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Hemispheric Implications Of Chavez’s Illness

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The recent dramatic pronouncement that Venezuelan President, Hugo Chavez, underwent cancer treatment in Cuba reverberated far beyond Venezuela, depressing his allies and elating his enemies.

While the leader of his self-proclaimed “Bolivarian revolution” is second only to his good buddy Fidel Castro in Washington’s black book, the fact remains that Chavez has discreetly deployed Venezuela’s vast oil and cash reserves to assist the struggling economies of a number of his Central American neighbors, which has earned him deep gratitude.

Ever the showman on alert for any opportunity to tweak Uncle Sam’s snout, in March 2006 in the aftermath of Hurricane Katrina, which damaged the U.S. Gulf oil infrastructure sending domestic prices soaring, he offered shivering New England residents discounted heating oil, infuriating the Bush administration.

Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere.

But the reality is that Venezuela remains the United States’ fourth largest oil importer, accounting for roughly 1.5 million barrels a day. Should Chavez ever in a fit of pique turn off the taps, the only option that the US would have to replace lost imports would be to turn to Saudi Arabia, the sole OPEC member, and ask them to ramp up production, as Saudi Arabia is the only OPEC member with the reserve capacity to do so.

This in turn would create political problems for Riyadh with other OPEC members, most notably Iran, as under the OPEC system each member state has a pumping quota, and Tehran has already accused Riyadh of breaching its quotas by stealth.

Chavez certainly has reason to be mightily annoyed with US policy, which has been turning up the pressure on Chavez for years while carefully calculating how to avoid a total rupture.

In 2005 Washington classified Venezuela as a country that does not “cooperate in the fight against drug trafficking,” with government officials stating that the lack of assistance should incur financial penalties. The following year the U.S. upped the ante, labeling Venezuela as a country that “does not cooperate sufficiently with the fight against terrorism” and imposed sanctions prohibiting US arms sales to Venezuela or those from any company in the world using US technology.

Upping the ante, in 2007 Chavez announced the nationalization of the country’s oil industry. The foreign oil companies were forced to sign agreements giving majority control of hydrocarbons projects to Petroleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned petroleum company. Projects owned by companies like ConocoPhillips and ExxonMobil, who failed to sign these agreements, were taken over by PDVSA.

US-Venezuelan relations proceeded to deteriorate rapidly.

Most recently, on 24 June, during the “Sanctionable Activities in Venezuela” hearing in the House of Representatives Foreign Relations Committee, a number of Democratic and Republican House members requested that the Obama administration take more aggressive action against the government of Hugo Chavez. Sub-Committee on Foreign Affairs for the Western Hemisphere head, Connie Mack, a Florida Republican, called the Venezuelan government “terrorist,” adding, “it’s time to act to contain the dangerous influence of Hugo Chavez and his relations with Iran.”

Pandering to the committee members, In testimony before the Committee, the State Department’s Assistant Under-Secretary of State for Latin America, Kevin Whitaker, stated that the administration is “seriously considering” labeling Venezuela a “terrorist state. No option is off the table and the Department will continue to study any further action as may be necessary in the future.”

Washington’s sanctions policy has isolated Cuba and crippled its economy for over fifty years, a relic of a long-gone Cold War.

It appears that Hugo Chaevz’s mortal sin in the eyes of Washington is that he did not come from Venezuela’s traditional white criollo population, less than 25 per cent of the country’s population, which had dominated Venezuela’s politics since the nation achieved independence in 1811. Chavez came instead from the country’s mestizo ethnicity, of mixed European, African, and Amerindian ancestry, which comprises about 65 percent of the country’s population and a working-class background.

Just as Obama smashed the color bar in US politics by being elected to the country’s highest office in 2008, Chavez, elected President in 1998, gave the majority mestizo non-white population not only of Venezuela, but of other nations across Latin and Central America, high hopes that one of their “own” could be elected, who would be more sensitive to their needs than their traditional white criollo elites (of whom his friend Fidel Castro is one), a political seismic shift of historic proportions.

As Washington remained fixated after 11 September 2001 on invading Iraq and Afghanistan, this political shift began to wash across Latin America, most notably with the 2006 election of Bolivia’s Evo Morales.

