US embassy cable - 05CARACAS713

C O N F I D E N T I A L  CARACAS 000713 
 
SIPDIS 
 
 
ENERGY FOR LOCKWOOD AND PUMPHREY 
NSC FOR SHANNON AND BARTON 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 03/09/2015 
TAGS: ENRG, EPET, PREL, VE 
SUBJECT: CHAVEZ SHARPENS OIL RHETORIC, FOREIGN MINISTER 
WALKS HIM BACK 
 
 
Classified By: Economic Counselor Richard M. Sanders.  Reason: 1.4(b) a 
nd (d). 
 
Summary 
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1.  (C)  While in India, March 7, President Chavez revived 
his threat to cut off oil sales to the U.S. in the event of 
U.S. "aggression" while proclaiming the end of the era of 
cheap oil.  Foreign Minister Ali Rodriguez, however, 
reaffirmed the importance of the oil relationship with the 
U.S.  Press reports continue to speculate regarding an early 
sale of either some assets of CITGO or the company itself, 
with the aim of extricating Venezuela from its high degree of 
integration with the U.S. oil market. However, Foreign 
Minister Ali Rodriguez subsequently reaffirmed Venezuela's 
interest in the American market.  We do not believe that 
Chavez's comments herald any short-term action to abandon 
Venezuela's oil relationship with the U.S., but they reveal 
his consistent desire to limit it as much as possible.  End 
summary. 
 
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Hugo Speaks 
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2.  (U)  While in India in his current international trip 
(which also includes Uruguay, Qatar and France) Chavez has 
made repeated comments about petroleum.  Repeating himself on 
different occasions while in India March 4-7,  he insisted, 
that "if there is any aggression, there won't be any 
petroleum."  He also suggested that OPEC should fix the price 
of crude between 40 and 50 dollars per barrel, proclaiming 
that "the world should forget about cheap oil.  The epoch in 
which crude cost 10 dollars per barrel will never return." 
He also noted Venezuela's desire to sel oil to India.  In an 
evident reference to the .S., he added: "We don't care for 
any nation whih maintains these arms called hunger and 
poverty. That's why we want to use petroleum as an 
instrment to achieve equality.  We don't want to use itto 
give more power to countries that are alreadypowerful." 
 
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Ali Clarifies 
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3.  (U)  In Doha, the next leg of the tip,  Foreign 
Minister (and former head of state il corporation PDVSA) Ali 
Rodriguez took pains t minimize the prospect of any 
suspension of oil supplies to the U.S. statig:  "No, no! 
The plan of action is to increase or production capacity... 
to invest 40 billion dolars to reach (production of) 5 
million barrels er day in five years, and thus satisfy new 
demandin the United States and in other countries." 
 
 
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Whither CITGO 
------------ 
 
4.  C)  Parallel to Chavez's cut-off threats and Rodriuez's 
professions of interest in maintaining (ineed expanding) 
sales to the U.S., press speculatin has spiked over a 
possible sale of CITGO, the assive U.S. refining and 
marketing chain wholly wned by PDVSA.  Prominent play was 
given in loca media to a story in Miami's "El Nuevo Herald," 
sserting that the GOV has received offers from "an rab 
group linked to OPEC," Brazilian para-statalPetrobras, and 
Russian firm Lukoil.  Energy Miniter/PDVSA President Rafael 
Ramirez has confined imself to saying that the GOV is 
interested in slling "some installations," asserting that 
CITGO wns some refineries that in fact are receiving Mexican 
rather than Venezuelan oil. 
 
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Comment 
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5.  (C)  Chavez's hot language on oil, and his use of the 
threat to cut off supplies to the U.S., is hardly new. 
Indeed, it is only part of his overall rhetorical mix, which 
of late has included repeated allegations that President Bush 
 
 
is out to kill him, accusations that the presence of a U.S 
Navy vessel in Curacao was a provocation, suggestions that 
the U.S. planning an invasion, and proclamation of his 
adherence to "twenty-first century socialism."  But clearly, 
the prospect of wielding his perceived oil weapon in a crisis 
is one that he savors, regardless of its practicality. 
Neither is Ali Rodriguez's assertion that Venezuela wants to 
maintain and even increase sales to the U.S. very surprising. 
 Such soothing words usually follow on the heels of Chavez's 
threats.  Of greater substantive importance, however, may be 
the prospect of a total or partial divestment of CITGO, which 
we believe, is indeed in the works, though it may take quite 
some time before it actually goes forward.  This would be 
hard evidence that the GOV is withdrawing from (or at least 
for the medium-term looking to restrict) its oil relationship 
with the U.S. 
Brownfield 
 
 
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      2005CARACA00713 - CONFIDENTIAL