Identifier
Created
Classification
Origin
04CARACAS366
2004-02-02 18:46:00
CONFIDENTIAL
Embassy Caracas
Cable title:  

PDVSA POWER STRUGGLES: THE REVOLUTION DEVOURS ITS

Tags:  EPET ECON PGOV VE 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L CARACAS 000366 

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR D. PUMPHREY AND A. LOCKWOOD

E.O. 12958: DECL: 01/29/2014
TAGS: EPET ECON PGOV VE
SUBJECT: PDVSA POWER STRUGGLES: THE REVOLUTION DEVOURS ITS
CHILDREN

REF: A. 03 CARACAS 4379


B. CARACAS 101

Classified By: CDA STEPHEN G. MCFARLAND; REASONS 1.4 (B) and (D)

------
SUMMARY
-------

C O N F I D E N T I A L CARACAS 000366

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR D. PUMPHREY AND A. LOCKWOOD

E.O. 12958: DECL: 01/29/2014
TAGS: EPET ECON PGOV VE
SUBJECT: PDVSA POWER STRUGGLES: THE REVOLUTION DEVOURS ITS
CHILDREN

REF: A. 03 CARACAS 4379


B. CARACAS 101

Classified By: CDA STEPHEN G. MCFARLAND; REASONS 1.4 (B) and (D)

--------------
SUMMARY
--------------


1. (C) With street battles between opposing labor groups,
mass protests to force the removal of managers, new
allegations of corruption in internal product sales, and
rumors of yet another new Petroleos de Venezuela (PDVSA)
board, January has demonstrated yet again the disarray in the
Venezuelan energy sector. Rumors that Ali Rodriguez will
leave the presidency of PDVSA or be replaced are also spiking
once again. Vice Minister for Hydrocarbons Luis Vierma, who
has been seen as an advocate for more involvement by private
sector firms, is also now the subject of rumors that he will
be dismissed. End Summary.

--------------
THE REVOLUTION IN THE STREETS
--------------


2. (U) After a holiday calm, evidence of the battles that
continue to rage within Petroleos de Venezuela (PDVSA),
between PDVSA and the rest of the government, and in the
Venezuelan energy sector in general have once again erupted
into public view in January. Violence broke out in western
Venezuela the week of January 19 as workers fighting over
jobs and control of PDVSA's Cabimas plant began shooting at
each other. Five people were wounded as workers from the
"Bolivarian Workers Front" clashed with those from the "Che
Guevara Trade Union of Unemployed Workers." In eastern
Venezuela, the situation was less violent but still tense as
protestors massed outside PDVSA's Maturin offices to demand
the removal of regional managers who had allegedly
participated in the December 2002-February 2003 general
strike. The entire PDVSA Board traveled to Puerto La Cruz to
discuss this incident that was apparently resolved on Janary
21 with the appointment of a new district manager.


3. (C) These two incidents appear more bizarre when one
realizes that, in the case of Cabimas, the violence was
between two pro-Chavez unions squabbling over control of the
jobs in a PDVSA facility, while in Maturin the protestors

were actually led by a member of the PDVSA Board, himself a
union leader. More seriously, a U.S. executive reported to
econoff on January 22 that the PDVSA manager who was removed
had worked well with international companies. He added that
another senior eastern area manager, with whom his company
has worked most effectively since the strike, was also
targeted by the protestors. So far, this manager has been
protected but he may yet be removed.

