24 August 2012
by John C.K. Daly, Oilprice
The biggest geostrategic change of the past decade overlooked by Washington policy wonks in their fixation on their self-proclaimed "war on terror" is that Latin America has been throwing off the shackles of the Monroe Doctrine.
These ignored developments may well soon refocus Washington's attention on the Southern Hemisphere, as Venezuela's President Hugo Chavez reorients his country's to China.
It is not an inconsiderable element of concern for the Obama administration. According to the U.S. Energy Administration, the United States total crude oil imports now average 9.033 million barrels per day, with the top five exporting countries being Canada (2.666 mbpd), Mexico (1.319 mbpd), Saudi Arabia (1.107 mbpd), with Venezuela in fourth place at 930 thousand barrels per day. Note that two of America's top four energy importers are south of the Rio Grande.
Furthermore, Venezuela's reserves according to OPEC now top those of Saudi Arabia, with Venezuela now estimated to have the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. Two years ago OPEC reported that of the organization's 81.33 percent of the globe's known oil reserves Venezuela had 24.8 percent, exceeding Saudi Arabia with 22.2
So, why is Chavez in Washington's bad books? Well, among other reasons, for the company he keeps, as the Russian Federation, Iran and Cuba are all allies. Note that the first two are also major oil exporters.
Worse however are the social programs that Chavez has implemented to benefit his people, which not only smack of socialism but offer an alternative to Washington's proscriptions. Case in point - Venezuela's health care system. A joint Cuban-Venezuelan medical program, "Barrio Adentro," has made health care free and accessible to all Venezuelans. Founded in 2003, Barrio Adentro expanded Venezuela's national health care system by employing more than 30,000 Cuban medical professionals as the government equipped clinics and hospitals with advanced high technology diagnostic and surgical equipment.
Something that Americans might consider as the presidential race heats up, with Medicare on the table. Such alternatives hardly please the powers that be in Washington, but are increasingly considered in Latin America.
But, back to energy. Despite the primacy of Venezuelan oil sales to the U.S. Caracas is shifting gears, and China will soon to become Venezuela's main trade partner, with oil sales surging 60 percent in 2012.
During a recent interview Oil Minister Rafael Ramirez said, "We are selling 640.000 barrels of petrol per day to China." This is now equivalent to 2/3 of Venezuela's oil exports to the U.S., up from 400,000 barrels per day in February. For those with a sense of history, before President Chavez took office in 1999, Venezuela did not ship oil to China, but Chavez has stated that by 2015 he intends to ramp up Venezuelan oil exports to China to one million barrels of crude per day. According to Ramirez, the rise in exports will come from increased production in the natural resource-rich Orinoco Oil Belt in the east of the country.
It is hard to see this emphasis shift as anything but a short-sighted diplomatic disaster for the U.S. Compounding the degradation of Washington, which insists that China in Africa in particular exploits poor nations by buying resources at rock bottom prices, Ramirez said simply, "We are selling oil to China at a better price than what is sold in the U.S. market.'' And, given Washington's foreign aid stinginess, last week President Chavez announced that China Development Bank will bankroll $4 billion dollars in development projects, to include housing, energy and industrial growth.
Again, those with a sense of history might note that the year Chavez took office, Venezuela exported to the U.S. market 1.5 million bpd.
So, where does Washington go from here? If it wants to preserve its increasingly tenuous foothold in a nation with the world's largest oil reserves, it might begin by engaging in some honest diplomacy.
And match Chinese rates of pay.