More important than the ethnicity of the chief executive, however, is that since the early 2000s left-wing political parties have risen to power in most Latin American countries. Besides Chavez and Morales these include Lula da Silva and Dilma Rousseff in Brazil, Fernando Lugo in Paraguay, Nestor Kirchner and his wife Cristina Fernandez in Argentina, Tabare Vazquez and Jose Mujica in Uruguay, the Ricardo Lagos and Michelle Bachelet governments in Chile, Daniel Ortega in Nicaragua, Manuel Zelaya (later deposed in a coup) in Honduras, Rafael Correa in Ecuador, and Mauricio Funes of El Salvador.

Chavez has been at the forefront of attempting to wean these governments away from Washington’s influence, most notably with the establishment of the Alianza Bolivariana para los Pueblos de Nuestra America (the Bolivarian Alliance for the Peoples of Our America,” or ALBA), which Chavez first proposed in 2004. The initial member states were Venezuela and Cuba, but ALBA now also includes Bolivia, Dominica, Ecuador, Nicarauga and the St. Vincent and the Grenadine islands. In August 2008, shortly before the coup, which overthrew him, Honduran President Manuel Zelaya signed an agreement to join ALBA. Further threatening Washington, in October 2009 ALBA leaders agreed a cereate a regional currency, the sucre, to used used in alliance transaction in lieu of both local currencies and the dollar.

Is it any wonder then why Washington sees Chavez as a threat?

Accordingly, the 64,000 bolivares question, not only for Venezuela but Central America and the U.S. as well is – how serious is Chavez’s illness, and what are the implications for Caracas if he is incapacitated? If Chavez leaves the scene, will a new government continue his policy of providing discounted energy to his poor neighbors, most notably Cuba, which receives 64,000 barrels a day, or the Dominican Republic, which pays Venezuela for the 50,000 oil barrels per day that it receives through Petrocaribe with chicken, lard, sugar and pasta? Nicaraguan businessmen are so concerned with the “precarious health” of President Chavez that they are insisting that the Ortega administration immediately negotiate a Free Trade Agreement with Venezuela. If Chavez leaves office, will these countries become more amenable to foreign investment, having nowhere else to turn?

Will a new administration let foreign oil companies back into Venezuela? These and many more questions hinge on the health of a single man, who whatever happens has had more impact on the Latin American political landscape than any other regional political leader of the last dozen years. Love Chavez or detest him, it is impossible to ignore both the man and his impact and the smart money will be gauging carefully the depth and longevity of the impact of the man and his vision should he leave the stage.

Daly writes for OilPrice.Com.

John Daly

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DPR Shuts 11 Gas Plants, Petrol Stations In Abuja

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The Department of Petroleum Resources (DPR) has sealed 11 illegal gas plants as well as seven filling stations over various sharp practices in Abuja, Nigeria’s seat of government.
The raided plants selling mainly Liquefied Petroleum Gas (LPG) also known as cooking gas and the filling stations visited were located in Karimo, Gwagwa, Games Village, Kuje and Gwagwalada in the Federal Capital Territory (FCT).
The petroleum industry regulator stated that the LPG plant owners were operating illegally while the affected petrol stations were carrying out their businesses without valid licences.
Some of the illegal gas plants affected were: Macco Synergy, Mr T&M cooking gas, Trinity cooking gas, Meter Smile Gas ltd, Sunny Sun cooking gas, among others.
In her remarks, during the operation, the DPR Abuja Zonal Operations Controller, Mrs Roselyn Wilkie, said that previous efforts to get the illegal operators to regularise their businesses failed to yield the needed results.
She said: “During today’s exercise, 11 illegal LPG plants were raided in collaboration with the Nigeria Security and Civil Defence Corps (NSCDC). Some personnel of these illegal facilities were arrested and they have been handed over to security operatives for prosecution.
She said, “All our efforts to get the attention of the illegal facility operators with the view to regularising their businesses failed to yield the desired result.”
DPR cannot sit back and watch the danger the existence of these illegal facilities portends to the lives and properties of citizens.
“This necessitated our going out as the situation arose to enforce provisions of the relevant laws and regulations for construction and operation of petroleum products facilities in the downstream sector.”
She added that the DPR as an opportunity house and business enabler had been engaging illegal petroleum product facility owners to get the best advice on how to regularise their businesses and operate legally in a safe environment.
Wilkie further called on all illegal facilities’ operators to come forward and regularise their operation by obtaining the necessary licence to operate from the organisation.
According to her, this would ensure the protection of investors’ assets and the safety of lives and properties within the sector.
During the raid, seven filling stations were visited while 18 petrol pumps were sealed for sharp practices, including for suspected cases of diversion of six trucks containing products.

