MEDIA REACTION OIL AND GAS NATIONALIZATION -

UNCLAS TOKYO 002952 SIPDIS SIPDIS STATE FOR I/RF, PA/PR/FPC/W, IIP/G/EA, EAP/PD, R/MR, EAP/J, EAP/P, PM; USTR FOR PUBLIC AFFAIRS OFFICE; TREASURY FOR OASIA/IMI; SECDEF FOR OASD/PA; CP BUTLER OKINAWA FOR AREA FIELD OFFICE; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR E.O. 12958: N/A TAGS: OIIP KMDR KPAO JA SUBJECT: MEDIA REACTION OIL AND GAS NATIONALIZATION - TOKYO LEAD STORIES: Tuesday's business daily Nihon Keizai front- paged an interview with World Bank President Wolfowitz Monday in Tokyo, during which he called for an international conference on reconstruction assistance for Iraq. ¶1. "Market Concerned About Nationalization of Oil and Gas Resources in Latin America" The top-circulation, moderate Yomiuri editorialized (5/28): "There is a new cause for concern in the international oil market, which is currently seeing high prices, and that is the moves in Latin America to nationalize oil and natural gas resources. Japan needs to keep a close watch on how this will affect the international competition for resources. On May 1, Bolivian President Morales declared the nationalization of his country's oil and natural gas industries.... Morales's declaration was clearly spurred by fellow leftist Venezuelan President Chavez, who relies on his country's oil exports to provide backing for his continuing anti-American performance.... In mid-May, Ecuador began seizing oil fields managed by major US oil firms.... ¶2. "In the short term, nationalization will bring a huge increase in revenues to nations rich in natural resources. Doing so is an attractive option for policymakers looking for an easy way to stimulate a sluggish economy. Nevertheless, the side effects are significant. In the mid- to long term, the flight of foreign capital and technology will stifle development and lower productivity.... As China has become a major oil consumer, its procurement of petroleum supplies is now one of Beijing's national strategic goals. China has made inroads into Venezuela, which accounts for about 60 percent of global oil exports to the US. The Chavez regime, which is looking to diversify its customer base, plans to triple its exports to China this year." SCHIEFFER