CHAVEZ COURTS SPANISH SOCIALISTS;LEAVES POLITICAL

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