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Chavez’s Political Hacks Plan Ecuador’s State Assisted Suicide

By Pedro Camargo

08.03.06 | On March 3, 2006 , Hal Weitzman in The Financial Times correctly noted that, “Protesters pour trouble on Ecuador 's oil producers. But lack of security, political instability and Quito 's inability to attract foreign investment are also part of the problem…”

Weitzman is also correct to point out that “ When protesters in Ecuador's eastern Amazon shut down the country's two main oil pipelines, occupied a couple of pumping stations and kidnapped dozens of oil workers last month, many in the Andean country had a sense of déjà vu. The protests forced crude exports to be suspended for a day. They brought to mind unrest from last August, when demonstrators dynamited pipelines and vandalized pumping equipment. Then, Petroecuador, the state oil company, shut down production and export for two weeks, pushing US crude oil futures up Dollars 2 a barrel in New York .”

These highly organized criminal attacks by known out of state actors and paramilitaries jacked up per barrel oil an extra two dollars.. We do not know how this added expense tacked on to global oil prices, is organized and paid….by whom and to benefit whose geo-political reach? Moreover, we have yet to review any fact-based reports on current state-backed monopolies for total pipeline oil control and market manipulation in South America from drilling to processing to shipping to pricing.

To extract a bit more from Weitzman’s highly detailed report:

“The second declaration of force majeure on oil exports in six months highlights the government's inability to provide adequate security, something that has deterred much-needed foreign investment in an ailing sector. Ecuador is the region's fifth biggest oil producer, with proven reserves equivalent to some 4.6bn barrels of oil, the third largest in the region. On a protest-free day, it produces about 525,000 b/d, of which some 200,000 barrels comes from oilfields controlled by Petroecuador. Despite efforts by successive governments to diversify the economy, South America 's second biggest exporter of crude to the US has become increasingly dependent on oil exports. In 2005, they totaled Dollars 5.8bn (Euros 5bn, Pounds 3bn) - 60 per cent of all exports and 18.5 per cent of gross domestic product, according to Ecuador's central bank.But in spite of the oil price boom, Ecuador remains poor. In part, this is because much of its oil is a kind of sour heavy crude. Lacking adequate refining capacity, the country is a net importer of refined oil products, an expensive process for the government, since many of those products are subsidized. Ecuador could be exporting a lot more. Its production capacity, boosted by the opening of the OCP pipeline in 2003, is about 850,000 b/d. But the oil sector is paralysed by underinvestment.

The money cannot come from Petroecuador. Dogged by corruption and mismanagement, production by the state company has been in decline for the past decade. That has gone hand-in-hand with a long-standing and severe financial crisis: the company is on course to end this year with debts of more than Dollars 500m.

Luis Roman, its most recent president, resigned last month, saying Petroecuador did not have enough cash to maintain its basic operations. Luis Alfredo Troya, the finance director, describes the company's situation as "critical" and warns production could be affected. About 4,000 contract workers are threatening to strike this month to demand unpaid salaries. But Ecuador has been singularly unable to attract foreign investment: no new international investors have signed exploration or production contracts since 1996.The profound weakness of political institutions means Quito cannot secure law and order in remote areas such as the Amazon. As it did last August, the government called a state of emergency last week and sent in armed forces to confront the protesters. But it is unlikely that the ringleaders will be held responsible.

Weak government has also prompted President Alfredo Palacio to pander to populist sentiment in an attempt to shore up his feeble administration. Following the lead of Bolivia and Venezuela , Diego Borja, his economy minister, wants to raise taxes and royalties on foreign investors.A government-sponsored bill now before Congress would apply higher rates retrospectively to 2000, increasing the tax burden by Dollars 400m annually.

Aside from these current political concerns, there are several long-standing reasons why foreign investors have given Ecuador a wide berth. One is a legal framework that allocated oilfields with large proven reserves to Petroecuador, while marginal fields are concessioned. Under Ecuadorean law, private companies cannot enter into joint ventures with the state company on the choice fields.

"Petroecuador controls these 'jewel' fields, but it doesn't have the money or expertise to develop them," says Lisa Schineller, Ecuador specialist at Standard and Poor's in New York .

… Ecuador 's attorney general has asked the government to revoke its contract with Occidental of California, the biggest foreign investor, over various alleged contract violations.

