US embassy cable - 05LIMA4521

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 004521 
 
SIPDIS 
 
STATE FOR E, EB A/S WAYNE, WHA AA/S SHAPIRO 
ALSO FOR WHA/AND, WHA/EPSC, EB/ESC 
TREASURY FOR U/S TAYLOR 
DEPT OF ENERGY FOR D. PUMPHREY/G. WARD/S. LADISLAW 
ENERGY INFORMATION ADMINISTRATION FOR CHARLES ESSER 
 
E.O. 12958: DECL: 10/12/2015 
TAGS: EPET, ENRG, ETRD, PREL, ECON, VE, PE 
SUBJECT: PETROANDINA FALTERING? 
 
REF: LIMA 0372 
 
Classified By: Ambassador J. Curtis Struble.  Reason 1.4 (B,D) 
 
 1. (C) SUMMARY: GOP Hydrocarbon Director Gustavo Navarro 
told Econoff on October 13 that an Andean Community meeting 
to discuss PetroAndina failed to materialize.  At the 
preliminary meeting at the subministerial level, Venezuela 
wanted PetroAndina to be a vehicle to help only the poor. 
Navarro and Ecuadorian, Colombian and Bolivian 
representatives shared a different view -- to first explore 
alternatives to PetroAndina, and then to ensure that any 
PetroAndina ministerial meeting would consider how 
PetroAndina could help the general economy.  Ecuador wanted 
to add to the agenda a discussion on subsidies and their 
impact on  smuggling.  Venezuela then canceled the planned 
ministerial meeting without explanation.  Navarro said Peru 
is unlikely to consider PetroAndina as the election season 
begins.  The GOP has received no concrete PetroAndina 
proposals.  END SUMMARY. 
 
2. (U)  Econoff discussed PetroAndina with Gustavo Navarro, 
Hydrocarbons Director in the Ministry of Energy and Mines 
(MEM), Gustavo Navarro, on October 4 and 13.  Navarro 
attended an Andean Community meeting in mid-September, in 
Caracas to set the agenda for an Andean Community meeting of 
Energy Ministers on September 30.  The Venezuelans planned 
the September 30 meeting to advance President Chavez's 
PetroAndina concept.  Representatives from Bolivia and 
Colombia also attended, along with an Ecuadorian 
representative via videoconference. 
 
3. (C) Navarro said that he and the other Andean Community 
representatives had expected a technical meeting that would 
discuss mechanisms for regional oil integration, but instead 
the Venezuelan representative gave a political speech. 
Navarro began by suggesting that before Andean members went 
further on a separate petroleum integration such as 
PetroAndina, the Andean Community should explore oil 
integration with organizations such as the Latin American 
Energy Organization (OLADE) and The Regional Association of 
Oil and Natural Gas Companies (ARPEL).  Although the 
Venezuelan representative did not agree with this, the 
representatives from Bolivia, Ecuador and Colombia agreed to 
analyze these possibilities before supporting PetroAndina. 
 
4. (C) According to Navarro, the Venezuelan rep said that the 
Andean Ministers should recognize at their September 30 
meeting that regional petroleum integration should be a tool 
to fight poverty.  The Peruvian and Ecuadorian reps, 
supported by Bolivia and Colombia, argued that petroleum 
resources should not be restricted to poverty alleviation, 
but should be used to further economic development in 
general, including helping private industry as appropriate. 
The Venezuelan rep insisted that petroleum policy should 
benefit only the poor, but in the end he accepted that the 
agenda could include discussing how PetroAndina could further 
general development. 
 
5.  (C)  The Ecuadorian representative asked for an item to 
be included in the agenda.  He said that Ecuadorian gasoline 
subsidies were causing extensive smuggling into Peru and 
creating supply problems for Ecuadorian consumers.  After 
some resistance, the Venezuelan rep agreed to have the 
relationship between subsidies and smuggling as an agenda 
item. 
 
6.  (C) Three days after his meeting in Caracas, Navarro 
received an email from the Venezuelan rep saying that a new 
agenda  was forthcoming; a day later Navarro received another 
email saying without explanation that the PetroAndina meeting 
to be held on September 30 was canceled.  Navarro has heard 
nothing more about Venezuelan plans to hold a PetroAndina 
meeting.  He added that as the Peruvian election season 
loomed closer, it was unlikely that the Toledo administration 
would move forward on a controversial topic such as 
PetroAndina, which would be hotly debated by the media, 
politicians and energy pundits. 
7.  (C) MEM Energy Vice Minister Juan Miguel Cayo told DCM on 
October 18 that PetroAndina appears to be little more than a 
dream for Chavez at this point.  He said that to date the GOP 
has received no concrete oral or written proposals for 
creation of PetroAndina. 
 
8.  (C) COMMENT: President Toledo has made several public 
remarks recently disagreeing with the policies of President 
Chavez.  We see no political will for the Toledo 
administration to cooperate with the PetroAndina concept 
between now and the end of Toledo's term in July.  END 
COMMENT. 
STRUBLE