--------------
THE REVOLUTION FIRES ITS OWN
--------------


4. (C) In yet another bizarre episode, Fabian Chacon, a
Chavez loyalist who lasted as a legal counsel in PDVSA for
ten months between February and November 2003 when he was
reportedly fired by PDVSA President Ali Rodriguez, went
public the week of January 26 with charges that PDVSA has
lost millions of dollars by selling products at low domestic
market prices to firms that then re-sold the products abroad
at international prices. Although such allegations should
not come as a surprise to any observer of the chaos of the
current Venezuelan energy scene, they have spurred PDVSA, the
Ministry of Energy and Mines, and the National Assembly into
saying they will investigate irregularities in the sales of
crude and oil products. Chacon himself has been accused of
trying to funnel the legal business associated with the
severance claims of ex-PDVSA employees to lawyer friends.
(Note: Stories of corruption in PDVSA's international
marketing are rife. The former commercial manager of PDVSA
told econoff January 20 that he has received material from
within the company that could send people to jail. The only
new thing here is the allegation of corruption in the
internal market which would be very much in the trend


described in reftel A. End note.)

--------------
YET ANOTHER PDVSA BOARD?
--------------


5. (C) VenEconomy, a respected local consulting service,
published a story in its newsletter on January 29 stating
that Chacon"s allegations "are thought to be part of a
campaign to unseat Ali Rodriguez" and other members of his
Patria Para Todos (PPT) Party from PDVSA. This follows
public announcements by Rodriguez and Energy Minister Ramirez
that President Chavez will soon announce yet another
restructuring of the industry and yet another board of
directors. The press reports that the PDVSA Board will be
expanded to eleven from its current eight members.
Representatives from the Finance, Production and Commerce,
and Planning Ministries will reportedly be added to the board
to give the government more control over the company. There
is also speculation that the military will become more
overtly involved in the running of the company.


6. (C) The ever fertile Caracas rumor mill is once again
seething with rumors that Ali Rodriguez himself is on the way
out. A staffer of the Permanent Energy Commission of the
National Assembly informed econoff on January 15 that he
believes Rodriguez and other PPT party members will pull out
of the Chavez government when they think it will go down so
as not to be associated with a failure. This source, who
claims to know Rodriguez well from his time in the National
Assembly, believes Rodriguez will ultimately be more
interested in advancing his own political career than in
setting Venezuelan energy policy. ChevronTexaco de Venezuela
President Ali Moshiri commented to econoff on January 22 that
Rodriguez is indeed less "hands on" than he had been a year
ago. Moshiri noted that everything to do with crude trading
and lifting has been turned over to Senior VP Aires Barreto.
Another oil company source, however, commented to econoff on
January 29 that ultimately Rodriguez's most effective
advocate with Chavez is Fidel Castro. According to this
source, Castro depends on Ali Rodriguez to keep the oil
flowing to Cuba.


7. (C) Some of the candidates rumored to be in line to fill
Rodriguez's shoes include Energy and Mines Minister Rafael
Ramirez; General Francisco Rangel Gomez, currently President
of the state-owned Corporacion Venezuelano de Guyana (CVG);
CITGO President Luis Marin; and Gustavo Perez Issa, the
controversial former PDVSA internal security manager.
Rumored candidates for new board members include Carlos
Mendoza Potela, formerly Venezuelan Ambassador to Saudi
Arabia and a member of the controversial Gaston Parra PDVSA
Board in 2002; and Alfredo Rivera, currently a CITGO VP and
said to be leading the charge to move the company from Tulsa
to Houston because he would prefer to live in Houston. One
particularly cynical industry source commented to econoff
that those now in control of PDVSA know they are "on the way
out" and are fighting to get onto the board because of the
excellent pension benefits they would receive.


8. (C) And Rodriguez is not the only person whose imminent
departure is rumored. Vice Minister for Hydrocarbons Luis
Vierma, who has other important positions in PDVSA, is also
said to be on shaky ground because of his support for more
involvement by private firms in Venezuela's energy sector.

--------------
COMMENT
--------------


9. (C) PDVSA continues to be an almost dysfunctional
organization with different groups struggling for power,
jobs, control of its budget, and, of course, opportunities to
make money. But a larger stuggle may be looming in the
Chavez government between the nationalists and those who
support giving more operational freedom to the private
sector. This kind of managerial disarray only strenghtens
our suspicions (reftel B) that the firm's production is
likely to drift downward in 2004.
MCFARLAND


NNNN