Last week's shutdown may herald more violence to come. Industry representatives such as Rene Ortiz of the Ecuadorean Association of Oil Companies, which represents private companies in the sector, worry that the oil sector will become the target of more protest as the elections draw nearer.”

With all thanks to Weitzman, this story warrants continued attention. Over and over Weitzman notes….political turmoil, instability, crime…..and inoperable state machinery. As noted, over 60% of Ecuador ’s budget stems from its oil sector. Its oil sector is dependant on income in main from one company from North America , with a few assorted smaller operators. Ecuador has failed to cleanse its own perverted PetroEcuador corrupt operations, which have not functioned in as many years as memory serves and has instead deemed it useful to squeeze its only sustained revenue producer into an untenable situation. The on- going public attacks on OCCIDENTAL by government and `populist’ hacks .These paid mouthpieces have launched an unprecedented misinformation campaign complete with daily media slander, outrageous claims of corruption by anyone but themselves , extortion and bribing activities, false testimonials, and on-going diatribes. These hacks are joined by known leftist sycophants, highly paid by outmoded non- profit outfits whose sole intent today is to block any non-Chavez (Bolivarian) corporate participation (whatever that means)in the Andes; these actors stand united against some mythical `evil’ hegemony as perceived in free trade with North America. And once again this week, Ecuador has declared martial law in three provinces due to fresh assaults on its oil sector even as paid protesters rally in the capitol again to protest `globalization,’ free trade and blatant verbal threats against outside oil companies.

As the extant free trade with Andean countries and the U.S. expires in December, 2006, Ecuador will lose a good majority of its trade/exports and jobs should it fail to agree with Peru and Colombia to the new FTA agreement. One might assume that leaders would balk at biting the hand that feeds its overly dependant state machinery and delivers actual jobs for its citizens. The state machine is fed very well for doing nothing much except funding an inoperable, inert PetroEcuador to draw huge state salaries. In Ecuador , the federal budget pays over 70% directly to state held, state union salaries in what is obviously a bloated, inept, top heavy state system.

Ecuador , however, may well bite the hand that feeds its own self in one death-defying last leap in to the void of a Bolivarian political enjoinment. With no free trade, its employment/jobs sector will collapse with no hope of rebuilding. Its economy will once more collapse. And the only option remaining, some would assume, would be a neo-communist state under the Chavez plan if its current political crop succeeds while Chavez’s paid political advisors continue to pass out cash, leading this country off a cliff.

Leading Ecuadorean presidential contenders Correa and Leon Roldos are both avowed participants in this path to Ecuador ’s collective national suicide. Never before have we witnessed a state funded euthanasia of such dire proportions. This is more than a train wreck waiting to happen: it is a planned suicide with Dr. Kavorkian state actors ringing the death bell.

Neither Correa or Roldos should be candidates in any event. In fact, none of the current crop of politicians circling the presidential field to date are fit to lead. Correa, who is rumored to have taken millions from Chavez, was fired less than a year ago by current President Palacio for numerous reasons, none less important than he lied to Palacio about his acts before the World Bank, claiming matters that had not occurred. This wholly undependable small time social economist was last seen enjoying Caracas on a grand scale with Chavez and the Fora de Sao Paulo. Roldos, an affable and well known drunk, made a grave error last week in publicly teaming up with well known pro-Chavez actors of really shady pasts, to support illegal oil company asset seizures in Ecuador , a move that is still unconstitutional. As such, Ecuador desperately needs national leadership and still has no decent political candidates. Every candidate with political potential has fled the field for numerous reasons: none of them satisfying. Their excuses included an overwhelming political machine that cannot be beaten to an overwhelming governmental corruption scheme that cannot be beaten. These excuses are pathetically passive-aggressive and exhibit moral weakness. There are numerous men and women who would be excellent leaders, if they had voice to their platforms and if the biased media would encourage political air time. If any took the time in Ecuador to look at the facts, they would see that the political field is wide open today for candidates. Roldos has distanced himself from constitutional law and joined international law breakers; Correa, who was leading that same pack has distanced himself from legal campaign contributions. Rumors are afloat that poorly prepared, impossibly weak actors such as a scion of a local monopolistic banking family may enter the fray. As such, any honorable political team could over take this pro-Bolivarian leading duo still.

