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Chávez's News: "An international campaign against Petróleos de Venezuela"

By Gustavo Coronel

May 9, 2005 | The last three weeks have been a nightmare for Venezuelan strongman Hugo Chávez. Some of his problems are merely sordid: his close followers and top ideologues of his political party, Freddy Bernal and Juan Barreto, have taken to the press to denounce each other as drug users, thieves and sexual deviates. Others are more substantive: Petróleos de Venezuela (PDVSA) is crumbling down, under an interminable series of refinery malfunctions, partial work stoppages, militarization of installations, contradictory statements by the incompetent Minister of Energy and Petroleum, and President and CEO of PDVSA, Rafael Ramírez and other Board members, accusations of corruption in Citgo coming from a committee of the Venezuelan National Assembly and significant production decline. Chávez, usually indifferent in the face of popular and media criticism, now appears seriously rattled. Like Steinbrenner, the owner of the expensive and lackadaisical New York Yankees, he has been forced to speak out against the company that provides him with the money to stay in power and export his picturesque Bolivarian Revolution.

As usual, his counter attack hinges on paranoid claims of international and domestic sabotage. "The CIA is to blame!" shouts his Defense Minister, Jorge Garcia Carneiro. Chávez admits that PDVSA has lost some 100,000 barrels a day in production capacity (in fact, it has lost almost 800,000 b/d of actual production in the last six years) but says that this loss is due to sabotage by the opposition. He now says that he has evidence of corruption in past PDVSA Boards, a "convenient" find to announce at a time in which the current Board is under heavy criticism for incompetence and political corruption.

National Assembly member Julio Montoya does not mince words: "Petróleos de Venezuela President Rafael Ramírez should be fired for letting the company slip into anarchy, resulting in a drop of production" ("Petroleos Venezuela Is in Anarchy, Congressman Says," Bloomberg, May 4, 2005). Montoya is the highest-ranking opposition deputy of the Energy Commission of the Assembly. Montoya also added that the whole Board should be fired, since "there is no central decision-making process." The management of the company is a hotbed of intrigue and power plays, with at least three fractions struggling for power and the access to the money the company receives from the exports of oil.

In the same Bloomberg report, former President of the company Guaicaipuro Lameda, a Chávez follower turned adversary, is quoted as saying that the current managers of the company "are loyal to Chávez but corrupt."

More than USD $4 billion of oil income is being illegally diverted away from the nation.

In his arrogant defense of the failing company Hugo Chávez admits publicly to illegal use of oil income when he said that "Petróleos de Venezuela retains portions of the oil income for special funds and social programs" (Notitarde, "Hugo Chávez admite errores y fallas en la industria petrolera," Imperio Rodríguez, May 6, 2005) although by law all oil income should be handed in to the Venezuelan Central Bank. He added that the report that "PDVSA only sells 49% of the oil income dollars to the Central Bank is a half truth." I wonder what he means by that. He clearly admits to corruption in the use of these monies but simply seems to be arguing about the size of the illegality!

Chávez defends this arbitrary use of the money saying that it is being used in worthy programs, but he does not seem to understand that a democratic government has to be accountable to citizens and has to respect the laws of the country. Failure to do this converts the government in an autocratic, corrupt regime, the situation now afflicting Venezuela. Chávez labels the newspapers reporting this situation as "lackeys."

Thousands of PDVSA workers originally employed through corrupt practices are now being laid off.

While Chávez was busy defending the company, reports about the dismissal of thousands of workers from the company emerged in most Venezuelan newspapers and radio stations (El Nacional and Union Radio, May 3, 2005). The leader of the petroleum Labor Union of western Venezuela, Luis Ortega, denounced this mass dismissal saying: "Now they are firing the ones they themselves brought in, after utilizing them to counter the December 2002 work stoppage." PDVSA president Ramírez claimed that the contracts of these workers had merely lapsed. Whatever the true reason for the lay-offs one thing seems clear: there was immense over-employment in the company. The workers now being dismissed were employed, in large part, for political reasons and through murky dealings between contractors and management. (VenEconomy, "Lid blows off at PDVSA," May 3, 2005). The report adds that one of the contracting companies, Leomosca, had denounced this situation in an open letter to Chávez, stating that the level of employment on the Venezuelan oil industry had never reached the current level and that the contracting mechanisms were saturated with corruption.

