Feature
Sir
Ronald Sanders :
Venezuela
in the Caribbean (
I)
I believe it is true to say that prior to 2005,
Venezuela had little influence in Caricom, even
though for years it maintained diplomatic missions
in virtually every Caricom country.
Caricom
concerns with Venezuela centred on three things: Venezuela’s
claim to two-thirds of Guyana; Venezuela’s
passage of a law in 1978 which asserts not
only ownership of Aves island in the
Caribbean sea but also treats it is an “island” and
not a “rock” as defined by the UN
Convention on the Law of the Sea, therefore entitling
Venezuela
to an Exclusive Economic Zone which would impinge
on the maritime entitlements of Antigua and Barbuda,
St Kitts-Nevis, Dominica, St Lucia and Montserrat;
and Venezuela’s participation in complaints
to the World Trade Organisation (WTO) over the
Caribbean’s
preferential access to the European Union market
for bananas.
These three concerns defined Caricom’s relationship
with Venezuela and featured regularly in communiqués
issued by its heads of government.
Equally, the issue of Aves Island was regularly
treated as one of contention in the declarations
of the Organisation of Eastern Caribbean States
(OECS).
Then three events occurred.
First,
Caricom countries—with the exception
of T&T which is itself a producer of oil and
natural gas—suffered from skyrocketing oil
prices which reached unprecedented levels placing
an enormous burden on their economies and stunting
development.
Second, the government of President Hugo Chavez
in Venezuela benefited greatly from high oil prices.
When President Chavez came to power in 1999, the
price of a barrel of oil was US$10. During his
time in office, the price rose to as much as US$75
a barrel before dropping off to its average of
between US$55 and US$60.
This has given President Chavez considerable capacity
to manoeuvre domestically and internationally and
to challenge the old order of power in Latin America
and the Caribbean.
Paying
off debts to the World Bank last week, five years
ahead of schedule—having already
paid off the IMF—with the declaration from
the Finance Minister “Goodbye to you… Venezuela
is free and sovereign,” illustrates the scope
of the Venezuelan government’s manoeuvrability.
Third,
President Chavez became more strident than he
had been in his anti-American stance and his
denouncing of the US initiative for the establishment
of a Free Trade of the Americas Area (FTAA) which
he described as a vehicle for “US imperialism” and
said “should be buried.”
In
the course of developing what he calls “a
new era of 21st century socialism” in Venezuela
which includes nationalisation of some of the assets
of foreign-owned companies, President Chavez also
articulated the concept of a “Bolivarian
Alternative for the Americas” (ALBA) as a
substitute to the FTAA.
In 2005, President Chavez launched two initiatives
directed at the Caribbean: PetroCaribe and an ALBA-Caribe
Fund.
Briefly described PetroCaribe consists of two
sets of agreements: first a framework accord, the
Energy Co-operation Agreement, which was signed
by several Caricom governments in June 2005; and,
second several bilateral energy agreements which
were subsequently signed between individual Caricom
governments and the government of Venezuela.
Under PetroCaribe, Venezuela provides crude and
refined oil products to the participating Caribbean
states for part payment within 90 days. The balance
is then to be paid over a period of 23 to 25 years
at one per cent interest as long as the cost of
a barrel of oil does not fall below US$50 when
the interest rate would rise to two per cent.
PetroCaribe is in essence a loan facility and
not oil at a discounted price or cheap oil.
Under the ALBA-Caribe Fund, to which Venezuela
has subscribed $50 million, participating countries
can draw for financing social and economic programmes.
The question now arises as to what do Venezuela
and the participating Caribbean governments get
from these initiatives?
Clearly, in the case of Venezuela, it is an effort
by President Chavez to weaken US sway over the
region and extend his own influence in the area.
At
the signing of PetroCaribe, President Chavez
said that he wanted the Caribbean to be a “sea
of resistance” to US imperialism. Further,
Caricom countries represent almost half of the
34 votes in the Organisation of American States
where debates on the hemispheric political situation
are played out; and they are a solid bloc in the
Latin and American and Caribbean group at the UN.
With respect to the participating Caribbean countries,
they derive immediate relief from payment of the
full cost of their oil requirements under PetroCaribe
which eases their cash flow and allows them to
spend on other projects.
Some of them also recognise an opportunity to
get help from Venezuela for infrastructural projects
for which they have been unable to raise funding
elsewhere.
By the same token, it has been argued that since
PetroCaribe is effectively a part-loan arrangement,
the debt of the participating governments will
increase and a day of reckoning will come particularly
since 14 of these countries are already amongst
the 30 most indebted nations in the world in relation
to their GDP.
In any event, the immediate payment relief and
the social projects under the ALBA-Caribe Fund
have proved to be sufficient incentive for several
Caricom governments to sign up to PetroCaribe.
