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Venezuelan Oil: Free Gift of Nature or Wealth of a Nation? Author(s): Daniel Hellinger Source: International Tournal, Vol.62, No. 1, Natural Resources and Conflict 2006/ 2007) , p p . 5 5 -6 7 In te rn a ti o n a l C o u nci l P ublis hed by : C a n a d i a n Stable URL: http:l/ivwrvjstor.org/stable/40?04245 A c c es s ed: 3l / O l /2 0 1 4 0 3 :1 4

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oil Venezuelan
Free g1f.of notureor wealthof o nation?

Venezuelan oil diplomacy has long beena factorshapingthe international energyregime,and domesticpolitical conflictsin Venezuela havealways interactedsynergistically with conflict over the global energysystem.So it is the case with intense domestic conflicts that have swirled around PresidentHugo Châvez, the country'scontroversialpopulist leader.Partly at stakeis whetherthe rules of the globaloil regimewill correspond to a neoliberalframeworkpermitting freer access to minerals and hydrocarbons on the part of capital,or whethernationalsovereignty continuesto legitimatehost countries' right to regulate access and demandcompensation for exploitation of naturalresources. Are the resources in a sovereign nations subsoila free gift of naturethat lie worthless without the application of labour and investment,or do they constitute exhaustible"natural wealth" for which the nation is entitled to compensation? This question recurs in debates over the imposition of royalry participationin OPEC, management of state-owned and foreign participation enterprises, in differentphases of the industry.

DanielC. Hellinger is professor in the department of history, politics, ond law, Webster Univenity, St.Louis, MO, andco-editor ofVenezuelan Politics in the Châvez Era: Class, Pofarization, and Conflict (Boulder, Rienner, CO:Lynne zooj).

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of conventional ranks sixth in the $/orld in provenreserves Venezuela billion barrelsof heavyoil (at an eight with 78 billion barrels.'235 crudes, percentrecovery rate)in the Orinocotar belt can be addedto this total.At a total 30 percent rate of recovery the oil ministry estimatesVenezuela's in the entire at 7oo billion barrels,more than provenreserves reserves Middle East. Impractical today,such reservesmight becomeattractiveif most global oil fields havepassed"peak"ratesof recoveryglobal demand in emulsifyingheavy improvements continues to increase, and technological has the world's ninth largestreserve oils are made. In addition,Venezuela Venezuela of natural gas,trailing only the US in the Westernhemisphere. of oil to the US market. ranks in the top five exporters consistently diplomacy.Deliveriesof oil on credit helped Oil powersVenezuelan NestorKirchnerfacedown the InternationalMonetary ArgentinePresident expertsare advisingother latin governments, Fund in zooj-o4. Venezuela including Colombia and Bolivia, on contractswith foreign investors.Oil hemispherictelevisionnetmoney funds Telesur,a Venezuelan-initiated, effort to create a SouthAmericanoil company; work. Petrosur is Venezuela's providesdiscounted oil to countriesin the Caribbean Basin.Oil PetroCaribe diplomacyhas helped Châvezobstructthe US initiative for a NAFTAJike for free trade areaof the Americasand promotehis "Bolivarianalternative and regionalintegration. the Americas,"which prioritizessocialobjectives
V E N E Z U E L A A N D GL OB AL OIL R E GIME S Venezuela's leadership in shaping third world oil policies arose in part from

the consequences of the Mexican revolution. Mexico was the first third world country to nationalizeforeign oil companies(in 1938),but consequently the foreign maiors excludedPEMEXproductionfrom global markets until the r97os, when Mexicanoil was welcomedback as part of an effort to counterbalancethe Organization of Petroleum Exporting Countries(OPEC). ln 1943,because of politicalspace openedby Mexican nationalization,the companiesaccepted a new oil law revising generous concessions of the past and acknowledging that their profits are subjectto powersof taxation.A few yearslater,the Venezuelan Venezuela's sovereign governmentand StandardOil agreedto stabilizeeachside'sshareof profpromotedthis "5o-5o"agreement its at 50 percent. Americancompanies
t Estimatesvary. Unless otherwise noted, all data here compiled by the energy information Administration. agency of the US Energy

