Monday, May 01, 2006


Below I am posting an article called "Subversive Oil" by Bernard Mommer. It is a fairly long article and possibly not everyone will read it in its entirety. However, it is a very important article that explains not only why oil is so central to the ongoing battle between Venezuela and parts of the industrialized world (principly the U.S.) but why oil is so central to the bitter internal fight between the the government of Hugo Chavez and those opposed to him.

At every step of the battle between Chavez and his opponents, the Venezuelan state oil company, Petroleos de Venezuela SA, or PDVSA, has been in the forefront. Those who led PDVSA up until recently have been radically opposed to the Chavez government even going so far as refusing state control of their company and leading several oil production shutdowns, one of which coincided with the April 2002 coup against the government and another of which also sought Chavez's ouster.

Ultimately, Chavez won this confrontation and he has been successful in asserting control over the oil industry - much to the chagrin of the old management which is now unemployed and to the foreign oil companies which have lost a number of very favorable deals they used to enjoy. With the end of the conflict it is easy to forget what a central role the fight over oil policy played in creating an opposition movement to Chavez and its even easier to forget what what it was that brought the conflict about. While Chavez has consistently supported participation in OPEC to seak higher prices and maximizing government revenues from oil to fund social and development programs PDVSA's management had completely different ideas. They wanted to ignore OPEC, maximize production, minimize payments to the government and construct as large and independant of an oil company as possible. This clash of ideas brought about a serious conflict that dominated the first 5 years of the Chavez administration. The excellent article by Mommer, written in 2002, gives the best explanation of the origins of this conflict I have ever seen. So here it is (with key passages bolded - ow):