Chávez's answer to these scandals has been to say over a national TV hook-up: "Minister and President of Petróleos de Venezuela Rafael Ramírez will stay in his job." Defiantly, Chávez added that Petroleos de Venezuela "is being attacked to disestablish its production . . . and to cast shadows over the Board which is working intensely." In this occasion he mentioned that "PDVSA is being attacked in an effort by the local opposition and by Washington to put obstacles in the recovery of our petroleum sovereignty." He added: "The authors of this campaign should take notice that the results will be an acceleration of our efforts to recover that sovereignty." I wonder what sovereignty can he be talking about, when he is placing, more and more, the operations of our Venezuelan oil industry in foreign hands, and when he is giving away our oil wealth to Cuba and other countries in exchange for circumstantial geopolitical loyalties.

The grotesque move of PDVSA's Caribbean oil trading offices to Cuba.

In my previous articles I have already reported how some 40% of the Venezuelan oil production is already supplied by international contractors operating the least desirable and technically more complex oil reservoirs in the country and how the better oil reservoirs and installations operated by PDVSA are being mistreated due to technical incompetence and lack of maintenance. I have not yet reported on the newest "managerial" decision to move marketing offices of PDVSA to Cuba, to "better serve" the Caribbean area.

This laughable and servile move by Chávez makes no business sense whatsoever. As Miguel Octavio aptly says, Cuba is the farthest Caribbean island from Venezuela and their storage facilities are far removed from Venezuelan oil ("PDVSA-Cuba office: It makes perfect sense," The Devil's Excrement). Octavio also mentions the renewed efforts by Venezuela to operate the Cienfuegos refinery, an obsolete and rundown installation built by Russia, when this country was the sugar daddy of Castro. This refinery has been evaluated during the last 15 years by numerous companies curious to see if they could run it at a profit and discarded. Only Chávez wants to run it, not at a commercial profit but for "political" profit.

Together with the move to install the PDVSA offices, Ramírez announced that the supply of oil to Cuba now reached 90,000 barrels per day, almost twice the volume originally agreed by Castro and Chávez. This is an illegal move and one that should be sufficient to expel Ramírez from PDVSA and Chávez from the presidency, since the nation has never been consulted, formally or informally. The financial losses to Venezuela due to this arbitrary action are enormous since Cuba is not paying what it should and the Venezuelan regime is not enforcing payment.

The whole Venezuelan-Cuban operation looks like a bad zarzuela: the oil and products from Venezuela will be taken all the way to Cuba to be distributed among the islands of the Caribbean. Loyalty to the revolutions will presumably be the best form of payment. A bankrupt Venezuelan state owned bank, the Industrial Bank of Venezuela, would be the "technical financial advisor and agent." PDVSA, that cannot run its own refineries efficiently, will be running the Cienfuegos "coffee pot." In order to promote efficiency in the office, roosters will probably be sacrificed on full moon nights.


According to the Cuban Council of Ministers, Cuba consumes 160,000 barrels of oil per day (Granma International, April 29, 2005). This figure cannot be tested for accuracy although I think is grossly exaggerated. To illustrate: this is the same amount Peru or Norway consume. It is eight times more oil than Trinidad-Tobago consumes, much more than the consumption of the Dominican Republic, three times more than Guatemala, seven times more than Nicaragua, three times more than Panama, only a little less than Chile, three times more than Bolivia, and six times more than Costa Rica. It does not sound credible, given the comparative development of Cuba and the countries listed above. If real consumption is lower than that and Cuban production is about 80,000 barrels per day, this could mean that Venezuelan oil going to Cuba could be re-exported at a huge profit for Fidel Castro, since Cuba largely pays Venezuela in doctors and "technical" assistance. This could be giving Castro a financial bonanza he never had under the Russians, certainly a much greater one than tourism.