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in the Middle East,helping them muscle their way into subsoil previously the preserveof Europeancompanies.Illustrating how transitory government, facing a difsuchagreements can be, in r958 a Venezuelan dictatorship, ficult economicsituationinheritedfrom a recentlydeposed taxes. unilaterallyraised producerwasdiminishing as the Venezuela's advantage as a low-cost period of countrybeganshakilyin 1959what would be its first extended democratic rule. Middle Easternoil was streamingon line, and a recesprices. The Eisenhoweradministration sion in the US had depressed offer of preferentialprices in rebuffed PresidentRômulo Betancourt's by domestic exchange for guaranteed access to the US market.Pressured US oil interests, President Eisenhowerinvoked his authority under national securitylegislationto restrict further imports from outside of North America. his oil minister,fuan PabloPérez Betancourt In response, dispatched propose coordination of oil policies. Alfonzo,to the Middle Eastin 196oto The enthusiasticreception of Saudisled to the founding of the OPEC. more membersand influence,evidenteven OPECgraduallyaccumulated (not OPEC)cut offoil suppliesto the westduring the beforeArab exporters Six Day War in rg73. Hawng lost control of productionlevels,and subjectprices,the companies had few incentivesto fight nationaled to reference the accord to nationalize ization.ln 1976,Venezuela reached a negotiated ïvascrede Venezuela (PDVSA), A holdingcompany, Petrôleos oil industry. ated to control subsidiariescorrespondingto each of the foreign owned Finally, includingthe threemajors(Shell,Gul[, and Standard). companies, proclaimedthe country'sleaders,el petrôleoes nuestro("The oil is ours!").
THE NEO LI BERAL O I L O PEN I N G

poisedto retreatfrom oil nationalism Twentyyearslater Venezuela seemed and OPEC.The country had gaineda reputationas a notoriousviolator of OPECquotas. Arturo Sosa Pietri,president of PDVSA(rggo-gzl,openly for Venezuela campaigned to abandonOPECand join the International EnergyAgency, which was formed by consumingnationsin response to the OPECprice hikes.In 1995PDVSA s president, Luis Giusti,and the oil minister, Edwin Arrieta, proclaimedan aperturapetrolera(oil opening), intending to double production in ro years,busting through the OPECquota.Oil executives arguedthat limiting productionin defence of priceswasemblematic of a discredited rentier mentalitythat sustained an

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inefficient state,smotheredthe private sector,and fosteredunderdevelopment. New forward and backwardlinkages in the economywould more than compensate for revenues lost to the government.When critics raised the spectreof an internationaloil price war, they answered it was betterto producesix million barrelsper day at $ro than three million at $zo. In 1999,no longerPDVSApresident, Giustirevealed that the epertura was a kind of privatizationstrategy. Theimageof PDVSA asa national asset was,andstill is, toostrong to permit a conventional privatization scheme. Sellingthe company to privateinterests would be considered unacceptable, making it politicalsuicidefor anypublicfigureto advocate. Even placinga minor portionof PDVSA on the market...would requirereforming the exitinglegalframework.' PDVSAsoughtto athactlargeinfusionsof foreign capitalthrough joint venturesand operatingagreements. Criticschargedthat the aperfiira effectively privatizedactivitiesthat in pastwould havebeenregarded as concessions,and someof their concerns werelater borne out. For example, under coverof operatingagreements for reactivating marginalfields,foreigncompanies often drilled into more productive reserves farther below. Companies were not paid a straightforward fee for services, but were paid on a sliding scalepeggedto the market price of oil, relievedof any obligation to pay a royalty (which was shifted to PDVSA)and taxedat the lower rate (34 percent instead of 67 percent). |oint.risk explorationcontracts offeredaccess to two percentof Venezuela's total land area,but feeswere lessthan half of what was offeredin concessions offeredfor merely 8.2 sq. kilometresby the military dictatorshipin ry57. "Strategicassociations" to developheavyoil in the Orinoco would pay royaltiesat only one percent, justified because ofthe high costof production.Criticscontendthat the real purpose of boosting production was to provoke a crisis with OPEC. Technically, "Orimulsiorf would not count against Venezuela's OPEC quota, but as it would competewith lighter gradecrudes on the market, inevitably OPECwould obiect.'
z Luis E. Giusti, "La epeftura:The opening of Venezuela's oil industry" Journalof lnternational Affairs53 (fall r999): rr7. "Gobierno de châvez: (neuvosrumbosen la pollticapetrolera venezolana?" in 3 LuisE. Lander, Luis Lander,ed., Podery petréleo en Venezuela (Caracas: FACES-UCV PDVSA,zoql,57-92.

