of this shipment?  Let’s examine three issues:

  1. Chavez’ motivations: Why risk sanctions?
  2. Is this a significant material assistance to Assad’s regime?
  3. Has Chavez blundered by miscalculation? Continue reading

With a USA-dependent oil sector, Chavez can’t help Ahmadinejad

(Edited, 20 Jan.) President Ahmadinejad of Iran visited Venezuela on January 9, and then three of President Chavez’ closest Latin American allies, to search for help. His tour was part of a flurry of diplomacy in the New Year leading up to the imposition of severe new U.S. sanctions on Iran’s ability to export oil, beginning in June.

Presidents Ahmadinejad and Chavez in Caracas (Photo: El Universal)

While these two presidents met in Caracas, U.S. Treasury Secretary Geithner was visiting South Korea, Japan and China, and other U.S. officials were Continue reading

A Santos-Chavez Pipeline: Where’s the demand for Latin America’s oil boom?

President Santos of Colombia recently went to Caracas where he and PresidentChavez signed a letter of commitment  for the “Binational Project on the Venezuela-Colombia Oil Pipeline” to run 3,000 km. from Venezuela’s Faja heavy-oil region, west across Colombia to the Pacific port of Tumaco.  (El Universal and El Universal).  After many disappointments in recent years in collaborations with PDVSA, Latin American presidents haven’t endorsed many joint projects lately.  Nevertheless, Santos was beside himself with enthusiasm after the five-hour meeting on 28 November, declaring “Wherever we’ve mentioned this, people’s eyes open wide.” (Reuters)

Let’s look at some data to see if Santos and Chavez are really onto somehing here. Continue reading

Part IV: Another $6.5b in loans: The frustrated Beijing-Caracas courtship

(Greetings! It’s good to be back blogging.)  The common perception is that Chinese oil companies in Venezuela are winning big deals on very favorable terms.  However, as I’ve stressed in previous posts, Beijing is actually very frustrated not to be getting the deals it expects for new Faja heavy oil fields, especially considering its big investments in the Bolivarian state.  More evidence continues to emerge.

From 21-23 November the “10th Meeting of the China-Venezuela High-Level Committee” took place in Caracas at the Hotel Gran Meliá, with something like 400 businesses and state representatives coming from China.    Continue reading

Part III: Venezuelan heavy oil: China’s persistence is finally paying off

First, here is an outline of this and the next three or four blogs on this topic:

I. Changes on the Venezuelan side that are enhancing the Chinese role:

a.  Chavez’ recent interest in increasing national oil production 

b.  The existential crisis Chavismo faces from the slow collapse of dysfunctional state institutions, civil infrastructure, and nationalized enterprises

II. Changes on China’s side that enhance its role in Venezuela:

a.  China has now loaned Venezuela so much money, and Venezuela so badly needs continued Chinese financing (lately it  also feels a need for managerial and technical assistance), that Beijing has been able to insist Caracas not only begin to come through on long-awaited heavy-oil contracts, but that it also comply with certain  geo-political and fiscal-accountability conditions. A couple of these are pretty amazing.

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I. Changes on the Venezuelan side enhancing the Chinese role:   a. Chavez’ new interest in increasing national oil production

One reason for China’s deepening influence in Venezuela is that PDVSA‘s president and energy minister, Rafael Ramirez, is no longer alone in insisting that PDVSA’s level of production has to rise.  President Chavez now seems to have gotten behind the need to increase national production.  If the price of oil falls significantly (many feel six months at an average of $60/barrel would be ruinous) and PDVSA’s exports per day have not risen to compensate, Venezuela will be in real trouble.  Venezuela is extraordinarily dependent on imported goods, from food to machinery for which dollars are needed; and it also must keep up payments to foreign bond holders, for which a steady stream of dollars are also needed.  Chavez and Ramirez have every reason to expect that the world’s economic woes will lead to a decrease in oil demand over the next year or two, and this of course can lead to significantly lower prices.  These fears were not apparent in the recent past. It has been more or less a tenent of Chavista faith at elite-and-professional levels that the price of oil will never again fall significantly.  I have been told this many times.  Continue reading

Part II: Venezuelan heavy oil: China’s persistence is finally paying off

Major Chinese Faja heavy-oil-production contracts had not materialized till now. Why not?

(This is continued from Part I)    On the one hand, technical reasons would be given against closing deals with the Chinese. For example, it was thought by some in PDVSA that Chinese companies lacked the technology to efficiently implement the refineries needed to upgrade Venezuela‘s extra-heavy oil to a grade light enough to enable it to be accepted by foreign refineries. On this excuse, some top PDVSA executives had pressed Chinese firms to focus on making joint proposals together with, say, Total of France.  This was because Total had already proven the quality of its upgrader-refinery technology in one of the four proof-of-principle projects foreign companies had implemented during the previous government’s apertura period. (The apertura was the liberal “opening” of the oil sector to significant Continue reading