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

Posted on September 17, 2011 | 5 comments

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 →

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Posted in Chavez, China, corruption, Economic Crisis, Faja of the Orinoco, heavy oil, international relations, PDVSA, Resource conflicts, The USA, Venezuela diplomacy, Venezuela update

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

Posted on September 7, 2011 | Leave a comment

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 →

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Posted in Chavez, China, corruption, Economic Crisis, Faja of the Orinoco, heavy oil, Institutions and rule of law, international relations, PDVSA, Resource conflicts, The USA, Venezuela diplomacy, Venezuela update

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

Posted on September 6, 2011 | 3 comments

In my travels and interviews in Venezuela this summer, it became clear that there has been a major advance in the relationship between China and the Bolivarian administration of President Chavez.  China’s dogged persistence and large state-sponsored investments in Venezuela – apparently the largest they’ve made to date in any country – are finally beginning to bear fruit.  The new Chinese influence is being simultaneously extended to both oil and non-oil sectors. 

Partly this development is due to the many crises affecting the Bolivarian state, and decisions it has been forced to take to make increasing national oil production a priority.  To advance this program, President Chavez’ administration has made initial moves to grant Beijing access to Venezuelan oil in major ways it had not previously. 

However, there are two sides to this story: on the other side, increasing Chinese participation is also a product of China having step-by-step put some quite sharp demands on PDVSA and the Venezuelan Bolivarian state for financial transparency and accountability, for geopolitical stabilization, and in particular, for Chinese firms being granted large-scale access to new heavy-oil fields in the Faja of the Orinoco River.  The key ingredient here is that Continue reading →

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Posted in China, Economic Crisis, Oil subsidies, Resource conflicts, The USA, Uncategorized, Venezuela update

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Chavez brings Venezuela’s gold home: Iranian, Libyan and Syrian factors

Posted on August 25, 2011 | Leave a comment

Why did  President Chavez last week order that Venezuela‘s gold reserves held abroad be repatriated  and that international reserve funds held in banks in the U.S., Switzerland, Britain–the global north–be moved to banks in Brazil, Russia and China–to BRIC countries?  The move is being hailed by Chavistas; but, the generalized anti-imperialist and nationalist rationals being cited are not useful as far as a specific geopolitical analysis.  That is , they do not explain why this takes place right now  as opposed to having been done at any given time during the last 12 years of his presidency.

So, why is this being done now?  The idea is obviously to keep these funds in places where they cannot be seized or frozen.  But, WHAT might trigger seizures or freezing of these funds NOW as they lay in U.S., British or Swiss banks? Continue reading →

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Posted in Chavez, Economic Crisis, Gaddafi, Libya, Venezuela update

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Back from Caracas & Maracaibo: Time for writing and talks

Posted on August 23, 2011 | Leave a comment

First of all, Greetings!  I have been in Venezuela during July and half of August, talking to contacts and doing research on the present situation.

I was fortunate to have had the benefit of hundreds of hours of heart-to-heart discussions with Venezuelans  from both the pro- and anti-chavista camps, both in and out of government, and some in neither camp.  I also met with several foreign reporters, business people and diplomats.  There are really not many other people from the global north in Venezuela now (I did find one grad student, from Finland). Continue reading →

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Posted in China, Energy and Environment, The USA, Venezuela update

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Vietnam-China Naval Confrontation / Beijing reporter’s questions on “China’s Oil Aims in South China Sea”

Posted on June 16, 2011 | Leave a comment

Buffalo, NY  (on the road)

Last week tensions between China and Vietnam flared up over conflicting claims to oil reserves under the South China Sea.  Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam make variously conflicting claims.   But, China is the one that has become increasingly intimidating against other claimants.  This is not to say any Chinese claim is legimitate or not, only that China is the one initiating  confrontation in order to settle disputes in its favor.Map of South China Sea claims by country

VN claimed a Chinese vessel maliciously cut the cables of  one of its Continue reading →

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Posted in China, Resource conflicts, South China Sea, The USA

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Our modern “Fire Water” addiction: From Native American salesmen

Posted on June 15, 2011 | Leave a comment

The Seneca Nation of Indians  reservation.  NE of Buffalo, NY

Yesterday, I went with my brother from his small farm (en America Latina se dice “una finca” ) to the nearby Seneca Indian Nation Reservation (here is the nation’s official web site), to buy gas for his pickup.  Many of the locals hereabouts do this frequently.  The Seneca are, by treaty with the US federal government, a sovereign nation, so they are not required to charge federal or NY State taxes on gasoline.  So, there are a few very busy gas stations on the Continue reading →

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Posted in The USA, U.S. oil

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Watch my interview: The economic crisis & Impact on energy & environment

Posted on June 12, 2011 | Leave a comment

It would NOT TAKE ROCKET SCIENCE to make huge increases in energy efficiency and reduction of greenhouse gasses in the USA.   Here is an interview I gave, from Caracas in late 2009, to Erica Dingmann., on what needs to be done in transportation infrastructure and energy to REALLY make some big, practical gains in the USA.  It does NOT require big breakthroughs in technology.