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Hand in glovewith this strategy wasa policyof "internationalization," and distributionsystems, stafting i.e.,the acquisition of overseas refineries with VEBA Oil (1983)in Germanyand later Citgo (1986)in the United wasto secure marketsand transStates. The goal,said PDVSAexecutives, form the company into a fully integrated,modern enterprise.However, VEBA neverrefined Venezuelan s subsidiaries heavyoil; overall,PDVSA process terms with its much more light than heavy crude.Under contractual partners, discounts offa "netback"system PDVSAprovides oil at substantial pricing. of transfer The companyincurred a significantopportunitycostin foregoingother markets.Profits were not repatriatedto Venezuela, often sheltered on the booksof PDVSAservice companies in third counffies.r A handful of nationalist and leftist politicians criticizedinternationalizationand the apeftun, but theygainedlittle tractionwith the politicalelite Democratic Action(AD),founded by heading the two main politicalparties, party foundedby Rafael and COPEI,a ChristianDemocratic Betancourt, who served tenureas CEOof PDVSA. as president during Giusti's Caldera, found it diflicult to curb the powerthat PDVSAhad accuEvenpresidents mulated.How did this situationarisel
FROMNATIONALIZATION TO THE APERTURA Hugo Châvez's first priority after the 1998 presidential election was not to revise oil policy but to call a constituent assembly to rewrite the natior{s constitution, over the objections of the established political parties, whose hegemony would be threatened by an overhaul of the country's institutions. The erosion of the legitimacy of the extent constitutional order, however, was rooted in mass skepticism about the nature of Venezuelandemocracy and its capacityto administer the benefits of oil wealth. The issue was not whether some other type of system would be a better steward than a democracy, but whether this partr'cu1ardemocracy was delivering on the promise of "sowing the oil" in a project of national development that would include all Venezuelans. After 1935,when the dictator fuan Vicente Gômez died, conservative elites in Venezuela claimed that democracy could be viable only after a period of social modemization lifted the civic capacity of the majority poor.

"El programa Boué, Carlos de internacionalizacién en PDVSA: estratégico o 4 Juan ;Triumfo y petréleo, desastre fiscal)"in LuisLander, Poder t11-84.

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Advocatesof mass, universal suffrage, and direct election insisted on immediatedemocracy. Only such a statewould demandfrom foreign companiesa "iust share"of oil profits to the nation; only such a statewould "sowthe oiÏ' in a developmental projectto lift living standards and create a modern, inclusive society,one sustainableafter the nations "natural wealttf was exhausted. This latter vision, articulatedby Betancourtand AD, prevailedand was institutionalized after the fall of the military dictatorship in 1958in the constitutionof 196I. A seriesof elite pacts,espe"pactof PuntoFijo'amongnon-Communist politciallythe power-sharing just ical parties, signed electionsof before the first post-dictatorship December 1958,laid the basisfor a populistsystem, known as puntofiiispopular influence over mo. However,the samesystemof pactsattenuated electedofficials. As long as oil fuelled economicgrowth and opportunities for socialmobiliry this matteredlittle. Throughoutthe post-G ômezera,aslong asexploitation of oil remained failures could be attributedto the mostly in foreign hands,developmental petrolero.Wlth raking offof the country's"naturalwealtH'by imperialismo its limits. This new that populistdiscourse reached nationalizationin19T6, politicalfactwasobscured by the oil bonanza. Eightyears9974-8r)of spectacular growth seemedto reinforcethe existingpopulist model. President of Betancourt, soughtto convert a protégé CarlosAndrés Pérez$974-28ll, Venezuelaovernight into the Ruhr of South America, but his grandiose projectsproduceduncompetitiveheavyindustriesand unprecedented corborrowedagainstfuture oil earnruption. Worse,Pérezand his successors ings to accelerate their plans. COPEI's PresidentLuis Herrera Campins promised betterstewardship but then mismanaged the second oil FgZg-&ll price hikes after the fall of the shah and Iran-lraq War.By r98r, oil prices were sliding, but HerreraCampinssoughtto evade difficult economicdecisions. Then, suddenly, on zr Februaryry83,he announced that the bollvar would be allowed to float off its 4.3:r mooring to the dollar. "The party's headline. over,"readone newspaper By the 1976 nationalization,the subsidiariesof foreign companies executives. They were unenwere alreadybeing run by nativeVenezuelan thusiasticaboutnationalizationto begin with; HerreraCampinsgavethem reasonto resentstateownership.fust beforethe devaluation, the president reserve fund of $5.5billion at the forcedPDVSAto repatriate its overseas rate old rate.When the tripled, trvothirds of PDVSAs accumulated reserves were wiped out. "ln this first critical test of the relationshipbetrveen the

