Interview with Minister of Energy and Mines, Rafael Ramirez
Dollar and Euro
Walter Martinez: Àt this moment we have the satisfaction of having the Minister of Energy and Mines with us so that he may clarify for us, why he is just returning from Vienna. Minister, what is the situation there? We have even received information that says that OPEC would be disposed to consider the use of the Euro, which seems an absolutely interesting and newsworthy item.
Rafael Ramirez: Yes, there is a discussion which is not new within OPEC, which has to do with the use of which reference currency for OPEC’s own commercial transactions and consequently of the speculative market derivatives, which are greater even than the volumes that OPEC handles. Also, there is a discussion, at the moment, that is on the table due to the strong devaluation the dollar has had with regard to the Euro. So there is a discussion, but it is a discussion that we are looking at with care due to its implications. For example, this gives us an adjustment of the price band [in which oil is traded], in proportion to the devaluation that the dollar has undergone. We would thus have a price band that would oscillate between $29 and $38 dollars per barrel, which would also mean an impact on the economy – something that would not agree with us. It is necessary to maintain a balance that allows the defense of our price, but which also allows that economic growth takes place which increases demand. Then there is an aspect that we are discussing, a proposal: probably the most balanced option would be to have a basket in order to maintain a balance between the dollar and the euro for the commercialization of oil. But this is a discussion that is in the midst of development, as you usually say, and there is no firm position of the ministers about it.
Walter Martinez: So there would be the possibility of studying a basket of hard currencies that then allows for the devaluation of the dollar, which some sources considered to reach 35%.
Rafael Ramirez: Yes, 34 to 35%, and that comes to be more of an aspect of the speculative markets, that is to say, there are exogenous elements to the oil market, that introduce variations. Oil countries effectively have a loss of real income. Although, in the case of Venezuela this is compensated for because all of our purchases of services are also expressed in dollars, which makes this a more or less complex equation that must be carefully evaluated.
Walter Martinez: Now, we go to our situation. What message do you bring to us from Vienna?
Rafael Ramirez: Well, at the last extraordinary meeting the factors of political tension and instability in the Middle East which continue to affect the price of the barrel were carefully evaluated. The reality is that the situation in Iraq is not stabilized; the reality is that Iraq cannot export in the North. The estimates that have been made back then, that they would be producing more than two million barrels per day, has not become a reality. There is a serious infrastructure problem and the Iraqi resistance and the armed confrontation that there is there. That is an aspect. On the other hand there is the presence of Russia, which is always an unknown with regard to its own internal processes. It is hoped that there is a demand. It is considered that there is economic growth in the North American economy, moderate growth, but in China it follows a growth that is beating all the records.
Walter Martinez: It’s sustaining at 7.5%.
Rafael Ramirez: Yes, in such a way that there are elements that indicate that we could have a situation in the second trimester of 2004 where we have to be very alert for efforts to restrain the price of petroleum. Nevertheless, the answer that OPEC gave in September was timely, preventive answer, to mainly avoid a slide in the price of petroleum and above all in its speculative aspects. This we can state it, that we have a price that remains towards the top end of the price band, which in some way compensates for the situation of the currency devaluation, and we are ready for next year. It was decided to have another meeting in January , with the objective of evaluating the behavior of the consuming countries during winter time, and to take some decisions that fit better. What has been demonstrated this year and what will be demonstrated next year is that OPEC is going to continue, that we are going to continue in OPEC with a very close monitoring on the basis of extraordinary meetings, so that OPEC is a reference point, so that the reference is not in the speculative aspects of the market, which can maintain the price of petroleum within the price band.
Walter Martinez: When Saddam Hussein was there the production ceiling [of Iraq] was 2.6 million barrels approximately. What means does OPEC have to monitor what it is happening at this moment in Iraq’s production? The other thing is if production level is established and a regime that controls Iraq at the behest of the invaders, what is OPEC going to do? Will we have an Iraqi representative in opposition to OPEC within OPEC? Will we have a Trojan horse made by the designs of a Cheney, a Rumsfeld?
