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Chavez Pushes Petro-Diplomacy

President Nestor Kirchner of Argentina, right, and Venezuelan President Hugo Chavez meet in Puerto Ordaz, Venezuela, yesterday. The two nations are negotiating terms for a $4 billion natural gas pipeline.
President Nestor Kirchner of Argentina, right, and Venezuelan President Hugo Chavez meet in Puerto Ordaz, Venezuela, yesterday. The two nations are negotiating terms for a $4 billion natural gas pipeline. (Via Reuters)

Chavez also has angered U.S. officials by visiting Fidel Castro in Cuba, going to Libya to collect an award from Moammar Gaddafi and criticizing the United States while appearing on the al-Jazeera television network.

Chavez has complete control over Venezuela's oil production, analysts said. After a strike by oil workers in 2002, Chavez replaced top officials at the state-owned company, Petroleos de Venezuela SA, and some executives at Citgo.

Some publicly traded oil companies also operate in Venezuela, and they have been at odds with the government over efforts to increase taxes and other charges.

Big jumps in oil prices have filled government accounts and given Chavez diplomatic power. When oil prices were lower in 2003, the Venezuelan oil company reported a profit of about $3.28 billion. This year, the company has a goal of $6.5 billion in profit.

Chavez told the Argentine newspaper Clarin last month that Venezuela has "a strong oil card to play on the geopolitical stage" He said, "It is a card that we are going to play with toughness against the toughest country in the world, the United States."

He created programs that have provided subsidized oil to a number of countries in the Caribbean and Latin America, including Cuba.

Chavez recently struck a deal with left-wing opposition leaders in Nicaragua to sell subsidized oil to that country. Analysts said Chavez is trying to boost the Sandinista party and its leader, Daniel Ortega, a fierce critic of the United States who is expected to run for president.

The Venezuelan government said the oil-related initiatives -- including the post-hurricane shipments to the United States and offers for financial assistance to the poor -- are for humanitarian purposes and regional unity.

"Venezuela is committed to go ahead with regional integration," said Fadi Kabboul, minister-counselor for petroleum affairs in the Venezuelan Embassy. "Venezuela never used oil as a political weapon. Venezuela is not going to use oil against the U.S. as a political weapon for anything."

Eleven Senate Democrats turned to oil companies after Congress did not add funding for a low-income energy assistance program, which is expected to be stretched thin this winter.

Until now, Chavez has not used Citgo to advance his political objectives, analysts said. The company, which Venezuela gained control of in 1990, operates several refineries in the United States. About 14,000 independently owned gas stations carry the company's name.

Venezuela controls nearly 7 percent of refining capacity in the United States and its territories through Citgo and other Venezuelan-owned operations.

So far, analysts said, Chavez has had little success using oil to unite Latin America against the United States. His biggest petroleum-influenced victory, they said, was in gaining support from Caribbean countries for Jose Miguel Insulza of Chile, who this year was selected as secretary general of the Organization of American States. The U.S.-backed candidate did not attract widespread support.

"His petro-diplomacy has been providential for Venezuela," said Laurence R. Birns, director of the Council on Hemispheric Affairs, a Washington-based think tank. "The oil premium has been a bonanza for Chavez."

Venezuelan officials have said the country plans to expand production well beyond its estimated 2.6 million barrels a day, which will allow more oil to be sent to China or other new customers. But analysts said Chavez has not been spending enough money to maintain oil fields, let alone expand them.

It's unclear how much longer Chavez will be able to afford to use oil to his advantage. If the price recedes, the windfall will be gone. That also would create domestic problems for Chavez because the president has been using oil revenue to fund popular social programs in Venezuela.

"Oil prices and revenue are currently high enough to permit the Venezuelan government to finance social commitments at home and abroad," said Esteruelas, the Eurasia Group analyst. "At the current rate of fiscal spending, should there be a small decline in prices, there will be a need for adjustment."

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