1. Energy Security: Meeting the Growing Challenge of National Oil Companies
- Author:
- Matthew E. Chen and Amy Myers Jaffe
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Journal of Diplomacy and International Relations
- Institution:
- School of Diplomacy and International Relations, Seton Hall University
- Abstract:
- Last February, Hugo Chavez decreed a staged nationalization in a drive to take over large segments of the Venezuelan economy as part of his revolutionary vision for the country. Specifically, the Chavez government set its sights on the oil industry, giving notice to foreign oil companies—including US firms—that they had until June 26 to reduce their ownership in Venezuelan Orinoco Belt heavy oil field projects so that the state could take at least a 60 percent share. This year alone, the Venezuelan government has already formed the Venezuelan Electricity Corporation, comprised of all state electricity utilities, to ensure state control of the electricity sector. It has also initiated the takeover of CANTV, the country’s biggest telecommunications operator. Chavez also has threatened to nationalize Venezuela’s banking sector unless banks “give priority to financing [the country’s] industrial sectors.”1 Commenting on his drive for “21st century socialism,” the president said that “I’m not deceiving anyone. I’m only governing the country, and the country has elected me various times. ...All of those who voted for me backed socialism, and that is where we are heading.”2 Venezuelan Oil Minister Rafael Ramirez threatened in early May that US oil giant ConocoPhillips would be kicked out of Venezuela altogether if it tried to drive a hard bargain for turning over shares in its fields in the Orinoco Belt. The official US reaction has been muted. On May 1, 2007, US State Department spokesman Sean McCormack said Venezuela’s negotiations with oil companies “will proceed as they will,” but that Chavez’s broader actions, including withdrawing from the World Bank and International Monetary Fund, were “digging a hole for the Venezuelan people.”3 The US has a long tradition of circumspect responses to the moves of national oil companies. The US has responded tepidly to many moves since the 1930s when Mexico nationalized the oil field holdings of US oil companies. In the case of Mexico, the US had other foreign policy priorities at the time of these nationalizations, first the fight against Nazism and then the struggle to keep communism out of the hemisphere. Thus, despite lodging diplomatic protests and rebuking Mexico with mild economic penalties, the US did not allow the incident to damage bilateral relations in the face of greater strategic challenges.4 Similarly, the US government did not interfere with Venezuela’s 1976 nationalization, for which the international oil companies received compensation.5 The United States was even passive as recently as the 1980s, when Saudi Arabia implemented the gradual nationalization of the American oil company stakes in the Aramco Oil concession. US-Saudi relations were relatively strong in the 1980s and into the 1990s, and the US government made no objections whatsoever to Saudi Arabia’s nationalization of Aramco’s oil assets.
- Topic:
- Foreign Policy, Oil, Nationalization, and Energy Security
- Political Geography:
- South America and Venezuela