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Venezuela: Empty threats? [update]
Posted by: McQ on Monday, February 11, 2008

Hugo Chavez is threatening to cut off oil shipments to the US over a law suit against his state oil company brought by Exxon Mobil Corp:
President Hugo Chavez on Sunday threatened to cut off oil sales to the United States in an "economic war" if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.

Exxon Mobil has gone after the assets of state oil company Petroleos de Venezuela SA in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez's government.

A British court has issued an injunction "freezing" as much as $12 billion in assets.

"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said during his weekly radio and television program, "Hello, President." "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."
Of course the suit is a private suit brought by a private corporation over the theft of their assets by Chavez's government. However, Chavez, as do all dictators, requires an external enemy, and that would be the US. So the rhetoric is aimed at a specific entity:
"I speak to the U.S. empire, because that's the master: continue and you will see that we won't sent one drop of oil to the empire of the United States," Chavez said Sunday.

"The outlaws of Exxon Mobil will never again rob us," Chavez said, accusing the Irving, Texas-based oil company of acting in concert with Washington.
Venezuela ships us about 12% of our oil and is our fourth largest oil supplier. While significant, it is probably an amount that we could, over time, replace with other suppliers. OTOH, Chavez and Venezuela, as we've outlined here, is seeing both its oil production and revenue decline in a boom market for the commodity.

And, as has been noted, Venezuela's oil can only be sold to certain consumers because of the special refining it requires. So dropping a large customer who can refine your oil and trying to find replacements isn't as simple as one might think. You have to believe that this is mostly empty rhetoric aimed at internal consumption as well as trying to leverage some pressure through the US government to have Exxon Mobil back off.

That said, he was able to drive oil prices to $94 a barrel based on those threats. I'm not going to suggest that Chavez isn't bull-headed enough to carry them through, but I will suggest it is highly unlikely for the reasons given.

UPDATE: Venezuela moves its overseas funds into Swiss bank accounts:
Venezuela has moved oil revenue into Swiss banks to avoid a possible seizure of funds by Exxon Mobil in a legal battle that pits leftist anti-U.S. President Hugo Chavez against America's biggest company.
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Previous Comments to this Post 

How he’s going to continue dealing with Chevron while withholding oil from ’the US’ is already covered no doubt by another one of his brilliant plans.

Once it goes into the tanker, I doubt he has much control over where it actually goes or so says the tale I keep hearing about middlemen knocking the future’s price up to $99 a barrel.

Written By: looker
URL: http://
If we import 12% of our oil from him, what is the percentage of the oil he ships out to us equal too? 40-50? 60?
Written By: navtechie
URL: http://
Yet another argument for exploiting as much of our domestic resources as possible in the least amount of time. Even the mere threat of us doing so would seriously blunt the effects of Commandante Hugo’s verbal diarrhea.

Hello! Washington! Anybody home?
Written By: D
URL: http://
Venezuela has fared poorly under Chavez.

Their economy is faltering. The Bolivar has fallen against the US dollar from 1,607 in 2003 to 2,147 in 2007, a loss of 25%. Despite its oil wealth, nearly 40% of its citizens live below the poverty level and unemployment is over 9 %. Inflation last year was 20.7%. In January it rose to 3.6% (annualized 43%). Currently, Hugo Chavez is on a path not unlike that of Bobby Mugabee in Zimbabwe. Food and other goods are disappearing from the stores to avoid government seizure.

Chavez nationalized the oil industry on 2007, after rejecting partnership offers. Oil accounts for 90% of Venezuela’s foreign exchange, 50% of government revenue and 30% of GDP, so threats of an embargo of the US ring hollow. Under foreign operation, the oil companies employed 35,000 workers. Since nationalization, the skilled labor has left and Chavez has hired locals - 75,000 of them. Exxon/Mobil has filed a $12B claim and will probably win. More importantly, it freezes 65% of Venezuela’s international capital.

In a vote in 2007 Chavez’ request to be named President For Life was rejected. Many feared he would refuse to recognize the decision, but the Venezuelan armed forces told him they would not support him, so he backed down.

In my view, Hugo’s days are numbered.
Written By: Arch
URL: http://
If only the number could be etched on a bullet...
Written By: Joel C.
URL: http://
I hope he stops shipment of oil to the us. then alternative technologies will become a more viable and cheaper choices. eventually switching away from oil hugo will have no money to prop up his fake government
Written By: SLNTAX
URL: http://
Regarding the update:

Well, they’ve only moved what hasn’t been frozen...

I hole Exxon wins. Screw Chavez... :)
Written By: Scott Jacobs
URL: http://
Perhaps he is trying out excuses for what he will say when, due to his government’s actions and incompetence, oil production decreases.
Written By: timactual
URL: http://

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