Identifier
Created
Classification
Origin
06LAPAZ2511
2006-09-15 21:47:00
CONFIDENTIAL
Embassy La Paz
Cable title:
HYDROCARBONS NATIONALIZATION FUMBLING ALONG
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C O N F I D E N T I A L LA PAZ 002511
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/07/2016
TAGS: ECON PGOV PREL BL
SUBJECT: HYDROCARBONS NATIONALIZATION FUMBLING ALONG
Classified By: Amb. David N. Greenlee for reasons 1.4 (b) and (d).
C O N F I D E N T I A L LA PAZ 002511
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/07/2016
TAGS: ECON PGOV PREL BL
SUBJECT: HYDROCARBONS NATIONALIZATION FUMBLING ALONG
Classified By: Amb. David N. Greenlee for reasons 1.4 (b) and (d).
1. (C) Summary: The Hydrocarbons Ministry issued a
Ministerial Resolution on September 12 which shifts foreign
companies' hydrocarbon revenues to the Bolivian state-owned
company YPFB. The Resolution is legally in line with
Hydrocarbons Law 3058, but comes at a time when the GOB is
negotiating natural gas prices and refinery operations with
Petrobras and with Brazilian national elections are two weeks
away. Strong reactions from Petrobras and the Government of
Brazil caused the GOB to temporarily freeze the Resolution,
but we expect further political turbulence on nationalization
in the weeks ahead. End summary.
2. (C) On September 12 the Hydrocarbons Ministry issued
Ministerial Resolution 207/2006 which shifts foreign
companies' hydrocarbon revenues to Bolivia's state-owned
company YPFB. The Resolution is legally in line with the new
Hydrocarbons Law 3058 (May 2005),which states that the
production, refinery, storage, and commercialization of
natural gas and hydrocarbons be in the hands of the
government. Simultaneously, the GOB accused Petrobras of
earning "excess" profits and said it will not compensate
Petrobras for lost revenue resulting from Bolivian unilateral
action. The Ministerial Resolution came two weeks before
Brazilian national elections and as the GOB and Petrobras are
in tense negotiations regarding natural gas prices and equity
participation in refineries.
3. (C) The Brazilian reaction was strong: Brazilian Charge
told Poloff that his government cancelled Energy Minister
Rondeau's September 14 visit to La Paz in response to the GOB
announcement. Petrobras publicly declared it would have to
cease refining operations and said it was studying
"appropriate" measures. President Lula's special advisor
Marco Aurelio called Acting-President Garcia Linera to
express Lula's displeasure with the "unilateral" decision.
On the evening of September 14, after meeting with the GOB
hydrocarbons team, Garcia Linera announced the "momentary
suspension" of the Resolution and the possibility of
negotiations.
4. (C) Comment: This amounts to a case of very bad timing.
Although the Resolution is in line with enacting the new
Hydrocarbons Law, it is obvious the GOB did not consider
possible Brazilian reactions. This most recent set-back is
yet another example of the GOB acting while only considering
its most radical base. The time, the GOB clearly fumbled and
VP Garcia Linera was left to pick up the ball and try to fix
the problem. End Comment.
GREENLEE
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/07/2016
TAGS: ECON PGOV PREL BL
SUBJECT: HYDROCARBONS NATIONALIZATION FUMBLING ALONG
Classified By: Amb. David N. Greenlee for reasons 1.4 (b) and (d).
1. (C) Summary: The Hydrocarbons Ministry issued a
Ministerial Resolution on September 12 which shifts foreign
companies' hydrocarbon revenues to the Bolivian state-owned
company YPFB. The Resolution is legally in line with
Hydrocarbons Law 3058, but comes at a time when the GOB is
negotiating natural gas prices and refinery operations with
Petrobras and with Brazilian national elections are two weeks
away. Strong reactions from Petrobras and the Government of
Brazil caused the GOB to temporarily freeze the Resolution,
but we expect further political turbulence on nationalization
in the weeks ahead. End summary.
2. (C) On September 12 the Hydrocarbons Ministry issued
Ministerial Resolution 207/2006 which shifts foreign
companies' hydrocarbon revenues to Bolivia's state-owned
company YPFB. The Resolution is legally in line with the new
Hydrocarbons Law 3058 (May 2005),which states that the
production, refinery, storage, and commercialization of
natural gas and hydrocarbons be in the hands of the
government. Simultaneously, the GOB accused Petrobras of
earning "excess" profits and said it will not compensate
Petrobras for lost revenue resulting from Bolivian unilateral
action. The Ministerial Resolution came two weeks before
Brazilian national elections and as the GOB and Petrobras are
in tense negotiations regarding natural gas prices and equity
participation in refineries.
3. (C) The Brazilian reaction was strong: Brazilian Charge
told Poloff that his government cancelled Energy Minister
Rondeau's September 14 visit to La Paz in response to the GOB
announcement. Petrobras publicly declared it would have to
cease refining operations and said it was studying
"appropriate" measures. President Lula's special advisor
Marco Aurelio called Acting-President Garcia Linera to
express Lula's displeasure with the "unilateral" decision.
On the evening of September 14, after meeting with the GOB
hydrocarbons team, Garcia Linera announced the "momentary
suspension" of the Resolution and the possibility of
negotiations.
4. (C) Comment: This amounts to a case of very bad timing.
Although the Resolution is in line with enacting the new
Hydrocarbons Law, it is obvious the GOB did not consider
possible Brazilian reactions. This most recent set-back is
yet another example of the GOB acting while only considering
its most radical base. The time, the GOB clearly fumbled and
VP Garcia Linera was left to pick up the ball and try to fix
the problem. End Comment.
GREENLEE