Venezuelan leader Hugo Chavez survived a vote to oust him Aug. 15, in a referendum the conservative opposition hoped would culminate their long campaign to overturn the left-populist president.

"Now we can start the next phase of our revolution!" Chavez roared, pumping his fist from the presidential balcony after the vote. "This is a victory for all countries of Latin America that fight for liberation and alternatives to the neoliberal dictates of Washington!"

Opposition leaders refused to accept the official findings that Chavez had won by 58%. "We categorically and resoundingly reject these results," said Henry Ramos Allup, head of the Democratic Coordinator opposition coalition. "The National Electoral Council has committed massive fraud." But the victory was affirmed by international observers, including Jimmy Carter. There referendum drew a record 8.5 million of Venezuela's 14 million registered voters, and many waited up to 12 hours to cast their ballot.

The vote was occasioned by some violence. One person was killed and four wounded on the 16th when Chavez supporters reportedly fired on a crowd of opponents marching through Caracas banging pots and pans and chanting "Fraud!" Earlier that day, opposition demonstrators crashed Carter's press conference to denounce his findings. (Newsday, Aug. 17)

On July. 31, a Venezuelan court ordered the arrest of 59 dissident military officers accused of rebellion for taking part in anti-Chavez protests in October 2002, when over 100 military dissidents took over a public square and proclaimed their opposition to the regime. Authorities ordered the arrest of the officers for failing to appear at a hearing on charges of conspiracy, rebellion and inciting insurrection, the Venpres state news agency said. (Reuters, Aug. 1)


Chavez was quick to point to Washington's hand behind the unrest and the recall campaign generally. The US National Endowment for Democracy provided funds to opposition groups such as Sumate, which the New York Times acknowledged violated election norms by distributing survey results showing Chavez as losing while the vote was still pending. (NYT, Aug. 20)

Bernard Aronson, assistant secretary of state for inter-American affairs from 1989 to 1993 and now with "a private equity firm that manages investments in Venezuela and elsewhere," had a New York Times op-ed piece day before the vote, "Venezuela's Fake Democrat," portraying Chavez as a dangerous demagogue. Aronson warned that if he was not defeated, Latin America's future may belong to "leaders like Hugo Chavez: men who campaign to consolidate their power and inveigh against the oligarchs while their people descend deeper into poverty." (NYT, Aug. 14)

Chavez, meanwhile, made much of his campaign to use Venezuela's oil wealth to better the lives of the 80% of the country that lives in poverty, redirecting profits from the state company to education, health care, job training and other social programs. In the days before the vote, the Venezuelan Embassy ran a series of ads on the New York Times' prestigious op-ed page boasting: "In the past, Venezuela's oil wealth benefited a few. Today, it benefits a few *million.*" The ads directed readers to a website touting the benefits of the new oil-funded social programs,

Venezuela's oil reserves, the largest outside the Middle East, are the real prize in the ongoing struggle. Chavez portrayed an international oil industry rooting for his victory as the best guarantor of a stabile investment climate in Venezuela. "My friends from Wall Street breathed easier overnight," Chavez said after the vote. "Even in the White House there were people who breathed easier when they heard the results." (Newsday, Aug. 17)

The reaction of international markets loaned credence to this boast. Oil prices, which had been rising the previous week in response to violence in Iraq and the potential for further instability in Venezuela, dropped as it became clear that Chavez had won. Low-sulfur crude oil closed Aug. 16 at $46.05 a barrel, down 53 cents on the New York Mercantile Exchange. (NYT, Aug. 16)

But other analyses indicate that petro-oligarchical relief at the Chavez victory is not universal. Wrote Brad Foss in a commentary for Canadian Press: "Exploration and production have suffered under Chavez, analysts said, because the populist ruler diverts too much money from the state-run oil company's budget to finance social programs for the poor. If a better balance isn't struck soon, they said Venezuela, a major supplier of fuel to the United States, faces a potential double whammy: The country could find itself marginalized within OPEC as other countries are given greater market share and that would mean less oil money available for Chavez' social agenda."

Venezuela's current daily output is about 2.5 million barrels, or 400,000 barrels below its official OPEC quota, according to Foss. Total Venezuelan output was above three million barrels a day as recently as 2001, but has never quite recovered from a long strike by middle-management at the state company Petroleos de Venezuela (PDVSA) aimed at ousting Chavez, which lead to the firing of some 18,000 employees.

With proven reserves of 78 billion barrels and easy access to US markets, Venezuela is seen as critical by the international oil industry. But Foss portrays an industry impatient with perceived mismanagement of the oil sector by Chavez. He quotes Robert Cordray, a senior Latin America analyst at Washington-based PFC Energy Group: "It takes pretty substantial investment to sustain production, let alone increase it. And it appears that that investment is not happening. If these fields are left to their own devices, it's hard to imagine a scenario where they're not declining."

PDVSA has spent only about a third of the $3.3 billion available for exploration and production in 2004, according to Cordray--and the amount allocated is down 33% from the $5 billion originally set aside, he claimed.

Said Steven Tholen, chief financial officer of Harvest Natural Resources, a Houston-based company that produces 20,000 barrels of oil a day in Venezuela in a joint deal with PDVSA: "We're very anxious to try and grow our presence in Venezuela. From our standpoint, we're apolitical."

ChevronTexaco is considering a $6 billion investment to produce heavy crude in Venezuela's Orinoco tar belt and upgrade its operations there, and Royal Dutch/Shell is said to be interested in a new project there, too. "However," writes Foss, "one impediment to new foreign investment in oil exploration and production has been the country's 2001 Hydrocarbons Law. It raised royalties private companies have to pay the government and guarantees Petroleos de Venezuela a majority stake in any new projects." (AP, Aug. 25)

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A New York Times business section story July 24 hailed as "Herculean" PDVSA's recovery from production that had dropped to under a million barrels a day at the height of the strike in late 2002. But it warned that foreign companies are wary of the tight control Chavez has established over PDVSA through his Ministry of Energy & Mines, and the redirecting of profits to literacy campaigns and other social programs at the expense of reinvestment in infrastructure and exploration. It even gave voice to some high-level skepticism about PDVSA's recovery. "Coming back after the strike to reach 2.5 to 2.7 million barrels is pretty heroic," said Lawrence J. Goldstein, president of the New York-based Petroleum Industry Research Foundation. "They should get credit for that, but we do not believe their numbers."

The story saw nostalgia for the free-market days before Chavez, when ExxonMobil, ChevronTexaco, ConocoPhillips and Total of France struck deals with PDVSA in the Orinoco tar belt, known locally as the Faja. Said former PDVSA executive Antonio Szabo, who left the company before Chavez came to power and is now chief executive of Stone Bond Technologies, a Houston energy consulting firm: "Right now, PDVSA is not a mercantile entity. Right now, it's an instrument of the Venezuelan government." (NYT, July 24)


(Bill Weinberg)

Special to WORLD WAR 3 REPORT, Sept. 6, 2004
Reprinting permissible with attribution