US embassy cable - 04MADRID4612

C O N F I D E N T I A L SECTION 01 OF 03 MADRID 004612 
 
SIPDIS 
 
E.O. 12958: DECL: 12/03/2014 
TAGS: PGOV, ECON, EPET, ELAB, EIND, PHUM, PREL, MARR, SP, VE 
SUBJECT: CHAVEZ COURTS SPANISH SOCIALISTS;LEAVES POLITICAL 
TURMOIL AND ECON PROMISES IN HIS WAKE 
 
Classified By: Political Counselor Kathy Fitzpatrick for reasons 1.5 (B 
) and (D) 
 
1.  (C) SUMMARY: Venezuelan President Hugo Chavez visited 
Spain November 21-23, in a trip that was touted by the 
Spanish government as primarily economic in nature.  Chavez 
commenced his stay by stating that good relations with Spain 
"have become of strategic importance" and that he "welcomes 
the new course" of the Spanish government.  Chavez also made 
three economic announcements, which concerned petroleum 
production and possible contracts for Izar, the troubled 
Spanish shipbuilder.  During Chavez's visit, Spanish Foreign 
Minister Miguel Angel Moratinos stated during a television 
interview that the previous Aznar government had supported 
the 2002 coup against Chavez in cooperation with the US 
government.  Moratinos' statements led to the Partido Popular 
(PP) calling for his resignation and threatening to break off 
cooperation with the Zapatero government.  Chavez departed 
November 23, continuing on a tour that included stops in 
Libya, Russia, Iran and Qatar, but returned on November 30 
for a private dinner with King Juan Carlos.  In the Spanish 
Congress December 1, Moratinos said that he had not meant to 
indicate the Aznar government was involved in the coup 
attempt; rather, that the Aznar government should have 
condemned the attempt and did not do so.  Moratinos did not 
mention the U.S. in his appearance, except to refer to 
Washington having joined in the OAS's condemnation of the 
coup attempt.  While Deputy Foreign Minister Bernardino Leon 
told Charge November 29 that the Zapatero government had 
firmly conveyed the messages to Chavez that the Secretary had 
suggested to Moratinos in their phone call, MFA Director 
General for Latin American Affairs Sandomingo told us that 
Chavez had not responded substantively to these messages. 
Sandomingo indicated that these issues arose during Chavez's 
meeting with Moratinos, and that the Zapatero meeting was 
mainly ceremonial, and focused on economic issues.  END 
SUMMARY. 
 
//COURTING THE SOCIALISTS// 
 
2.  (U) Chavez arrived in Spain on November 21, greeted by 
about 200 supporters.  During a memorial service for the 
victims of the March 11 train bombings, Chavez gave a speech 
in which he stated that stronger relations with Spain "have 
become of strategic importance" and that he "welcomes the new 
course" of the Spanish government.  On November 22, Chavez 
began his day by delivering an anti-imperialism speech at a 
local university.  He criticized the foreign policy of the 
previous Aznar government stating, "It was sad that Spain was 
subordinate to Washington and how nice it is to now see a 
free, happy and independent Spain with new ideas." Chavez 
also stated that the US "appeared to be predestined to plague 
America with misery in the name of liberty" and said, "we 
reject the war in Iraq, we reject any type of attack, we 
reject the sanctions against Cuba and any kind of threat to 
the people of Iran."  After his speech, Chavez met with the 
President of the Chamber of Deputies Manuel Marin, and then 
with Zapatero. That evening, Chavez attended a social 
gathering with left-wing artists, politicians and journalists 
during which he publicly praised Cuban leader Fidel Castro 
and Argentinean President Nestor Kirchner.  On November 23, 
Chavez attended a meeting with Defense Minister Jose Bono, 
which resulted in a general agreement on increased military 
cooperation between the two countries with details to be 
determined at a later date. 
 
//ECONOMIC ANNOUNCEMENTS// 
 
3.  (U) In 2003, Spanish exports to Venezuela fell 48 
percent, from EUR 616mil (800.8mil USD) to EUR 320mil (416mil 
USD), while imports from Venezuela dropped 58 percent. 
Chavez had been expected to announce the formation of the 
first ever joint venture company in the Venezuelan oil 
industry, but negotiations did not conclude before his trip. 
The venture, which includes state-owned Petroleos de 
Venezuela (PDVSA) and Spain's largest oil firm Repsol-YPF, 
will aim to improve oil and gas production in the Lake 
Maracaibo region, where both companies maintain oil fields. 
Under Venezuelan law, Repsol-YPF would be limited to 49 
percent of the joint venture company's capital. During his 
visit, Chavez made three significant economic announcements. 
First, that the GOV is considering giving priority to the 
Spanish shipbuilder Izar for repairing petroleum tankers.  As 
a result, it is likely that the GOV will send two tankers to 
Spain in early 2005 for repairs.  Second, Chavez announced 
that the PDVSA might contract with Izar for the construction 
of three new petroleum tankers.  The deal would be worth an 
estimated EUR 150mil (195mil USD) and would provide three 
years worth of work for Izar.  Finally, Chavez announced that 
Venezuela would not support any proposed reductions in oil 
production at the next OPEC summit.  After his meeting with 
the Zapatero, Chavez skipped a scheduled speech that was to 
be delivered to over 200 businessmen at the Spanish Chamber 
of Commerce.  In his place, Venezuelan Commerce Secretary 
Wilmar Castro addressed the group and urged them to invest in 
Venezuela.  Chavez also met with President of the Spanish 
Business Association Jose Maria Cuevas.  In his meeting with 
Chavez, Cuevas reportedly stressed that legal security and 
political stability were key to business investment in 
Venezuela.  Cuevas also reportedly stressed the importance of 
open dialogue with Venezuelan business leaders, mentioning 
the business group Federcamaras specifically.  The 
Federcamaras leader, Pedro Carmona, led the coup against 
Chavez in 2002 and is currently in exile. 
 