Rafael Ramirez: This is a real danger. This is where our position in the last meeting comes from, when we abstained. We made an objection to the inclusion of the Iraqi delegation because according to the statutes of OPEC, delegations must be sovereign and they must be able to have the power to decide as a whole state, as a nation. This is a situation that is not given since any decision that the group of people that is governing in Iraq takes, must always pass the approval of the North American military administration. It is an occupied country.
Walter Martinez: Now who would decide: the UN recognizes an Iraqi representation and OPEC has internal procedures that are different from the UN?
Rafael Ramirez: Yes, OPEC has principles that in this case, according to our understanding, were bypassed and for that reason we strongly objected. This is not usual. And Venezuela has never done this before, but in this case it seemed to us a position of the principle of international law, with which we think that it is a danger for the Organization.
Problems are going to arise among other actors besides Iraq, who are going to try to supply greater volumes. We are speaking of Kazakhstan, and we are speaking of Russia and Angola—an area which is emerging all along the African West Coast right now, which has become very attractive for transnational companies.
Walter Martinez: And the consequent panorama of political instability, to justify any kind of intervention. But Russia worries me very much, aside from which you are outlining.
Rafael Ramirez: Russia has several elements. In Russia there is an internal situation where apparently the government is trying to retake control and from this come the direct actions against some industrialists, owners, petroleum tycoons, who have assumed a very predatory direction with respect to their resource because their initial interest was to accumulate a great mass of capital on the basis of placing large production volumes of on the market, without seeing a little without paying attention of the reserves to maintain such an increase in production. On the other hand, Russia is growing its economy, is growing its Gross National Product and thus will continue to also increase its internal consumption. So there are elements that are not linear one has to watch and that lamentably are not in our hands, not in the hands OPEC countries. At this moment we are working to obtain agreements with them, to try to maintain a balance between the efforts of OPEC countries and non-Opec countries. What we are decided on is that we are not going to continue lose terrain in our markets at the cost of a policy from which other countries benefit without sharing the risks. So we are very firm in that position.
Walter Martinez: That is very important because in addition we have many friends who benefit from everything what OPEC does but, they are not part of the family; and that goes from Ecuador to Mexico through other latitudes. Now, I investigated and it turns out that Dick Cheney, in the last government of Bush the elder, in the last year in office was the one who promoted major investments to place pipelines from the Caspian Sea towards the Mediterranean and all this is connected to geopolitics, if the control of countries like Afghanistan is achieved or if one also controls situations like the one in Georgia and everything what we have there. That is to say, geopolitics at this moment seems to be blatantly linked to all of the crises that we are having, to the control of the energy resources.
Rafael Ramirez: Yes, yes and it has been a confrontation that has always been there. Somehow this is elucidated via agreements, but other times it has a violent ending, which is what it is happening now, and which in some way is what it has happened in Venezuela. We are convinced that a good part of the harassment from some sectors towards the country is very closely tied to the firm intention of the Venezuelan government, the government of President Chávez, to maintain the control of our resources, to exert a sovereign policy, and to exert towards the exterior a policy of support of OPEC. This has had a terrible cost in terms of instability for the country, but we have done it. I believe that we have passed the worst phase of the worst obstacle that they put in front of us due to our support of that policy. And now exactly one year has passed since the confrontation of this situation in the national arena.
Walter Martinez: In this anniversary we see a substantial change in Latin America: Lula in Brazil, Kirschner in Argentina, change signaled in Paraguay and now in Uruguay. Once again the people teach a lesson and say that they refuse, by referendum, the privatization of the oil industry.
Rafael Ramirez: Yes, during the last trip of President Chávez to Argentina, in all of the conversations with political actors, with the governments of those countries, the topic of the Venezuelan proposal of Petroamérica, came up and received much support. It has received the support of the government of President Lula, of Uruguay, of Paraguay. We have an agreement signed with Trinidad that goes beyond unification and we believe that it would be an effective collaboration for the two state companies, to work together in the Caribbean and to complement each other. What he has happened in Bolivia has been very important, we were there with the President in the last trip to Bolivia and we spoke to President Mesa, who asked for the support of Venezuela to be able…
Walter Martinez: That is very interesting – he solicited and officially you can say this.
