ARGENTINE PRESIDENT TO VENEZULA: ENERGY,AG THEMES

C O N F I D E N T I A L BUENOS AIRES 000288

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E.O. 12958: DECL: 03/05/2018
TAGS: ECON EPET ENRG EAGR VZ AR
SUBJECT: ARGENTINE PRESIDENT TO VENEZULA: ENERGY,AG THEMES
OVERSHADOWED

REF: A. BUENOS AIRES 274


B. BUENOS AIRES 272

C. BUENOS AIRES 230

D. 07 BUENOS AIRES 360

E. 07 BUENOS AIRES 311

Classified By: Ambassador E.A. Wayne. Reasons 1.5 (b,d)

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Summary
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1. (SBU) President Cristina Fernandez de Kirchner and her
Planning Minister Julio De Vido will meet March 6 in Caracas
with Venezuelan President Hugo Chavez on her way to the Rio
Group summit in the Dominican Republic and a visit to
Argentine peacekeeping troops in Haiti. Following Bolivia's
February 23 statement that it may not be able to provide all
the natural gas supplies it had promised Argentina, GoA
statements over the past week have raised expectations that
this CFK/Chavez meeting will be used to explore more
substantive energy cooperation between Argentina and
Venezuela. CFK continues to argue that as Europe needs Putin
and Russian natural gas, so South America needs to deal with
Chavez to meet its energy needs. However, relatively
non-substantive energy and food security accords will anchor
the brief bilateral visit, and the mobilization of Venezuelan
troops on the Colombian border and intensive OAS diplomacy
may well subsume economic themes.
End Summary


2. (SBU) President Cristina Fernandez de Kirchner departs
March 5 for Caracas and a March 6 bilateral meeting with
President Hugo Chavez on her way to the Rio Group summit in
the Dominican Republic and a visit to Argentine peacekeeping
troops in Haiti. Post has confirmed that Planning Minister
De Vido will accompany the President for at least the
Venezuela portion of the trip. (De Vido had personally
advanced the CFK/Chavez bilateral in a visit to Venezuela the
week of February 18.) Foreign Minister Taiana will also join
and continue to the Dominican Republic and Haiti.

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CFK/Chavez Energy Accord: Non-Substantive
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3. (SBU) An extension of a now 3-year old agreement for GoA
national oil company ENARSA to purchase power plant fuel oil
and refined diesel from its GoV counterpart PDVSA is set to
be an anchor agreement signed during the CFK/Chavez meeting.
Interestingly, local analysts note that the bulk of fuel oil
and diesel fuel purchased under these bilateral accords to
date has not/not originated in Venezuela but instead has been
purchased by Venezuelan brokers on international commodity
markets for on-sale to Argentina. Given the very liquid
international trading market in international hydrocarbon
derivatives, local analysts highlight the lack of
transparency in these GoA fuel purchases through Venezuela
and, ultimately, the benefit to Argentina of having the GoV
play a brokering role at all.


4. (SBU) Following Bolivia's February 23 warning, made during
a CFK/Lula Morales energy summit (Ref C),that it may not be
able to provide all the supplies it had promised Argentina,
the GoA has been highlighting energy cooperation with
Venezuela. "If we don't have Bolivian gas, we'll have to look
for alternatives," Cabinet chief Alberto Fernandez told a
radio journalist February 25. Fernandez did not give a
precise plan but said Argentina might import fuel oil from
Venezuela, as it did in years past, or turn to bottled
natural gas to ensure that consumers are able to heat their
homes, cook their food and power their cars.


5. (SBU) On February 26 (and later in her March 1 State of
the Nation speech to Parliament - Ref B),CFK called for the
final incorporation of Venezuela as a full member of the
MERCOSUR trade bloc to "finally close the region,s energy
equation." She qualifies her call as a measure of &pure
rationality for (the region,s) energy requirements8 and not
a defense of Venezuelan President Hugo Chavez. Argentina's
second largest circulation daily, La Nacion, reported


February 27 on GoA sources saying that "Chavez has never been
so necessary as now." The sources said that the arrangement
to be proposed during CFK's March 6 meeting with Chavez is
"food for Venezuela and political support for a weak Chavez,
in exchange for energy." Chief Cabinet Minister Alberto
Fernandez told Ambassador March 5 that CFK firmly believes
that, just as Europe needs to deal with and sign accords with
Putin to get Russian natural gas, so Mercosur and others need
Chavez, even if they don't agree with all of his ways.

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Food Security Pact, Argentina Venezuela Trade
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6. (SBU) According to Embassy Planning Ministry contacts,
the food security accord will formalize existing efforts by
Argentine companies, the GoA's National Institute of
Industrial Technology (INTI) and the National Institute of
Agricultural and Livestock Technology (INTA) to sell
agro-industrial products and technology to the GoV and to
Venezuelan private sector players. (Ref D). In fact, while
overall agricultural trade between Argentina and Venezuela
has expanded, its overall levels remain modest: Argentine
exports of agricultural products to Venezuela, primarily
agro-industrial equipment, totaled $320 million in 2007, up
533% since 2003. Interestingly, exports of milk products to
Venezuela fell 43% to US$56 million in 2007, the year that
the GoV made a much-publicized bailout of an Argentine milk
cooperative (Ref C) with a repayment plan which was to
include expanded shipments of powdered milk.


7. (SBU) Overall Argentine exports to Venezuela in 2007
totaled $1.2 billion, and imports $24 million. Argentine
exports have risen every year since 2003 (a total of 734% in
that period). Imports from Venezuela were primarily in the
areas of tools, aluminum and products, vehicles, and
hydrocarbons. Hydrocarbon imports are down significantly
from a 2004 high of $19.5 million (when Argentina' imported a
much-publicized fuel oil shipment from Chavez) to just $2.8
million in 2007. On the export side, vehicles led the way
with a value of US$ 379 million, followed by machinery ($139
million),iron and steel and products ($107 million),meat
($79 million),and fats and oils ($74 million). All of these
exports have increased substantially over several years,
especially vehicles, which grew over 8500% (from $4.4
million) since 2003.

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Comment
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8. (C) While the visit's original focus was broadly economic,
with agreements on food security and on energy cooperation to
be signed, the mobilization of Venezuelan troops on the
Colombian border and intensive OAS diplomacy -- and CFK's
desire to play a leading role in brokering a peaceful outcome
-- may subsume the economic agenda of the trip. Facing
growing domestic concerns about energy shortages, CFK had
been billing the GoA's tolerance of the BRV as pragmatic,
with a view to "closing the energy equation." In her March 1
State of the Union speech (Ref B),CFK repeated her position
that Mercosur should admit Venezuela to help address energy
security, not because of "personal sympathies or political
friendships." CFK and her advisers are well aware that the
timing of her visit to Caracas may shift attention away from
the original objectives for the trip. CFK will meet with
Ecuadorian President Correa the evening of March 5 in
Caracas. Septel will report the Ambassador's conversation
with Cabinet Chief Fernandez regarding CFK's intention to use
her previously scheduled stop in Caracas to urge a lowering
of tensions and peaceful solution to the crisis. The
Ambassador has privately urged CFK's advisers to be wary of
Chavez's likely efforts to manipulate her visit to his
political advantage. We have been assured that she is aware
of the potential traps and will seek to avoid them.
WAYNE