In a brilliant op-piece published in El Nacional ("El Voto naufragó en las costas de Cuba," May 5, 2005), Milagros Socorro argues that the worst thing about the PDVSA-Cuba connection is not its lack of logic but the fact that it was a visceral decision by Hugo Chávez. She says: "The aperture of PDVSA towards Cuba is not the result of a rational analysis or planning based on the best interests of Venezuela. PDVSA is now installed in Cuba due to the whim of one man, who has no knowledge of the oil industry and is not known for common sense: Hugo Chávez. If he had decided to install a chain of "arepa" joints in the Middle East . . . or create "cuatro" teaching academies (cuatro is a small, four string guitar, common in Venezuela) in every Chinese hamlet, he would have done it because there are no institutions left in Venezuela to regulate the presidency, today openly converted into a monarchy." Socorro adds: "The huge amount of money put in the hands of Castro, the sad spectacle Chávez offered in Havana last week, have destroyed the last remnants of democracy in Venezuela. . . . After this, elections, voting, the National Assembly, the Cabinet, all is empty of content, signify nothing."

When Chávez boasted in Havana of Venezuela becoming a Socialist State, argues Socorro, "our illusion that voting has any sense disappeared." And ended her powerful article saying: "The solution for Venezuela is no longer electoral. Voters waiting in line do not dethrone a king. We have already been far too permissive with the autocrat. . . . We are living a tragedy and tragedies always have terrible and inevitable final outcomes."

Meanwhile, back at Citgo

In Citgo the reports on wrongdoings continue. The Committee of the National Assembly investigating the irregularities in that company are concentrating in four events: The refinancing transactions of Citgo's debt which took place last year; the handling of the pension funds; a contract for the transport of asphalt signed with Sea Pioneer Shipping and the the activities of international procurement by PDVSA Services, another affiliate of PDVSA based in the U.S. According to this report all indications point to Luis Marín and Antonio Rivero in connection with these irregularities. According to members of the investigating committee Jesús García Rojas, a member of the Chávez party, the responsibility for these actions rest on all the members of the Board, not only on the two above mentioned. He added that the Securities and Exchange Commission is also pursuing this investigation (El Universal, Mariana Parrraga, May 4, 2005).

Luis Marín and Antonio Rivero obviously had in mind to stay a long time in Houston. Public records in hands of some of the National Assembly members show that both executives had acquired houses in Lakes of Parkway, an upscale Houston residential section. Records show that the values of the houses are in the vicinity of $900,000 while Marin obtained a loan of $776,530. This does not mean that there is something irregular in these acquisitions but it simply suggests a style of living that must be taken into account by the investigators.

Well, the Armed Forces are taking over petroleum installations, oil production is declining, petroleum refineries are having continuous problems, contracts with international companies are being unilaterally modified on the basis of take it or leave it, marketing of much of our oil is in hands of traders and brokers, oil is being given away to Cuba, oil money is being improperly retained by the Chávez regime instead of going to the Central Bank, corruption is outcropping in employment, contracting and procurement in the Western Division of PDVSA and in Citgo . . . but Chávez says:

"We are being the objects of an international conspiracy. The current management of PDVSA is doing a very good job. . . ."

In the offices of the petrochemical company Pequiven, an affiliate of PDVSA, in the eastern shore of Lake Maracaibo, posters have been placed for all to see. The logo of the company is shown, together with two faces: one belongs to an unsmiling Simon Bolívar; the other one belongs to a youthful, lean, smiling Hugo Chávez.

I know why Bolívar is not smiling.

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