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stateand its operatingcompany," wrote BernardMommer, later a key poli"the governmentsubjected cfmaker in the Châvezera, PDVSAto treatment that a landlord might make of his coffee finca."s The companynow soughtto avoid accumulatingcashreserves, but in a tight international market,and limited by OPECquotas,investmentat home was not an option. The solution was internationalization, beginning with the VEBApurchase in 1983.President Lusinchi (AD, 1984-88) faime halted the program, but only temporarily. later, when PresidentCarlos Andrés Pérez(1989-92), respondingto critics in his own party,ordered PDVSA to sellCitgo,the company arguingthat no buyerwould temporized, payVenezuela a fair price.The tacticworked.Pérez, beset by politicalwoes, was driven from office beforehe could insist on the sale. To win the December as a pop1988election,Pérezhad campaigned ulist. The good times enjoyed in his previous presidencywould return. to learn the country's CertainlyPérezknew better,but evenhe was shocked he financialcondition.Only $3oo million remainedin reserves; desperate would needto negotiate t989, Pêrez a $+.5billion bridgeloan. In February package negotiated with the announced a structural adiustment pricesand gasoline International Monetary Fund.On the daythat domestic public transportationfareswere to be hiked, urban rioting broke out in zz of this rebellionreinforced and days.The repression cities,lastingseveral which, led by Châvez, launchedan enlarged a conspiratorial military faction coup in rg9z. The previouslyobscurelieutenantcolonel unsuccessful the situbecamea symbolof popular discontent.Mommer later described ation well: "The military dreamt about savingthe country; PDVSAexecutivesdreamtaboutsavingthe companyfrom the country."6 but the punto{iiistasystem Pérez was forcedfrom officeby congress, was mortally wounded. In this context the oil company elite effectively pressedfor the apertura.Pérezhimself, seekingto deal with the financial for waysto boostoil revenues, procrisis, had turned to PDVSAexecutives Asidefrom moting SosaPietri,Giusti,and othersto companyleadership.

(Oxford: Mommer, polftica y petréleo Oxford lnstitute for Energy Venezuela, Studies, 5 Bernard r9 9 5 ),5 . Mommer, "Subversive Ellner and Daniel Hellinger, eds.,Venezuelan 6 Bernard oil," in Steve Politicsin theChâvez Era:Class, Polarization, CO: Lynne and Conflict(Boulder, Rienner, eoo3),
l 3l.