Tell me what you think.

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Posted in Alternative energy, Economic Crisis, Euroepen Union, The USA, Transportation

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Cracks in OPEC – Political-Economic basis for two factions with two different geopolitical roles

Posted on June 12, 2011 | 4 comments

Northampton, MA (Area of “the five colleges,”  UMass Amhers, etc.)

On Thursday, the lead headline story in the WSJ asserted “New Cracks in Oil Cartel: OPEC Fails to Agree on Production Boost Amid Rising Saudi-Iran Tensions.”  The “cracks” may have widened at this meeting, but they are hardly “new.”  Continue reading →

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Posted in OPEC

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Ending U.S. Federal Subsidies for Oil Companies to Drill

Posted on June 8, 2011 | Leave a comment

Boston, MA (From the road, with visits to Lynn and Marblehead)

I had the unexpected opportunity yesterday to hear the Governor Patrick of the State of Massachusetts and local Boston U.S. Congressman Ed Markey – Chair of the House Select Committee on Energy and Environment –talk to a meeting of union activists who will be canvassing local Boston voters to ascertain their concerns before the next elections.  I spoke briefly with the congressman.

Markey has been instrumental in the recent attempts to repeal Bush-era federal legislation that grants subsidies to oil companies to encourage them to drill for oil in US territory. As he pointed out, this seems especially inappropriate at a time when oil prices are about double what they were when these subsidies were adopted. The congressman explained how he felt there was no need for such encouragement now, especially at taxpayer expense and when there is such concern to reduce the federal deficit.   (I thank my old friend and union organizer/analyst here in Boston for inviting me.)

My next post, in a day or two, will be on what I see as: “The Pragmatic Turn in Venezuelan Foreign Policy.” This is a complex (and controversial) topic and it will occupy many future posts. However, first one has to establish whether this turn is or is not actually taking place … and only then can we analyze what the implications and effects, for better or worse, might be.

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Posted in Oil subsidies, U.S. oil

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Venezuela: Anarchy in a prison reflects general weakness of institutions and rule of law

Posted on June 6, 2011 | 1 comment

(Brooklyn, New York City)  This is my first blog here.  It will be short and rather disturbing.

The topic is the decline of institutions, especially state institutions, and of the rule of law in Venezuela.  I study especially the oil sector and the national oil company, PDVSA, and its relation to the rest of society.  It is not easy to see inside PDVSA, but here we have a rare window into the state of affairs in another Venezuelan state institution: a prison.

A Venezuelan friend sent me this video link  to the NY Times story filed by Simon Romero about the prison on Margareta Island.  

In passing this on to me, she drew two larger societal lessons from this report:

  • When thre is no the rule of law someone will surely impose rules (in this prison, it is El Conejo)
  • This lack of a rule of law–and of the institutions it requires–has fostered a culture of anarchy in personal life, in all social classes
  • I would add that this “anarchy” undermines trust between not only the state and citizens, but between individuals as well.  It undermines civil society and personal life.  It is part of what makes everyday life often so very wearing in Venezuela, despite the beautiful natural surroundings.

For example, take the insecurity and violence that citizens face. Venezuela appears to have the highest national homicide rate inthe Western Hemisphere,  about 75 per 100,000 persons are now murdered annually according to Roberto  Briceño-Leon, director of the Venezuelan Observatory on Crime, and professor at Oxford U. and UCV in Caracas.  This rate has shot up since 2002.  I have been reading a collection of essays by Venezuelan experts edited by Professor Briceño-Leon et al,  Inseguridad y Violencia en Venezuela, Informe 2008, and I will soon post notes and commentaries on this serious sociological work.  I must say, in a society where there is such extreme stress on individual lives, it is understandable for people to despair and of course this increases tension and polarization between and within all social classes.  To break out of these cycles it is necessary not only for the experts, but for civil society at all levels to reach a consensus on what can be done, and to support politicians who have the will and stamina to implement these policies over the long run.  Anyone who does not believe that Venezuela’s demoralizing decline of the rule of law and institutions, and the growth in anarchy this reinforces for everyone can be reversed, needs only look at neighboring Colombia, where a similar crisis in the 1980s and 90s has now been decisively reversed.    Briceño-Leon draws important lessons from Colombia´s experience for Venezuela, and I promise to discuss these here soon.

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Posted in Anarchy in life, Institutions and rule of law