Economia y Politica Venezolana
Mood:  d'oh
Global Market Brief: March 7, 2005

Venezuelan President Hugo Chavez said in New Delhi on March 4 that "any
aggression" by the U.S. government against Venezuela or him personally would
trigger an immediate suspension of Venezuelan oil exports to the United
States. In subsequent remarks to international reporters, Chavez expanded
his threat to include "any U.S. aggression against any country in Latin
America."

Chavez frequently launches rhetorical tirades against the U.S. government in
his speeches. However, Stratfor thinks the Venezuelan president's threats of
oil export suspension are not a bluff. Chavez wants a political
confrontation with the Bush administration. He is looking for any excuse to
stop sending crude oil to the United States -- even though a complete
suspension of Venezuelan oil exports to the United States entails
significant economic and political risks for Chavez.

The Bush administration appears resigned to a break in relations between
Washington, D.C., and Caracas. Late March 4 in Caracas, U.S. Ambassador to
Venezuela William Brownfield said the United States will buy oil elsewhere
if Chavez suspends U.S.-bound exports. Brownfield also said Venezuela is
free to sell its oil to any country it wishes. He admitted that Venezuela's
shutting off oil exports to the United States would create near-term
disruptions. However, Brownfield added that global oil markets would adjust
quickly to any circumstances, "because the energy market is a free market."

Why is Chavez seeking to provoke a confrontation with the Bush
administration? Several reasons are likely.

Chavez apparently believes his Bolivarian revolution has completely defeated
Venezuela's traditional political parties and special interest groups like
business and organized labor, since "chavista" candidates swept
gubernatorial and municipal elections Oct. 31, 2004. Having dismantled his
political opponents at home, Chavez is now seeking to neutralize the United
States, which he perceives as the greatest external enemy of his plans to
regionalize his revolution.

Chavez also apparently feels he is very strong economically. World oil
prices remain high, and Venezuela's Central Bank has more than $23 billion
in total foreign exchange reserves. Moreover, Chavez recently devalued the
Venezuelan currency by 12 percent, generating an overnight windfall to
continue funding local social programs -- called "missions" by the
government -- that are distributing hundreds of millions of dollars in
direct subsidies to poor Venezuelans. The devaluation gives the Venezuelan
government 12 percent more in local currency -- about 8.8 trillion
bolivares, or between $350 million and $400 million dollars. These direct
cash handouts have raised his popularity to above 55 percent in some recent
polls.

Private Venezuelan economists estimate that if Venezuela were to stop all
oil exports today, the Central Bank's foreign exchange reserves would allow
Chavez's government to maintain current spending levels for a year before
the reserves are exhausted.

While the Venezuelan government's economists are not renowned for their
competence, Chavez also might believe (accurately) that if Venezuela stops
exporting oil to the United States, world oil prices would quickly soar
above $60 a barrel. A sharp upward spike in oil prices would theoretically
help Venezuela compensate at least partially for near-term oil export
revenue declines. Given the fungible nature of global oil markets, Chavez
also could think that within a year, Venezuela could find enough new clients
for its oil exports to offset any potential loss in its long-term oil
revenues that would result from a complete suspension of oil exports to the
United States.

Chavez is eagerly courting new buyers of Venezuelan crude oil including
China, India, South Korea and other countries. Moreover, Venezuela's
Bolivarian government sees some of these countries -- like China and
India -- as potential strategic allies in what Chavez perceives as an
emerging global network of nations determined to challenge U.S. economic and
political hegemony.

Venezuela currently exports about 1.5 million barrels per day (bpd) of crude
oil and refined products to the United States, accounting for about 15
percent of total U.S. oil imports. A complete suspension of Venezuelan oil
exports to the United States likely would trigger an overnight jump in U.S.
gasoline prices, which would be politically uncomfortable in the near-term
for U.S. President George W. Bush's government.

However, Chavez likely is miscalculating if he thinks that U.S. public
opinion would judge Bush harshly if Americans have to pay higher gasoline
prices. It is far more likely that U.S. public opinion -- which currently
ignores tense U.S.-Venezuelan relations -- would turn sharply against
Chavez.

Also, a complete suspension of Venezuelan oil exports to the United States
would give the Bush administration more leeway to place increased overt --
and covert -- pressures on the Chavez government. Washington is not likely
to seek international sanctions against Venezuela. It is also very unlikely
that the Bush administration would threaten military action against
Venezuela. However, if oil-based relations between Caracas and Washington
are completely broken, the Bush administration could seek more actively to
destabilize the Chavez government in ways that do not involve overt military
force.

In fact, a suspension of Venezuelan oil exports to the United States could
entail greater risks for Chavez than for the Bush administration or the U.S.
economy. For example, if Venezuela can not find rapid alternative buyers for
1.5 million bpd of crude oil and refined products it might have to reduce or
even shut down crude oil production, because Petroleos de Venezuela (PDVSA)
would run out of tank farm storage capacity within a few weeks at most. A
prolonged shutdown of PDVSA's oil fields could cause irreparable structural
damage that would permanently reduce the country's production capacity.

A suspension of Venezuelan oil exports to the United States also likely
would trigger a flood of breach of contract lawsuits against PDVSA and
Venezuela's government in U.S. courts. Since Venezuela's government --
through PDVSA -- is the 100 percent owner of Citgo in the United States, it
is not inconceivable that U.S. courts might allow companies suing Venezuela
and PDVSA to go after Citgo's assets. Chavez might retaliate against such
actions by kicking U.S. oil companies out of Venezuela, but this would only
increase the Venezuelan state's international litigation costs.

(Uno se pregunta si no sera por ese riesgo y otros mas que en USA quieren activar la posible explotacion petrolera en Alaska, como se dice en CNN Internacional: ALASKA