It
is significant that the some of the countries
that signed up did so despite receiving a letter
dated June 27, 2005 from the US State Department
that was heavily critical of President Chavez saying
that “democracy was being threatened under
his rule” and accusing him of destabilising
neighbouring countries by supporting radical groups.
The letter was ignored by many Caribbean leaders
in part because they were concerned about the unilateralist
practices of the Bush Administrataion and the demonstrable
lack of meaningful involvement by the US in the
economic and social issues that most concern Caricom
governments.
These
leaders take some satisfaction in Chavez’s
unbridled criticism of US policies.
He is doing what they can not afford to do.
In any event, they would have been perfectly aware
that while they were being urged not to deal with
the Chavez government, the US continued to be the
largest market for Venezuelan oil.
If
the US could continue to deal, in its own self-interest,
with the Chavez government despite all the matters
identified in the State Department letter, why
shouldn’t Caribbean governments? Particularly
as the US remained neglectful of the issues that
most concern the Caribbean.
These issues remain: official development assistance
to build infrastructure and to provide employment,
to alleviate poverty, and to finance human resource
development and the provision of health services.
Since the end of the cold war, US official development
assistance to Caricom countries has dwindled and
has focused only on issues of concern to the US;
issues such as the interdiction of drug traffickers;
port and airport security as part of the US war
on terror; and illegal migration.
And
while the US has been neglectful of the Caribbean’s
needs for assistance, it has been proactive on
issues of trade in goods and services that have
hurt the region.
These include joining as a complainant with Latin
American countries, including Venezuela, at the
WTO to protest preferential access to the European
Union market for bananas from Caricom countries;
US antagonism to the offshore banking industry
in the region; and, so far, noncompliance with
a WTO ruling in favour of Antigua and Barbuda that
the US should bring its domestic laws into conformity
with its international obligations and allow the
delivery into the US of internet gaming and betting
services from Antigua.
US unilateralist actions have deprived Washington
of any sympathy for many of its positions.
The
disregard for the UN Security Council over Iraq
and the subsequent invasion; the reversal
of the US government’s commitment to the
Kyoto Protocol at a time when the region is facing
increased and stronger hurricanes; the reported
atrocities at Abu Ghurayb; the detention of prisoners
without charge at Guantanamo; and the continued
imposition of an embargo against Cuba, have all
contributed to a decline in US-Caricom relations
at an official level.
A
vacuum was left in the Caribbean by US neglect.
And Venezuela filled it by its readiness to provide
help to counter the damaging effects of high oil
prices. It should be noted, however, that the readiness
to embrace the Venezuelan government’s initiatives
does not include all
Not
all Caricom members support Chavez
Caricom
countries, nor indeed does it include all the
actors within some of the Caricom States
whose governments have drawn closer to President
Chavez.
1. The government of Barbados has not signed on
to PetroCaribe on the basis that it is a loan facility,
and even though it is on soft terms, it is still
a debt and fiscal management dictates that such
debt be avoided; a new government elected last
December in St Lucia has indicated that it may
not pursue membership of PetroCaribe even though
the previous government had signed up to it.
2.
The former Prime Minister of St Vincent & the
Grenadines, Sir James Mitchell, has said that he
doesn’t “want to be friends with anybody
who is nationalising everything in the country
where its currency is continuously devaluing;
3. Just a few days ago on April 12 the government
of Suriname indicated that it has not fully signed
on to PetroCaribe in part because Venezuelan oil
would be granted access to the Surinamese market,
a factor that could be detrimental to the state-owned
oil company, Staatsolie;
4.
The government of Guyana has clearly decided
that, given its peculiar position with Venezuela
maintaining a claim to two-thirds of its territory,
it cannot make itself wholly reliant on Venezuela
for its energy needs: it has opted to take only
half of its petroleum requirements under PetroCaribe,
the other half continuing to come from T&T.
The
PetroCaribe agreement has also had a polarising
effect on Caricom itself, particularly in relation
to T&T. And the cost of this may be counted
in the future.
Caribbean
Media Corporation (CMC) report: “St
Lucian government not interested in Venezuela’s
PetroCaribe initiative,” February 20.
Sir James Mitchell, address to 21st Annual Convention
of New National Party in Grenada in March.
“
Suriname government not ready for PetroCaribe deal,” CMC
(CANA) report, Paramaribo, April 12.
Venezuela has now replaced T&T—a founder
member of Caricom—as the main energy supplier
in Caricom in contradistinction to three Articles
of the Revised Caricom Treaty, one of which Article
79 obliges member states “to refrain from
trade policies and practices the object or effect
of which is… to nullify or impair benefits
to which other member states are entitled under
the treaty.”
And,
while the T&T Government eventually decided
to facilitate PetroCaribe, Prime Minister Patrick
Manning is on record as saying that his country
would not step into help if there is any break
in supply from Venezuela in the future.
