The Politics of Oil

"Standard Oil (now Exxon-Mobil) and Shell seat and unseat kings and presidents, finance palace plots and coup d'etats, have innumerable generals, ministers and James Bonds at their command…..make decisions about peace or war in every field and every language." - Eduardo Galleano, Open Veins of Latin America

Venezuela is the world's fifth largest oil producer and, crucially, supplies the United States with 14 percent of its oil needs.

Reserves are said to be in excess of 74 billion barrels, along with 146 trillion cubic feet of gas. Oil provides the government with over half its revenues. But that figure masks a truly corrupt reality. When PDVSA [the nationalized oil industry] was established in the 1970s, it kept 20 percent of the oil revenue and passed the remainder to the state.

By 1990 the ratio had fallen to 50:50. By 1998, when President Chavez was elected, the process had been reversed: PDVSA kept 80 percent of revenues and passed a mere 20 percent to the state.

...In 1999, the Chavez government submitted a new constitution to the people. It was overwhelmingly endorsed by popular vote. A key provision forbade the privatisation of PDVSA.

In the international arena, Chavez also moved to rebuild and revive the Organisation of Petroleum Exporting Countries (Opec), thereby ensuring Venezuela received a better price for its oil abroad.

As a result, the price of oil virtually doubled to over $20 a barrel and a Venezuelan - Ali Rodriguez - became the new head of Opec. Washington was less than enamoured by these developments. The Administration's ties to the US oil industry - in the form of National Security Adviser Condoleeza Rice, vice-president Dick Cheney and President Bush himself - have been well documented.

Washington's hostility towards Venezuela became more pronounced, with senior officials questioning President Chavez' 'commitment to democracy' – this from a US administration that required the intervention of the Supreme Court to enjoy 'electoral' success!

...In January 2002, the Venezuelan government gave legal expression to its plans to radically reform PDVSA by passing the Hydrocarbon Law. This law also doubled the royalties charged to foreign oil companies in Venezuela, chief among them US giant Exxon-Mobil. It was to take effect on January 1, 2003.

...President Chavez' domestic opponents - driven by the kleptocracy that ran PDVSA - had found new friends abroad. After the coup, it would emerge that the National Endowment for Democracy (NED), an agency of the US government, had quadrupled its funding for Venezuelan 'democrats' (the opposition) in the year leading up to the coup. NED funding of the opposition totalled $877,000.

Source: The Revolution Will Not Be Televised