CHAVEZ SHARPENS OIL RHETORIC, FOREIGN MINISTER

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 -------------- ¶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. -------------- Hugo Speaks -------------- ¶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." -------------- Ali Clarifies -------------- ¶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." -------------- 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. -------------- Comment -------------- ¶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 NNNN 2005CARACA00713 - CONFIDENTIAL