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
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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.

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Hugo Speaks
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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."

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Ali Clarifies
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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."


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Whither CITGO
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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.

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Comment
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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


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