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the Citgo controversy,little debate ensued; oil policy, at the centre of Venezuelan politics before nationalization,now seemedperipheral.What matter frow PDVSAprofited if all profits went to the statel The only opposition to the aperturacame from a handful of leftist intellectuals and former guerrillas,most importantlyAli Rodriguez, from his seaton the congress's oil oversightcommittee,and Mommer, a companydissident.Theseleftists had had a relationshipwith Châvez's military circle sincethe r98os. Giusti and many of his circlein the companybegantheir careers in the pre-nationalization era working for the Shell subsidiary(Maraven);they becameknown as the generaciôn de Shell;Their first stepswere to widen a loophole in the nationalizationlaw which otherwise reservedthe oil industry to the state.Article 5 allowsfor "associations" betweenPDVSAand privateentities in "specialcasesand when it suits the public interest," requiring that the statecompanyretain control over such associations. In addition, the ry43law requiredthat congress and the presidentreviewand approve suchcontracts. In rggo, the company(not the ministry)obtained a supremecourt ruling that not only clearedawaythat requirementbut also all pre-nationalization legislationthat might conflict with the apertura under article5. This removed legalbases for criticsto challenge reductions of royalry internationalarbitration of contractdisputes,sliding rates of taxation, etc. PDVSAexecutives then "satisfied" the legalobligationfor statecontrol with ineffectualjoint committeesof control insteadof majority ownershipof shares. To further cement tlte apertura,PDVSAs contracts for servicesand partnershipmade the companylegally responsible to absorbany additional costsimposedas a resultof new government regulation or changesin the tax and royaltyregime. Effectively, the company had abrogatedthe ministry function of managing relations betweenthe nation and foreign capital,and to consolidate its role it madeitself hostage to its partners. In ry93 RafaelC-aldera was electedto his secondpresidentialterm (1994-98; the first was 1964-68).His hopesto implementa more heterodox economicpolicywere shattered by the nearcollapse of the banking system and his failure to hold bankersresponsible. Giusti and the generaciôn de Shellmovedto widen the apertura. Then cameChâvez.

7 José Enrique Arriola, Clientes Negros: Petréleos de Venezuela bajo la generacién de Shell (Caracas: Los Libros de El Nacional rSS8).

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O I L PO LI CY UNDER CHÂVEZ

by the collapse of world oil prices campaign in 1998wasabetted Châvez's in the aftermathof the 1997 Asian economiccrisis. By some estimates, The apereamingsfell from $r3.7billion in ry97 to $4.3billion in 1998.8 as low as one percent,slidfura soughtto minimize fiscalretums (royalties reducedministry capacity to audit costs)per barrel to attract ing tax scales, volumesof production.This concept new foreign investmentand increase and probablynot by the presi' was not well understoodby most chavlsfas, dent himselt who saw the "meritocracy,"as the genemaciôn de Shell proudly referredto itself, as merelythe leadingedgeof a corruPtoligarchy. to leadershipof OPEC determinationto return Venezuela Only Châvez's The Bolivarianconstitution of the oil executives. with the objectives clashed not privatization of sub' privatization PDVSA, of of 1999 prohibited The turning point came sidiaries.The aperturawas stalledbut not closed. authority of the national with a new hydrocarbonslaw decreed{under 2oor. in November assembly) regime'spoliciessincethen canbe summarizedasfollows: The Châvez the new oil regimecontinues Privatecapital.Farfrom ultra-nationalist, joint and operating and service ventures,sharedrisk partnerships, to allow But thesemust be consistentwith article 5 of the nationalizaagreements. tion law of rg75,the new (rgqg) Bolivarianconstitution,and the zoor decreelaw,which insistsupon majority ownershipof sharesin foint enterto the meritocracy. prises,all objectionable are onceagain Fiscalregime.foint venturesand operatingagreements subjectto substantialroyalties,and taxeswere raised,replacingarrange' of ments that had reducedroyaltiesto as little as one percent(exploitation with all zz companies heavycrudein the Orinocotar belt).Despiteprotests, zoo6. With migratedto the new law by zG fanuary operatingagreements high oil prices,and the governmentthreateningboth to exdude resisters oflegal from new venturesand to take overexistingoperations(regardless the companiesdecidedto comply.However,renegotiation consequences), was still pending in early zoo7. of heavycrudecontracts Intemationalization. Contraryto earlyindications,the governmenthas not proceeded to sell off Citgo or VEBA, settling for greateraccountability and repatriationof profits. Debt obligations,conffactualobligationsto proreal"Myth busting:How much moneydoesVenezuela 8 See"Oil wars,"oilwars.blogspot.com; zoo6. ly get from oill" Venezuelanalysis.com, r5 January

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vide discountedcrude, and disintereston the part of buyers made a sale unattractive. to OPECquotas,even returned to strict adherence OPEC.Venezuela reducing its eamings.In zooo, agreeing to includeheavyoil, significantly Venezuela successfully advocated the implementationof a "priceband"sysin overall production. President tem to trigger increasesand decreases onlythe second in the orgaan OPECsummit in Caracas, Châvez convened nizatiorfshistory.
T H E VE N E Z U E L AN O IL WA R OF zoor-o3