We are reminded of a comment made this last week by a very well-informed person of high standing who noted that there are few honest politicians leading in the Andes . And to this, he added, there are also dishonest and dishonorable men leading some of the countries. Ecuador is heading toward a dishonest, dishonorable disaster in short order unless its citizens stand in support for on-going free trade, reinstatement of law and order, even handed justice, contract law, and international law.

To cure democracy’s ills, the OAS recently foisted on Ecuador a new purchase of touch screen voting machines. Calling it a “test case” for less than 10% of voting stations, the OAS hawked a so-called Brazilian based computer voting machine. With no open bids, no analysis of the machines themselves, no warranties, no facts….in short: no due diligence, the OAS has opened Pandora’s box in Ecuador . The first question to be asked is: are these not in fact decoys of Chavez’s Smartmatics by another name and what has the computer voting machine analysis group at Johns Hopkins said, other than they have never seen one computer voting machine with less than 15% margin of error? Ecuador needs many things but it cannot sustain additional voting fraud by pre-rigged machines. All Latin nations should follow the Chilean voting model of late: clean, swift, operational and cheap. The OAS should get out of the shameful business of hawking voting machines with a high propensity to rigging and return to promoting the very thing it has forgotten of late: clean contracts and due diligence.

If we are to suffer oil price gauging from these politically and self enriching ( for the few) oil hikes in Latin America , then put the energy and political pricing facts on the table. To accomplish these sweeping political and economic take-overs by murky speculators in the Andes, the Chavista foot soldiers of the Bolivarian circles are now up and running with a sole job to soften the region through political turmoil and hand the field to Chavez’s self enrichment club. In the U.S. , major media reports that about $20 is tacked on to each barrel of oil sold in the USA to satisfy hidden speculative profiteering. These hidden `costs’ are tacked on benefits to faceless speculators: offshore, tax-evading, unknown murky oil hedgers. This is not what is commonly called as `globalization’ but is a specific sub set of actors. Inasmuch as speculative activities and international trade are not per se negative acts, far from it, but the paid political actors to destroy whole nations in order to recast enire regions in a global bloc which will guarantee pre-rigged energy controls to benefit a few is abhorrent. It is also…criminal. To this, we know that additional dollars are added per oil barrel due to `political turbulence.’ This turbulence, as in the $2 per barrel price hike due to Ecuador ’s incapacity to govern, stemmed directly from attacks coordinated with known Chavistas and the FARC. Their well funded attacks have caused oil prices to spike. We can only hope that oil speculators were not tipped off, as insiders, in advance of these attacks to ease their profits upward, at the expense of so many.

However, insider speculation is occurring with broad geo-political implications….with well planned hits to drive up pricing and profiteering, using paid protesters and paid paramilitaries. But try explaining the value of these events to…..families who lose loved ones to this violence, try explaining this to an already overburdened police force and military in Ecuador and elsewhere, try explaining this to a voting public who is quite weary of instability and soaring crime, and try explaining this to consumers. Then try to explain that this is not in fact….planned pricing manipulation.

On March 2, 2006 , the U.S. Department of Energy, in sworn testimony before Congressman Burton’s subcommittee, explained…none of this, relying on the shop worn phraseology such as ` we are worried about political instability in oil producing nations.’ While this is true and while the U.S. DoE is not known for its geo-political leadership, we can only assume that all comments were engineered for a soft touch. In all fairness, the very useful Financial Times piece had not been printed before the hearing date although the issues so noted are broadly available. And of course, the U.S. Department of Energy need not rely on print media for its resourcing. However, Weitzman reiterated numerous key features about U.S.-Latin oil matters that are relevant. Unfortunately, no valid official, unofficial or publicly available assessment of U.S.-Latin energy issues (or any issues whatsoever) in the Andean nations exists to date because several key governmental and non-government actors have applied valid data, where it exists, in analysis of today’s state-run energy machines. No one has chosen to collate data drawing the geopolitical confluence of paid unrest by out-of-state actors with in-state disruption. To date, there is no useful reporting on the petroleum sector in Venezuela , Bolivia and Ecuador (the non-reporting bloc). We can only hope that soon enough, Peru will not be added to this growing list. With no forensic audits of these cash cows and too many hands illegally dipping in to the state revenue wallets, it is no wonder that countries like Chavez’s Venezuela now balk at legally mandating financial reports to the U.S. SEC, preferring instead to cough up cooked books to hide their vast malfeasance.

