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Venezuela's PetroCaribe Is Dealt Setback

From Bloomberg

June 29 (Bloomberg) -- Venezuela's proposal to create a Caribbean oil venture was dealt a setback after two of the 15 prospective partners refused to sign the agreement creating PetroCaribe, saying they needed more time to study the proposal.

Venezuelan President Hugo Chavez, at the closing ceremony of a one-day summit in Puerto La Cruz, said he was surprised and saddened that the proposal wasn't unanimously adopted by the 15 countries invited to join. Chavez, 50, said U.S. pressure had caused some countries to change their minds. Trinidad and Tobago and Barbados refused to sign.

``There are countries who won't sign the agreement today,'' Chavez said. ``This saddens me and it's difficult to believe.'' He said he was ``indignant'' over U.S. interference in pressuring countries not to sign. A U.S. embassy spokesman in Caracas declined comment.

Chavez, whose country has Latin America's largest oil reserves, has advocated greater cooperation to lessen the impact of higher energy costs on the region. He has also said Venezuela is seeking to diversify its oil customers to lessen dependence on the U.S., where it sells more than half of its oil.

The Venezuelan president had touted PetroCaribe in the opening session as a way to lower energy prices by cutting out third parties and speculators, while lessening the influence of foreign oil companies.

``PetroCaribe was born today,'' Chavez said, after the accord was signed. An evening press conference was canceled without explanation.

Trinidad and Tobago Prime Minister Patrick Manning said earlier that his country needed more time to study the proposal, especially for its impact on existing agreements. Trinidad and Tobago has the region's largest energy reserves after Venezuela.

``We want to review this in detail,'' Manning said. Trinidad and Tobago is the U.S.'s largest supplier of liquefied natural gas.

Lower Prices

Hundreds of soldiers and national guardsmen were mustered to provide security for the heads of state and delegates. Two Venezuelan warships were anchored in the bay across from the conference hotel. Venezuela has signed similar alliances with Argentina, Brazil and Uruguay.

``We're not talking about discounts,'' Ramirez said, describing the benefits of the pact. ``We're talking about financial facilities, direct deliveries of products, infrastructure.'' Foreign Minister Ali Rodriguez told reporters that preliminary studies show oil prices might fall by up to $6 a barrel in the region if third-parties were cut out.

Venezuela already supplies oil to many countries in the region with preferential pricing under the Caracas and San Jose agreements. PetroCaribe would build on those agreements, seeking to foster energy and social development, Ramirez said.

``PetroCaribe would be more flexible as regards payments,'' Rodriguez said. Industrialized countries are more capable of absorbing higher energy prices than the countries in the Caribbean, whose economies are smaller and developing, he said.

Development Fund

Venezuela may sell up to 34,000 barrels a day of oil to the eastern Caribbean countries, excluding Cuba and the Dominican Republic, as part of PetroCaribe, Rodriguez said. Venezuela, which is the Organization of Petroleum Exporting Countries' third- largest producer, has daily output of about 2.5 million barrels a day.

About two-thirds of the country's exports, or about 1.5 million barrels a day, now goes to the U.S. As part of PetroCaribe, a social and economic development fund will also be created, Chavez said. Venezuela donated $50 million to the fund, the Venezuelan president said.

Cuban President Fidel Castro, one of the signatories, said he was confident that differences among the Caribbean countries could be resolved.

``We'll overcome this,'' he said.

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