Venezuela’s Defunct National Assembly Attempts to Privatise Oil Industry

Merida, July 12, 2018 (venezuelanalysis.com) – Venezuela’s National Assembly (AN) has approved a controversial legal reform which may open up the country’s sizeable state oil firm to privatisation. The opposition‐controlled institution’s move to legalize privatisation in the oil industry comes amid ongoing criticism from chavista grassroots groupings of de facto privatisation in the industry over the past few years.

The modification of the “Law of State Control Over the Assets and Services Related to Primary Hydrocarbon Activities” (2009) removes an obligatory state monopoly on primary oil assets and services by allowing primary oil activities to be carried out “by private firms” or even individuals.

Regarding mixed PDVSA-private oil projects, it also overturns the legal “control” PDVSA had over such projects, which effectively equated to a minimum 51% stake for the state oil firm and up to 49% for private firms in them. According to the modified law, PDVSA-private relations may now be “of any proportion.”

The reform also adds a clause to the law which obliges the oil giant to prioritise Venezuelan firms when offering contracts, as well as instructing the oil ministry to pay “fair” compensation within 180 days to the ex-owners of an array of recently expropriated oil-related infrastructure around Venezuela’s oil-rich Maracaibo Lake.

However, the reform is not set to make any immediate changes to the industry, since it potentially breaches Article 303 of Venezuela’s constitution, which guarantees full state control over the countries primary oil activity.

Likewise, the AN and its decisions have been considered illegal since it refused to disincorporate three deputies accused of vote-rigging, shortly after the 2015 parliamentary election. In January 2016 Venezuela’s Supreme Court declared it in contempt, and as such all votes declared null. Previous to this court ruling, decisions by the AN had been rapidly nullified by the Supreme Court and left without effect.

The approved reform does, however, demonstrate the oil-policy of its majority right wing groups.

In discussion of the reform, numerous rightwing deputies, including Luis Stefanello, Jorge Millant, and the reform’s peddler, Elias Matta, voiced their support for the privatisation of the oil industry.

AN president, Omar Barboza from the rightist A New Era party, also hinted that the application of this reform would be a priority for any future rightwing administration, explaining that it “becomes part of the body of laws… which will form part of the legal framework of the new Republic.”

De facto privatisation

Grassroots workers and chavista organisations have frequently alleged a backdoor “semi privatisation” of PDVSA over the past three years, suggesting that the company’s administration has been selling out the Bolivarian project.

Recent statements by the director of oil firm Gas Energy Latin America and previous executive secretary of the Latin-American Energy Organisation, Alvaro Rios Roca, point in the same direction.

“A semi privatisation or an anticipated dividing up of PDSVA already exists, and this will be seen more clearly shortly,” he told the online Petrochemical Review two weeks ago.

Rios Roca claims that falling oil production and the spectre of a PDVSA default have created a need for asset liquidation, with Chinese and Russian oil giants eager to snap them up.

In 2016 and 2017, meetings between the then-president of PDVSA, Eulogio del Pino, and international oil magnates stoked rumours of an oil privatization. Current PDVSA President Manuel Quevedo has recently convened similar meetings.

One of the many groupings which have alerted about de facto privatisation in the oil sector is the Venezuelan Communist Party (PCV).

General-secretary of the PCV, Oscar Figuera, suggested last December that the on-going corruption probe into the industry was being used to privatise the firm. He said “they won’t blind us to what is a re-privatising of the [oil] industry with the blanket of the struggle against corruption.”

Likewise, a January 2017 joint statement from the ‘Jesus Faria’ Class-Conscious Current of Oil Workers and the regional Bolivarian Trade Union of Oil and Petrochemical Workers (SIBOTIPPECOL) criticised de facto privatisation in the Maracaibo Lake area. They claim that an entire dockyard, three oil barges, six passenger boats, and 45 workers have passed to the private firm Alianza.

In August 2016, another statement from the workers’ organisations alleged that the re-privatisation of PDSVA assets in the same region had been going on “for more than three years.” They accuse PDVSA managers and even its president of “green lighting” the selling of assets to private firms owned by the same actors who ran the oil industry before Hugo Chavez fully nationalised it, such as Cobsa, Z&P, Eckhopec, Petrolago, Flag, and the GLCV consortium.

Worries of a possible privatisation increased in April this year, when President Maduro signed an executive order which declared a state of emergency in the oil industry and assigned special powers to PDVSA President Quevedo to “reorder” and “restructure” the firm.

Despite accusations of a closet privatization, both the current and previous presidents of PDVSA have taken public stances against such a policy.

In August 2016, Eulogio del Pino declared that “there will be no privatisation of PDVSA.” In January of the same year, his soon-to-be successor, Quevedo, then minister for housing and habitat, staunchly opposed AN-led attempts to privatise the GMVV housing program, stating that “we will always say no to privatisation.”