In her March 2, 2006 sworn Congressional testimony, DoE’s Karen Harbert, formerly 2 nd in command to US AID’s Franco for Latin American AID projects, noted that, extracted here,

“Of course, other countries have an important role to play in ensuring hemispheric energy security and economic prosperity. We have a long energy history with Venezuela , and we want this mutually beneficial relationship to continue. We will continue to promote the importance of a stable, transparent, investment climate which invites private sector investment to unlock valuable natural resources. Other governments, like that of Bolivia , may begin to reject some of their openness to investment established in recent periods. Venezuela continues to change its investment regime to reflect the government’s revenue needs and desire for greater control of the energy sector, despite the evidence that these decisions result in sub-optimal levels of investment. Unresolved investment disputes in some of these countries, like Ecuador , may also deter future investment. The IEA estimates that Latin America will require nearly $1.3 trillion of investment in the energy sector between 2001 and 2030. We believe that all countries are best served by a strong, stable hemisphere. We also believe that a strong, stable and prosperous hemisphere is created by all countries basing their energy development, transportation and use on market reliance; by allowing for private capital to ensure optimal development; and by using the best technologies and a broad range of energy resources to give consumers the best choices. However, energy security depends on the choices countries make, and we are concerned that some of the countries in our hemisphere are making choices that will not optimize the development of energy resources.”

The 4 th witness at the 3-2-06 Subcommittee hearing, Ms Anne Korin of IAGS noted that: “ To increase its choice of clients, Venezuela is positioning itself as an energy hub for the entire continent, creating interdependencies with many of the region’s countries. Attempts to reform Ecuador ’s oil sector in order to attract investment have been struck down by the country’s legislature. As anti Americanism spreads across the world it is critical that the U.S. maintain its strategic posture and popular support in the Western Hemisphere . This can be done through increased effort to promote democracy, economic reforms and good governance and, no less importantly, by enriching our neighbors and promoting economic interconnectedness with them…”

Dr. Weintraub, also formerly of US AID, now at CSIS, urged that Chavez’s PDVSA is merely changing old oil contracts to new equity-based contracts and as such, the U.S. should keep its hands off Venezuela because the public sector, he claimed, remains fully engaged in Venezuela. He noted that the U.S. should never interfere with nationalization there because it does not really matter.

In the Questions period of the Hearing, Ms. Harbert, to paraphrase, noted that Chavez’s new proposed oil pipeline will not be exclusionary of U.S. oil interests and waged that Chavez would never fully nationalize oil interests in any event.

What Ms. Harbert failed to reveal is how much of the Chavez oil money is pouring directly in to anti- democracy and anti-U.S. efforts underway. Although never a pleasant task, it is far easier to detail how many Clinton-era anti-U.S. and anti-democracy projects which Ms. Harbert approved with Adolfo Franco while at USAID, it is far more difficult to track Chavez’s systematic theft of his country’s assets for personal enrichment while sending his paid political foot soldiers into numerous countries. However, there does exist more than enough concrete data to detail this oil and political profiteering scheme. As Chavez hardens his well-known theft on a grand scale of his nation’s revenues in main, we can only presume that every new Bolivarian member state will see its own budgets as opaque, as illegal, and completely taken over for enrichment of Chavez’s few, under the Chavez-Castro take-over plan. Today, there is no separation of energy policy in the Americas from trade and commercial issues, even as there is no separating it from Chavez’s geo-political reach. And there is no separation of oil for political gamesmanship even as there is no separation of Chavez’s behavior as it impacts Homeland Security and the thousands of asylum seekers from Venezuela . They seek asylum as their nation is unbearable. There is no separation of energy issues from global security issues as Chavez, legally a fascist dictator since 8-04, in full control of his militaries and his nation’s revenues, even as today there is no separation of narcotrafficking issues as known anti-democracy terrorists and human traffickers increasingly use the same smuggling routes. There is no separation of global financial crimes as Chavez’s cronies corrupt U.S. and global banking institutions and markets of scale. As Chavez’s corruption affects the warp and woof of our world today, his petty tyranny can be brought to justice.

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