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Opinion and Analysis: International | Oil and Gas

Venezuela Stands with Argentina in Struggle for Energy Sovereignty

Venezuela was the first to express its full “support and solidarity” for Argentina as President Cristina Fernandez de Kirchner decided to assert greater control over the country’s natural energy resources.

In response to the “energy sovereignty” announcement made last week, Venezuelan President Hugo Chavez and high-ranking members of his cabinet asserted, once again, that Latin America continues along the path of “sovereignty and independence”.

On Monday, April 16, Argentine President Cristina Fernandez de Krichner announced it was in the “public’s interest” to control at least 51% of the country’s oil investment and extraction efforts. As such, she ordered the immediate intervention of Spanish-owned YPF, the largest oil firm currently exploiting Argentine crude, and announced that its shares “were subject to expropriation”.

Kirchner accused the firm of failing to invest a sufficient amount of its earnings ($3.7 billion since 2007) in Argentina, blamed it for declining output, and sent the proposal to the country’s legislature for further discussion and approval. Though some debate ensued regarding how much should be paid for the YPF shares, the vast majority of lawmakers backed the nationalization.

Once the nationalization becomes effective, 26% of shares will be held by the national government while another 25% by the Argentinian state governments involved in oil exploration.

A poll taken over the weekend found 75% of Argentines favor the decision. The move, however, did not come without harsh attacks from corporate-backed governments and their allies in the media. Threatening “grave consequences” for the Argentinian economy, private media outlets from across Spain, Western Europe, the United States and elsewhere issued dire warnings against any additional moves at natural resource sovereignty.

The Wall Street Journal, for example, called the decision a “theft”, while US Secretary of State Hillary Clinton, Spanish Prime Minister Mariano Rajoy, and Mexican President Felipe Calderon all called it “unjustifiable” and “a mistake”. British Foreign Affairs Minister William Hague said he was “very concerned about the decision” while the European Parliament called it “deplorable”, warning a trade agreement between Europe and Mercosur was now “at risk”.

Venezuela Offers: “Full Support”

Venezuela’s support came one day after the April 16 announcement, with President Hugo Chavez phoning his Argentine counterpart directly. Chavez called Kirchner to voice his unwavering support for “the doctrine of sovereign control over natural resources” and added, “he had watched the entirety of her televised address announcing the nationalization”.

President Chavez also told Argentina’s Cristina Fernandez that her public address “reminded him of conversations held in 2003 with President (Nestor) Kirchner” in which the two discussed the urgent need “to build energy security and sovereignty – renamed ‘the South American energy equation’ by Cristina Fernandez”.

Chavez affirmed that Kirchner’s energy policies “are to provide stability to the region for the next 100 years”, and went on to congratulate the Argentine President “for her commitment to keeping Argentina on the path of development”. Both presidents “committed themselves to maintaining regular contact so as to continue the advance towards a unified South America and a strategic, binational alliance in strategic sectors, with all efforts dedicated to the well-being of both peoples”.

Venezuela and Repsol

With corporate media spreading fear of further nationalizations in the region, Venezuelan Minister of Energy and Petroleum Rafael Ramirez told reporters that he expected “no problems to arise” when it comes to private oil investments in Venezuela. Though Ramirez was firm in his support for Argentina’s decision, he added that oil investments are safe in Venezuela because, “agreements with Repsol are on very clear terms, including a majority share controlled by us”.

Ramirez explained that moves towards greater energy sovereignty in Venezuela, consolidated by the Chavez government between 2005 and 2007, had “strengthened” oil production in the country and resulted in “a period of significant growth” for the country. Of the twelve transnational oil firms forced to renegotiate oil deals with Venezuela in 2006, only two (Conoco-Phillips and ExxonMobil) rejected negotiations and took Venezuela to court. The rest, including Repsol, currently enjoy positive economic development through oil extraction in the country.

According to Ramirez, current cooperation agreements be-tween Venezuelan state-owned oil giant Petroleos de Venezuela S.A. (PDVSA) and Repsol subsidiary Upstream “are advancing very well”. Repsol is currently involved in Venezuela through the jointly-held oil firm, PetroCarabobo. Though the Spanish firm holds only 11% of the company’s shares, an estimated 40% of production (165,000 of 400,000 barrels per day) is to be refined by Repsol and its subsidiaries.

While he recognized the successful collaborations between PDVSA and Upstream, Ramirez also stressed that “the decision made by the Argentine Government must be respected”. “Reasons exist for Argentina’s decision”, Ramirez said, referring specifically to the “grave situation of declining production and a need (by Argentina) to import gasoline”. “It’s no longer acceptable that a company holding the rights to production of Argentine oil be exporting earnings while they fail to attend to internal needs”, he affirmed.

Ramirez added that he had spoken personally with Argentine Minister of Planning Julio de Vido, telling de Vido that Venezuela “is at their service when it comes to operational capacities and the definition of legal policies”. Venezuela’s Minister of Energy and Petroleum added that he was “concerned” with declarations coming out of Spain and insisted that the Spanish President, among others, “should calm down a bit and understand that governments have the right to protect the national interest.”

True Independence

Speaking to the press last week, Venezuelan Foreign Minister Nicolas Maduro described Argentina’s decision as “concrete proof that we are moving towards a new state of true independence, of the consolidation of a regional block in which we defend ourselves in spite of ongoing attempts by other sectors of the world to colonize and use our natural resources”.

Maduro told the press that he to had spoken with his Argentine counterpart, Foreign Minister Hector Timerman, and said that Timerman was “very pleased” to receive the “solidarity” of Venezuela.