Rafael Ramirez: Yes, there even is an agreement that we are working on between both governments because President Chávez of course offered all our knowledge, the accumulated experience we have. What is interesting, they have gone through a process of re-negotiating with transnational companies the terms in which their gas would be commercialized, so as to prioritize attention to the internal market, to prioritize industrialization in the country, to prioritize the control of the state over the resources. We have all of that reflected in our gas and hydrocarbons laws. It was enough for us to show them the terms of our hydrocarbon and gas laws, and for them this was a discovery. So, in Latin America, as far as the control of its sovereign resources, that which is parallel to that is the revision of the role of the state in those sectors. The same situation exists in Ecuador. I must say that we have helped to the government of President Lucio Gutiérrez in their attempts to outline a sovereign policy. In some areas they have not been successful, but in the hydrocarbons sector, for example, they have put a halt to a shameful process of the delivery of their oil resources, which even forced them to leave OPEC. Venezuela has been sending technicians, analysts, advisors, and they are right now in a process where they are trying to somehow retake the control licensing procedures. So, all of Latin America is taken not only by a discussion of topics such as the FTAA, but also a discussion of the issues such as the control over resources, over natural resources, which is a discussion that can be extended to all areas. It has to do with our forests, with our rivers, with our own industry as a good of the nation, a subject that of course has to do with the sovereign survival of our countries and of natural resources.
Walter Martinez: Certainly, otherwise we react at this moment to the tremendous advance of the FTAA, with all of its pressures. Nobody is going to us to bring us the money from the heavens. What is the situation? We know that Bolivia has in this gas boom the need to place its gas line towards the Pacific. But in addition to this it needs a liquefaction plant for the gas to put it in a liquid state so as to put it on tankers, which take it to Baja California and to California, to Mexico and the United States. There they have to have another plant so that the liquefied gas is turned back into a gas and another gas line that takes it to the United States. This is a gigantic project that requires a fleet of ships and, in addition, wherever the port is going to be there will have to be an investment on the order of 1.2 to 1.5 billion dollars. That is to say, around this port one is going to create a town, a city, which would come very well to depressed Northern Chile, but Chile left Bolivia without an exit to the sea and the Bolivians obviously said: never via Chile, and that has a political cost that caused a government to fall, which did not understand the reality and how it worked. Because, in addition, it has, let us not be deceived, the outgoing President had shares countless transnational corporations. Now, Ecuador has the Manta Base, it has given a part of its sovereignty, in this respect, to the United States. Ecuador was a member of OPEC and has left. What is happening with Lucio Gutierrez, Bolivia’s President, who after they laid out the red carpet for him in the White House, seems that he has changed? Has he returned to the family or are the people putting pressure on him?
Rafael Ramirez: I believe that in Bolivia as well as in Ecuador there is a clear pressure from the popular sectors. In Bolivia people have had their say not only with respect to the exit to the sea via Chile, but that in addition are saying, “how is it that we do not have access to the sea here in Bolivia? how is it that we here in the country cannot enjoy those wonders, of these resources that are ours and are being removed in a colonial manner?”
Walter Martinez: Excuse me Minister, but people do not know, because the media do not say this, that there is a tremendous cost for any Bolivian, in a country that is swimming in gas, to be able to have a gas tank to cook. This is what caused the reaction that took several governments down and could take others.
Rafael Ramirez: Yes, in fact, a good part of those populations still cook with firewood. It is a situation where there has been a very interesting discussion because what the countries take advantage of is a little what has been the Venezuelan position with regard to the handling of its resources. Now if President Lucio is changing his most recent political positions, well, I would not know what to say at this moment, but they have asked us for support, to try to recover some of their political space we have given it in the best spirit of collaboration.
Walter Martinez: With respect to Bolivia, what is the most recent situation?
Rafael Ramirez: They are requesting a constitutional assembly 2004 and we think that it is a very dynamic situation that is taking place there. We have provided and are providing technical support, are singing an agreement of understanding between our ministries, between both governments and we are going to continue, to the extent in which they ask of us, always respecting the sovereignty of each country. To the extent to which they ask for help, we are going to continue collaborating and help with our extensive experience.
Edited and translated by: G. Wilpert
Part II: Changes in PDVSA