PresidentChâvez's oil policieswere at the centre of a fierce strugglefor political survival. For most of three years, the chavistas concentrated on political reforms. The oil ministry was entrustedto aperturacritics, but remainedensconced in their suites.Châvez appointed PDVSAexecutives presidency for loyaliststo the of PDVSA,but they were chosen their perWhile executives comsonalrelationshipto the president,not oil expertise. plained about politicizing the company,these early chief executives were easilycaphrredby the meritocracy.For example,the presidentof PDVSA publicly criticized the ministry's intention to raise royaltiesin the draft oil law of zooo. issuedhis controversial Then, in November2oor, PresidentChâvez 49 decreelaws, including urban and rural land reform, limits on industrial law. PDVSA executives fishing, and, most crucially,a ne\ryhydrocarbons reactedfuriously and threw their lot in with the oppositionfrrlly.A relatively successful one-daycivil strike in Decemberconvincedopponentsthey could bring down the president.Aside from oil executives (Gente de Petrôleol, oppositionorganizations included FEDECAMAS, the national labourbosses with the traditionalpolitical business association; associated parties; opposition parties and middle class civic organizations, some financed in part with US taxpayermoney; and the country's most prestigious newspapersand private broadcastnetworks. In February 2oo2, ChévezreplacedPDVSAs presidentwith an apertura critic, GastônParra, and named new directors (actually,a committee acting in his name, joinedforces chaired by the oil minister).On rr April zooz, the opposition with dissident sectorsof the military to oust Châvezbriefly, installing as president.Among Pedro €armona, head of FEDECAMARAS, was to from PDVSA, Carmona's first actions oust Parra evenbeforehe had appointed a cabinet.

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The coupwastriggeredwhen a massive demonstration marchedon the presidentialpalace, where it clashedwith Châvezsupportersand violence brokeout. The oppositiondemonstration, calledto supporta falteringcivic strike, was supposed terminate to in front of PDVSAheadquarters in the eastem,more afÏluent sectorof Caracas. At the last moment organizers calledon the huge crowd to march on the presidentialpalaceand "throw out the president."The media attributed responsibilitydirectly to government supportersfiring on unarrneddemonstrators. Subsequent investigations, while leavingunclear what actuallyhappened,showedthat the TV reports weremanipulated The US deniedanyinvolveand unsubstantiated. ment, but its intelligenceagencies aware in were of plans to overadvance throw Châvez.Some evidencesuggests that Washingtonencouraged the revolt.Ofïicially,the US lamentedthe coup but blamed Châvez for having provoked allegedly his own demise.e "Pedrothe Brief,"as he cameto be known,decreed the suspension of the national assemblyand repealedthe Novemberdecreelaws, including the oil statute. However, of mas48 hourslater,on r3 April, a combination sive, spontaneouspopular protest and loyal military garrisons brought Châvezback to power. Followingthe coup, ChâvezappointedRodriguez, generalof OPEC,to head who had served asoil minister and then secretary PDVSA.Rodrigueztried to reconcilethe meritocracyto the new chavista joined a neu/ civil strike, hegemony, but in Decemberzooz oil executives taking with them oil workersfrom the union headedby an AD union boss. captains groundingtheir The work stoppage and sabotage--e.g., of tankers vessels, computertechnicians erasinghard disks-reduced output from 2.9 million barrels a day(2.5million for export) to just 25,ooo.After repeated warnings, Rodriguezdischargedthe executivesand r8,ooo illegally Technicians from otherOPECcountries, strikingemployees. loyalworkers, The governmentsurvived;by April and retireesstaffed vital workplaces. production largely had recovered,though there remains disagreement aboutwhetherfull productivecapacity was restored. In Augustzoo4, Châvez confirmedhis legitimacy and the hegemony of his movement, winning nearly59 percent of votesin defeating an opposition attemptto recallhim. In late zoo4, Rodriguez became foreignminister,leavingthe companyand the ministry in the handsof RafaelRamirez,
9 Eva Colinger, El côdigo Châvez: descifrando la intervencién de los EE.UU. en Venezuela (Caracas: Editorial zoo5). Questi6n,