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IPMAN Suspends Strike, Directs Members To Resume Operation

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The Independent Petroleum Marketers Association of Nigeria (IPMAN) has directed its members in Enugu State depot to resume supplies of petroleum products.
The National President of IPMAN, Alhaji Sanusi Fari disclosed this in a statement made available to journalists last Saturday.
According to the statement, the national leadership of IPMAN had last Thursday directed the withdrawal of their services at the Enugu loading depot of the Nigerian National Petroleum Corporation (NNPC) with effect from Friday.
The National Executive Committee (NEC) of IPMAN attributed the directive to an alleged attack on their secretariat in NNPC, Enugu depot on Thursday by men of the Nigeria Police Force.
The foregoing halted the supply of petroleum products to Enugu, Ebonyi and Anambra, a situation which caused a significant hike in the pump price of Premium Motor Spirit (PMS) in the affected states.
Meanwhile, Fari said that the NEC of IPMAN had reviewed the situation and directed their members to resume their services and operations.
“As a result of the intervention of higher authorities in the unwarranted and unprovoked invasion of our secretariat at Enugu depot, the NEC of IPMAN has called off our strike actions.
“Normal services and operations will immediately resume in the affected states of Enugu, Ebonyi and Anambra to allow for fruitful discussions,” he said

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Why PIA Should Be Reviewed Every Five Years – ICSAN

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The Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) has recommended that the Petroleum Industry Act (PIA) should be subject to review at least every five years.
Its Registrar, Taiwo Olusesi, made the recommendation in the Institute’s position paper on the PIA on Saturday in Lagos.
The Institute said that such periodic review would help to consolidate on the gains of the epoch-making legislation. “This is to accommodate the genuine yearnings of the stakeholders as well as other requisite exigencies that might come to light during usage of the law,” she said.
The Tide source reports that the PIA provides for the establishment of the Nigerian National Petroleum Company Limited (NNPCL) within six months after the enactment of the Act. She enjoined government to build a proper governance structure around the NNPCL.
Olusesi urged that the appointment of the directors to its board must be based purely on merit with emphasis on issues of relevance, board requirements, and diversity in the board composition.
She added that there must be strict adherence to the notions of disclosure and transparency while ethical observances must be ingrained in the template of the company’s operations. “There must be an adequate framework of risk management and control system which should incorporate well-articulated whistleblowing policy.
“Furthermore, proper checks and balances must be built into the system to ensure that no individual, unit, or department can undermine or dis-apply the control system at his or her whims and caprices.
“We request that NNPCL should always have board to oversee and guide the management to achieve the expected objectives.
“There should be an annual board appraisal with the corporate governance evaluation of NNPCL, which should be published,” she said.
She said that without putting in place all these governance mechanisms, the envisaged metamorphosis of the moribund NNPC into a more efficient and dynamic NNPCL would not be realised.
According to her, the exercise will simply be a mere change of name without a change of anything else, with all its concomitant business-as-usual tendencies.
The corporate governance professional added that as a public interest entity, the NNPCL must have a qualified and experienced company secretary to oversee its secretariat.
She said this would enable the secretariat also play its role as the compliance officer responsible for the entrenchment of good corporate governance in the company.
“The qualification and experience must not be less than that of a company secretary of a public interest entity and the recruitment process must be competitive.
“The status of this management staff, duties, functional and administrative roles, responsibilities, reporting lines and mode of determination must be clearly stated in writing by the Board,” she said.
Olusesi also called for the proper and adequate monitoring of activities in the downstream sector to discourage all manner of sharp practices including hoarding of products to create artificial scarcity for price increment.
“The Federal Government should be proactive in devising ways and measures to counter the unscrupulous elements who may attempt to sabotage the interplay of demand and supply in a deregulated market,” she said.
She urged government, through the Federal Ministry of Petroleum Resources, parastatals and regulators to embark on massive stakeholders’ enlightenment campaign to dispel the confusion by illuminating the provisions of the Act and revealing their implications.
“Much of the controversies trailing the PIA 2021 emanate from many of its grey areas and provisions which are capable of many interpretations.
“This lack of preciseness and clarity of many provisions in the Act is breeding mistrust and apprehensions among many stakeholders.
“For example, the provisions on the Thirty per cent Frontiers Exploration Fund require elucidation.
“The Institute, in consonance with its tradition of guiding on issues of Corporate Governance and Public Administration, hereby undertakes to convene a stakeholders’ webinar for the sake of mass enlightenment on this new PIA 2021,” she said.

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