Global Processing

Chavez: No Plans to Cut US Oil Exports

February 18, 2008
According to the Associated Press, President Hugo Chavez sent a soothing message to American motorists on Sunday, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets a week ago when he threatened to halt shipments to the United States in retaliation for Exxon Mobil Corp.''s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don''t have plans to stop sending oil to the United States," the socialist leader said Sunday during a visit to heavy-oil projects in Venezuela''s petroleum-rich Orinoco River basin that were nationalized last year.

But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us."

Chavez has repeatedly warned against a possible U.S. invasion he says Washington would use to seize control of Venezuela''s immense oil reserves.

U.S. officials have denied any such plan exists.

The United States relies on Venezuela for about 10 percent of its oil imports.

The administration of Chavez -- a close ally of Cuban leader Fidel Castro -- is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy oil projects in the Orinoco River basin.

Exxon Mobil, the world''s largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.

Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.

On Thursday, Oil Minister Rafael Ramirez said Exxon Mobil is demanding more than 10 times the compensation it may deserve from Venezuela for nationalizing the oil venture.

Exxon Mobil walked away from its heavy-oil upgrading operations in the Orinoco basin after Chavez''s government changed the terms of the contract. Other major oil companies, including U.S.-based Chevron Corp., France''s Total, Britain''s BP PLC, and Norway''s StatoilHydro ASA, have negotiated deals to continue on as minority partners in the Orinoco oil project.

Noting that oil prices have increased drastically in recent years, Chavez floated the possibility Sunday of establishing a new tax on foreign oil companies that continue operating in Venezuela.

Without revealing details, Chavez told Ramirez and other top PDVSA officials to begin preparing "a recommendation for what we could call a tax on sudden earnings."

He also repeated previous threats that food companies caught hoarding goods to sell later at inflated prices "should be seized and taken under government control."

Chavez singled out Venezuela''s largest food producer and distributor, Empresas Polar, as a "clear example" of a business that could be taken over.

Representatives of Polar could not immediately be reached for comment, and its offices were closed on Sunday. The company has denied hoarding goods in the past, saying it hopes to work with the government to fight shortages.

Chavez has frequently warned food companies against sitting on food staples as the country struggles with sporadic shortages of some basic foods, including sugar, cooking oil, milk, black beans, eggs and chicken.

But no such takeovers have occurred so far, and many private supermarkets and food distributors continue to thrive in Venezuela.

Many leading retailers argue that currency controls established in 2003 are responsible for higher prices, because some businesses are forced to buy imports using black-market dollars at more than twice the official exchange rate.