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who oversawthe "migration' of foreign investorsto the new oil law. The by having chavistas further consolidated the new oil regime in Venezuela PDVSAdirectlyadministerfunds supportingpopular'missions" in education and health,aswell as in financing of cooperatives and subsidized markets. Opponentschargethat thesefunds are rife with comrption and say they should be administeredby the state.Privately, some cftansfaleaders agree.Therecan be little doubt, however, that by directlyinvolving PDVSA in theseactivitiesthe regime hasbuilt public identity with the statecompany and poseda formidableobstacle to any future attemptsto privatizethe company. physicalappearance Châvez's and style of speechresembles those of the masses,whom he calls el soberano(sovereignones). He uses his extraordinary socialcommunicationskills to confiasthis useof oil earnings with the squanderingof oil revenuesbefore 1998. Actually,despitehigh prices,because of obligationsand contractsinherited from the old regime, total revenues at Châvez's disposalthrough 2ooJ were not much different from thoseavailable His high approval ratings(still 65 to his predecessors.'o percentin Februaryzoo6) representthe masses' belief that he guarantees their inclusion in the benefits of oil. On the opposition side, fear that Châvezwill isolateVenezuela from the circuits of global capitalgenerates intense oppositionfrom the middle class.Alarmed residentsof the more affluenteastern neighbourhoods of Caracas left their condominiumsto participate in huge, sometimesviolent streetprotests,including the one that resultedin the tragic eventsof April 2oo2.
C ON C L U SIO N

Recentconflictsover oil in Venezuela suggest that there remainsa significant potentialfor conflict betweenthe Westphalian norm of territorial sovframework for the global energy ereignty and a neoliberal governance viewssubsoilresources regime.A liberal regime classically as a free gift of hand of nature awaitingexploitation. Ideally,these"gifts" the spontaneous are collectively owned-but only until they are discovered and conceded "property." Hence,sovereign ownershipof the subsoilshould to capitalas eliminate obstacles to explorationand extraction,but royalty and state in this Ricardianview. regulation of production are counterproductive,

ro See"Oil wars" and "Myth busting."

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oil I I Venezuelan

As a foundingmemberof OPEC, Venezuela led the postcolonial offensiveby the third world to assertterritorial sovereignty of host countriesover the "rights"of extractive industries.Lessan association of "oil-producingl nations, OPECcoordinates the policies of landlordstates dealingin a threeplayeaglobal energy game with consuming nations and oil companies." From the host country perspective, the subsoil constitutesa repositoryof exhaustible"wealth meriting compensation-ground rent in classical politicaleconomy-to the nation. From the perspective mineralsin the groundare worthless of capital, until capitaland labour are expended to extractthem so that their exchange valuecanbe realized in the markeçlace.Consumers, whetherusing energy in other industriesor in homesand cars,resenthigh prices,no matter whetheroil companies or exporting are responsible. Hence,in idenstates tifytng more with the IEA than with OPEC,the PDVSAmeritocracy aligned itself with interestsat oddswith nationalismand the landlord state. Under the concession system,the distinction betweenlanded sovereign propertyand capitalwas clear:the oil ministry articulatedthe interest that of capital. After nationalthe foreigncompanies of the landlordstate; little more than bureauthesetwo entitiesseemed ization,conflict between cratic infighting among stateactors.The institutional memory accumulatin 50 yearsof dealingwith foreign capital under the old ed by Venezuela concession systemwas almost wiped out. The aperturatreatedsubsoil in is replicated resources as a "free gift of nature"to capital. This approach If the modellegislation for mineralsindustrydraftedby the World Bank.'" landlords, was "land to Revolution, the tiller," aimedat slogan of the French might havebeen "oil to the driller." the sloganof the meritocracy Neither sovereign owner nor driller is likely to prevailentirely.The lesexperience is that states must balance their interests sonof the Venezuelan with their interestin promoting domesticeconomicdevelas rent seekers opment and rational exploitationof their "natural wealth."

rr SeeBernard Mommer, (Oxford: Global Oil and the NationState OxfordInstitute for Energy Studies, zooz). tz In research notyetpublished, I findsimilar tendencies in thecase ofcopper in post-Pinochet Alsosee, Chile. 'A mining strategy for Latin America andtheCaribbean," World Bank, technical paper, t996,345.

zoo6-zoo7| 67 | JournalI Winter I lnternational

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