Opinion and Analysis: International
That Time Tillerson Tried to Take on Hugo Chavez... And Lost
Donald Trump’s nominee for secretary of state, Rex Tillerson, has a long and shady history as a hatchet man for the world’s largest oil and gas company, from helping cover up his own company's role in causing global warming to funding climate change denialism. Indeed, one can look at his record as one long chain of victories for the most rapacious kind of global capitalism, one which puts profits before people.
There is, however, one notable exception: the time he tried to take on former Venezuelan President Hugo Chavez, and lost.
ExxonMobil was one of several major multinationals that pushed for and profited mightily from the privatization of the Venezuelan oil industry in the 1990s. Its two major projects in Venezuela, Cerro Negro and La Ceiba, were worth more than US$10 billion.
So as Chavez began the process of re-nationalizing the oil industry as a means of helping fund his Bolivarian Revolution, Exxon was at the top of his list. By 2008 Chavez had managed to come to compensation agreements with 20 of the 22 major oil multinationals in the country, offering to buy out the companies based on the “book value” of the company assets in the country. Tillerson’s ExxonMobil was one of the holdouts, arguing that they should be compensated based on the market value of the assets instead.
“From the very beginning, Exxon sent strong signals that they would not be run over, they would use all their legal rights, and they would be more confrontational,” Francisco Monaldi, a former consultant for Venezuela’s state oil company, told the New York Times.
Despite Venezuela offering Exxon US$1 billion for the book value, as well as buying back US$630 million in bonds which it had issued to Exxon to help finance the project, Tillerson took Chavez and the Venezuelan people to arbitration, suing them for US$10 billion.
In 2014, the World Bank’s international arbitration court finally ruled that Chavez's expropriations were in fact legal, but that they had slightly miscalculated the compensation offered. While the arbitrators ordered Venezuela pay Exxon US$1 billion this was a tiny fraction of the US$10 billion Tillerson had asked for.
One Venezuelan oil industry consultant told the New York Times, “In my opinion, (Tillerson) took it very personal with Chavez. (He) fell into the trap completely.”
One year after the ruling, Tillerson tried once more to undermine Venezuela by provoking a major international conflict with neighboring Guyana. Despite a 1966 treaty which established that the disputed border region could not be unilaterally developed by either country, Tillerson aggressively pursued an agreement with Guyana to exploit the oil resources of the disputed territory.
The announcement of the agreement led to a major conflict between the two neighbors with Venezuelan President Nicolas Maduro saying that this was part of a “brutal campaign against Venezuela, financed by ExxonMobil," with a goal of creating a “high-intensity conflict, to undermine the policy of peace that we have implemented.”
While the two governments soon smoothed over the diplomatic conflict instigated by Exxon by agreeing to renew discussions about the disputed region, to this date they have not reached a final agreement.
One can only wonder how Tillerson, now as U.S. secretary of state, may try to exact his revenge against Chavez’s US$9 billion dollar win.
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