UNCLAS SECTION 01 OF 02 CARACAS 000597

SIPDIS

SENSITIVE
SIPDIS

COMMERCE FOR 4431/MAC/WH/MCAMERON
ENERGY FOR CDAY, DPUMPHERY, AND ALOCKWOOD

E.O. 12958: N/A
TAGS: ECON ENIV ENRG PREL VE CU
SUBJECT: CHAVEZ' ETHANOL HYPOCRISY

REF: A. 06 CARACAS 3374

B. SAO PAOLO 212

C. CARACAS 584


1. (SBU) Summary: Subsequent to the ethanol cooperation
agreement President Bush signed with Brazil on March 9,
Chavez has labeled ethanol as "immoral," accusing the United
States of turning "food into fuel." The BRV's reaction is
indicative of its hypocrisy. It has actively pursued a
domestic ethanol program since 2005, imported ethanol from
Brazil, and only three weeks ago signed new agreements with
Cuba to develop 11 ethanol processing plants in Venezuela.
Chavez' contradictions on ethanol show that substantive
policies are less important to him than opposing the United
States. This 360 degree about-face also reflects his
insecurity that U.S. initiatives in the region - particularly
with a giant such as Brazil - will limit his own influence.
End Summary.

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2005: Chavez' Ethanol Politics Take Shape
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2. (SBU) The BRV's ethanol politics began to take shape in
2005 (Ref A). Energy Minister Ramirez announced that
Venezuela would replace leaded gasoline with an ethanol-based
mixing component as a more ecologically sound solution.
Ramirez added that Venezuela would be self-sufficient in
sugar cane-derived ethanol by 2012. Chavez used his weekly
television program "Alo Presidente" on September 4, 2005 to
announce that Venezuela would pursue domestic production of
ethanol, "We are going to start to produce ethanol, we
already have a plan of 200 thousand hectares to grow sugar
cane." Again, using "Alo Presidente" as a platform, Chavez
added in October 2005, "And I have already given the green
light on the ethanol project, and with Cuba, and Venezuela of
course, do you know how many hectares of sugar cane we need
to grow in the next few years to produce all the ethanol that
we need to inject into gasoline? 300 thousand almost!"
Despite Chavez' criticism of President Bush's "ethanol
diplomacy," PDVSA signed a deal to purchase ethanol from
Brazil's petroleum giant Petrobras in February 2005.

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2006: PDVSA Launches Ethanol Plan
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3. (SBU) PDVSA officially launched its Ethanol Agro-Energy
Development Project in October 2006 (Ref A). The project's
goal would be to produce over 10 million barrels of
ethanol/year at 17 processing plants from sugar cane, rice,
and yucca by 2012. This would enable Venezuela to meet its
ethanol needs domestically. PDVSA estimated the cost of the
project at USD 1.3 billion. PDVSA's 2006 financial report
also references a USD 153 million investment in ethanol
projects in 2005, an amount sufficient to construct three
small plants.

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2007: New Ethanol Agreements with Cuba
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4. (SBU) Only three weeks ago, on February 28, Venezuela
signed agreements with Cuba to build an additional 11 ethanol
plants from sugar cane. The agreements were signed by
Minister Ramirez and Cuban Minister of Foreign Investment and
Economic Cooperation Marta Lomas during the Seventh Meeting
of the Joint Intergovernmental Cuba-Venezuela Commission in
Havana.

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President Bush's Travel:
Chavez Attacks "Immorality" of Ethanol
--------------


5. (SBU) Since Presidents Bush and Lula da Silva signed an
MOU on ethanol cooperation, Chavez has made an apparent 360
degree about-face in his views on ethanol. Chavez has
continually referred to ethanol as "immoral." In an
interview with Argentine press during his visit to Argentina
March 9, Chavez said "President Bush's ethanol plan is
totally irrational and anti-ethical. To try to sow the good
land that we still have, to claim the countries of the south,
because in the countries of the north, they don't have any
fertile land or good water left." Chavez added,
sarcastically, "We will need to dedicate ourselves completely
to educating agronomists, agricultural engineers,

CARACAS 00000597 002 OF 002


specialists... to produce food for the cars of the gentlemen
from the North." Chavez characterized the agreement the
President signed with Brazil as an "OPEC for ethanol." On a
recent "Alo Presidente," Chavez said "What the United States
is claiming is impossible. To sustain with ethanol its style
of life we would need to cultivate corn six times over the
land of the earth." Cuban leader Fidel Castro chimed in from
his sick bed, saying "the idea of using food to produce
energy is tragic, dramatic...no one knows where the price of
food will go when soy is converted into fuel."


6. (SBU) During his visit to Jamaica on March 13, Chavez
continued the assault on ethanol using "ethical" arguments.
"So we are using land, machines, technology, fertilizer and
water to produce food, not for the people, but for the
vehicles of the rich!" exclaimed Chavez. Chavez added he
would "talk to Lula" and explain his position to Brazil.


7. (SBU) Minister Ramirez, despite inking ethanol agreements
with Brazil and Cuba, qualified the use of resources and
water to produce ethanol rather than food as "barbaric."
Ramirez opined that ethanol presented no threat to Venezuelan
oil exports to the United States, "It seems to be more of
political arithmetic on President Bush's part to increase his
popularity or his image in his own country...Imagine an OPEC
with the United States, an OPEC for ethanol," said Ramirez in
parroting Chavez' remarks.


8. (SBU) The pro-Chavez media has responded by launching an
extensive anti-ethanol campaign in the press. The
pro-government daily "Vea" ran a series of articles about the
dangers ethanol posed to food security and the environment,
while publishing interviews with BRV leaders parroting
Chavez' recent anti-ethanol comments. "El Tiempo" ran an
editorial that quipped Americans would fill their gas tanks
with arepas (Venezuela's corn-based staple) and tortillas,
commenting that ethanol production would provoke an
ecological disaster that would have the dimensions of an
apocalypse.

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Comment
--------------


9. (SBU) Chavez' latest campaign against the "immorality" of
ethanol on the heels of President Bush's visit to the region
- while the BRV has aggressively pursued its own ethanol
agenda - captures Chavez' two-faced nature. He has tried to
nuance his argument by differentiating between corn-based
ethanol in the United States and sugar cane ethanol produced
in Latin America. There remain obvious contradictions in the
BRV's statements and actions. Substantive positions on
issues matter less to Chavez than attacking the United
States. His ethanol tirades underscore that Chavez finds
himself in a defensive posture in response to President
Bush's overtures for increased economic cooperation with
Brazil, a country where Chavez still considers himself to
have a large influence.


WHITAKER