//SPANISH FM WEIGHS IN// 
 
4.  (U) In a related development on November 22, Spanish 
Foreign Minister Miguel Angel Moratinos announced during a 
televised interview with the program 59 segundos that the 
previous Aznar government had supported the 2002 coup against 
Chavez in cooperation with the U.S. government.  Moratinos 
stated that the Foreign Ministry had sent instructions to the 
Spanish ambassador to Venezuela to support the coup and to 
participate in a joint meeting with the US ambassador and the 
Venezuelan opposition leader.  The Moratinos statement caused 
a furor in the Spanish press and has led to public 
condemnation by the opposition party, Partido Popular (PP). 
The PP called for Moratinos' resignation and threatened to 
break off all cooperation with the Zapatero government if a 
public retraction and apology is not issued.  Zapatero and 
Chavez held a joint press conference the following day, which 
was marked by both parties' avoidance of questions related to 
the Moratinos statement in regard to Aznar's support for the 
Venezuelan coup attempt in 2002.  Chavez, who has made the 
same accusation in the past, stated that it was "a page from 
the past" and that he would rather speak about his pleasant 
visit to Spain and business relations.  Zapatero refused to 
elaborate on Moratinos's statements and said that the matter 
would be explained in front of the Spanish Congress on 
December 1.  On December 1, Moratinos did appear in front of 
the Spanish Congress and stated that his remarks were not 
meant to imply that the Aznar government had instigated or 
participated in the coup, but that the government had given 
the coup international legitimacy by meeting with its leader. 
 Moratinos then apologized about his choice of words during 
the television interview, but repeated his assertion that the 
Aznar government gave international legitimacy to the coup 
attempt.  In response, the PP has stated that they will not 
meet with Moratinos to reach a pact on foreign policy as he 
has lost "moral legitimacy". 
 
//SUBSTANCE ON HUMAN RIGHTS, OTHER KEY ISSUES?// 
 
5.  (C) Deputy Foreign Minister Bernadino Leon told Charge 
November 29 in a brief conversation that Moratinos had raised 
human rights, regional security and other issues the 
Secretary suggested he convey to Chavez.  In a meeting with 
 
SIPDIS 
Polcouns November 26, MFA Director General for Latin American 
Affairs Javier Sandomingo indicated that Chavez had little or 
no substantive comment for Moratinos on these issues, and 
that the meeting with Zapatero was largely ceremonial and 
focused on economic/commercial issues.  Leon said that 
Moratinos would try to phone the Secretary after Chavez 
return visit November 30 for dinner with King Juan Carlos. 
 
//COMMENTS// 
 
6.  (U) Negotiations between Repsol-YPF and PDVSA are 
expected to conclude within the upcoming weeks.  The deal 
could provide Spanish and EU markets cheaper access to 
petroleum and natural gas in the future.  Venezuela's 
announcement that they will oppose production cuts at the 
next OPEC summit should have a positive economic effect on 
the price of petroleum by soothing investor fears already 
shaken by the activity in Iraq. 
7.  (U) Izar continues to be both an economic and a political 
problem for the Spanish government.  A lack of civil 
contracts, a proposed restructuring that would separate the 
profitable military component from the struggling civil 
component, and EU pressure for the refund of illegal 
government subsidies threaten the employment of approximately 
32,000 Spanish shipyard workers, causing Zapatero's first 
real labor crisis.  Shipyard workers have held public 
demonstrations, some of which have resulted in scattered 
violence, in several cities.  A business deal with PDVSA 
would not be enough to save the company, but could be a good 
starting point for eventual economic stability of the civil 
component. The public announcements about future work for 
Izar are seen as Chavez's attempt to provide domestic 
political assistance to the Zapatero government.  However, 
the non-committal nature of Chavez's statements leaves doubt 
as to whether they will actually materialize. 
8.  (U) Chavez's failure to appear at the Chamber of Commerce 
may have a negative effect on Spanish investment in 
Venezuela.  Apparently, Spanish businesses are skeptical 
about doing business in Venezuela, especially after the 
failed 2002 coup.  The conversation between Cuevas and Chavez 
highlights this problem and Chavez's failure to prioritize 
business interests will not serve to soothe investors' fears. 
 In addition, Chavez's political speeches against the US and 
comments in support of Zapatero and other socialists have 
some Spanish political parties worried that he may have 
worsened U.S.-Spanish relations. 
9.  (U) The biggest story to arise out of the visit was not 
Chavez's activities, but the political polemics that emerged 
following Moratinos' coup support allegation.  The normally 
gregarious Chavez didn't comment on the statement during his 
joint press conference with Zapatero, leading many to 
speculate that Zapatero asked him to tone down the rhetoric. 
The PP has threatened to break off all negotiations with the 
Zapatero government except for those related to the fight 
against terrorism and normal institutional functions. 
Moratinos' statements before Congress will probably have 
little effect on smoothing over the rift that has grown 
between the PP and the Zapatero government.  Due to the 
minority nature of the Zapatero government, this could lead 
to the Socialists' inability to implement their agenda and 
also threaten Spain's ability to ratify the EU constitution. 
MANZANARES