He
made it clear that “if we have to shift
the markets from the Caribbean to, say, North America,
all of our output would be committed to our new
markets. Therefore in the event of a disruption
of supply we would not be able to keep the market
satisfied.”
The
fate of a Petroleum Fund—established
by T&T in 2004 to provide relief to Caricom
countries experiencing hardships because of high
prices for crude oil and petroleum, products—remains
unclear.
In
2004-2005, the fund was used to provide budgetary
support to the government of Guyana following wide-spread
flooding; to assist the government of Grenada in
its recovery from Hurricane Ivan; and to provide
a grant to Liat to help in the airline’s
restructuring.
But
as a Caricom Secretariat document observes: “Implicit
to the establishment of the Petroleum Fund is the
assumption that Caricom member states would source
their petroleum related needs from T&T.”
Text
of a reporting English by Spanish News Agency
Efe: “Caricom leaders seek energy talks with
Venezuelan President,” Madrid, February 16.
“
Caribbean Trade & Investment Report 2005; Corporate
Integration & Cross Border Development,” Caricom
secretariat, Guyana, 2006, p 53.
Why the Government decided, in the end, to facilitate
the PetroCaribe agreement is best known by the
government itself.
However,
the fact that T&T can now proceed
to divert its oil and gas supplies from Caricom
countries to the United States is one clue, and
another is that the T&T Government was interested
in settling its own arrangements with Venezuela
to exploit oil and gas reserves along their maritime
border.
On
March 20, President Chávez and Prime
Minister Manning signed an energy agreement to
share the hydrocarbon reserves located on the border
between them, including oil and natural gas. The
costs and benefits will be divided between the
two states depending on the amount of participation
of each government, guaranteeing a policy that
will allow for the development of both nations.
While
precise and full information on what has flowed
to Caricom countries under PetroCaribe and
ALBA Caribe is not readily available, the following
has been gleaned from numerous press reports:
n Dominica has received asphalt, University scholarships,
$12 million for housing and a fuel storage tank.
Venezuela has committed to building an oil refinery
in Dominica to process 10,000 barrels of oil per
day, but amid protests that this would spoil the
naturalness of the island, the Dominica government
has delayed implementation of the project pending
the results of an environmental impact study;
In St Vincent a liquid natural gas facility has
been built and a fuel storage tank is to be built.
Further, the Venezuelan government has promised
to help build an international airport on St Vincent
at a cost said to be around $200 million;
“
T&T signs energy agreement with Venezuela”,
Chris Carlson, Venezuelanalysis.com. March 21.
“
Dominica government, environmentalists agree on
oil refinery assessment,” Caribbean Media
Corporation (CMC) report, March 22.
“
Chavez tries to woo Carib- bean: Leftist calls
for anti-imperialist unity, blasts Nafta, promotes
his agenda,” Associated Press, February 18.
In Antigua, three fuel shipments of approximately
90,000 barrels each have been delivered. Venezuela
also made $7.8 million available to upgrade the
Airport prior to Antigua hosting games in the current
World Cup Cricket tournament, but it is unclear
whether this loan is part of the ALBA-Caribe Fund;
In Jamaica, a line of credit has been provided
for infrastructural projects such as a freeway,
a sports centre and renovation of the cultural
centre. Jamaica is reported to be receiving 23,500
barrels of oil a day from Venezuela under PetroCaribe
since July 2006.
There is also a promise to upgrade an oil refinery:
Guyana
has not yet accessed any oil shipments under
PetroCaribe because of a concession rate
that was being negotiated due to Guyana’s
classification as a Highly Indebted Poor Country.
Current information is that this hurdle has been
cleared and shipments will begin. In the meantime,
Guyana has applied for and been granted funding
of $1.5 million under the ALBA-Caribe scheme for
a homeless shelter; and Haiti has been promised
$1 billion for several projects including equipment
for the construction
of housing; support for Cuban personnel in Haiti;
and to construct four power plants. Given the size
of these funds, it is assumed that they are outside
the ALBA-Caribe arrangement.
Continued next week
Sir
Ronald Sanders is
a former diplomat.
Petroleumworld not necessarily share these views.
Editor's
Note: Sir Ronald Sanders on April 17, delivered
a lecture at Chatham House, St James’ Square,
London on the expansion of Venezuela’s
influence in the Caribbean and the potential
repercussions that could arise for the Caribbean
as a result of the growing antipathy between
the US and Venezuelan governments. Entitled, “Expanding
its sphere of influence: Venezuela in the Caribbean,” Sir
Ronald’s lecture was presented as part
of the Caribbean-Britain Business Council Seminar
Series 2007, and in association with Chatham
House and Canning House.
This
article was first publish in Trinidad Guardian,
Thursday 17th May, 2007. Petroleumworld
reprint this article in the interest
of our readers.
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05/20/07
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