Bolivia's carbon nationalisation - Africa next?
- 3 May 06, 10:21 AM
It's not often you see a decree on nationalisation these days, especially not one that starts "Heroes of the Chaco!" and accuses previous governments of high treason. So what is Evo Morales doing? In the first place this is not a classic Marxist expropriation. He is promising to buy back 51% of the oil and gas assets of private companies - albeit at a price set by him in 6 months time: implication...play ball or get out.... (See my report on all this last night ).
The companies we've talked to are playing it with the usual froideur of the hydrocarbon industry: Brazil is getting het up because it's naitonal oil company Petrobras put a lot of eggs into the Bolivian gas basket and Brazil itself gets half its gas from Bolivia.
Morales stood for election on one big promise: that he was going to Nationalise the oil and gas. He got a 54% landslide in the election. So this was expected. It's clear this is not meant as an anti-capitalist measure but to redraw the pie chart of who gets what from the oil & gas contracts.
Global companies, Washington and the EU are all tut-tutting about the lack of legal secirity this indicates for foriegn investment etc etc. Javier Solana, the EU foreign affairs minister said "Legal security is fundamental so that foreign investment arrives and development can proceed. I believed that he had understood what I had told him. (Now), I think that, at best, he had not understood everything."
Wise up people! Last year Rosneft snaffled the assets of Yukos on behalf of the Russian government! Venezuela renationalised its oil six years ago! There are guys in the mangroves of the Niger Delta who seriously believe they're gonna sieze the pumping stations and keep the revenues....And it can go both ways: three years ago Iraq had a nationalised oil industry...now, if it gets itself a government, the first thing they are going to be discussing is, once again, redrawing the pie chart.
The lesson here is that there is no stable "legal security" for the world's strategic energy assets: governments and businesses will have to stop seeing energy as a "business" issue and see it as one of geopolitics. The Bolivian people voted for nationalisaton - and as I found out are ready to lynch Morales if he does not enact it. These are the kind of forces that can rip up 25 year contracts.
Now, do you want the really interesting news...see the New York Times' of all this, with a very interesting quote from PIRA.
''I don't think the game is over,'' said Lawrence J. Goldstein, president of the , which is based in New York and is supported by the petroleum industry. ''It's going to move from the Americas to the Africans. This is a very dangerous precedent.''
As for the entry of Bolivia into ALBA, which I talked about on last night's programme, I will leave it for a later posting. In the meantime, to get your head around how Venezuela is able to underwrite most of the financial engineering going on among the left-inclined administrations in Latin America, I once again recommend reading .
Postscript: Now, fellow journos, when you ask me "why should we care about Bolivia" at least I will have less trouble keeping you awake!
Comments Post your comment
Paul,
"Wise up" ! Oooh, strong words.
There's rhetoric, but also reality, and I think (well, I hope) that any EU minister who's heard of the Ukraine knows the difference as well as any.
In our own small and very polite way, we in the UK are quite used to "nationalising" parts of the energy industry, and without compensation, when it suits.
But we call it windfall tax, which sounds perfectly fair and reasonable, and I'm sure is quite legal, but also amounts to a confiscation of assets from private companies to the Government.
And, on the whole, it's rather popular, I believe. Well, I enjoyed it !
Of course, Evo is a "madman" and Gordon is "Prudence". That's alright then.
Complain about this post
It's good to see the people of some South American countries taking back some of the overwhelming power foreign multinationals have held over their natiral resources. Whilst I have some worries about the dictatorial nature of the likes of Chavez there can be no doubt that his literacy programmes and the general help he has given to Venezuela's poor is a breath of fresh air compared to the policies of the pro-western leaders that went before him.
It's time these multinationals were pulled down the ladder several rungs, creaming off profits and massive dividends for shareholders have taken what should belong to the people of those countries. Lets hope some of this spreads over here!
Complain about this post
I lived in Venezuela in the 1970's. I did not see Multinationals because most of the businesses were under government control. The problem was that the Venezuelan Government at that time started to lose contact with the people. This is the same thing that is happening in the USA.
It shoudl also be remembered that Castro and Chavez are stooges of the two party system in America.
Complain about this post
I'm with Kim and Andrew, this all seems to be a jolly good show from where I'm standing.
On a slightly related topic, when Russia tried to recover the billions stolen from it by a handful of individuals I always found the cries of "state theft" from various quarters a bit puzzling. It all appears to be putting some much needed balance and fairness back into the system, or possibly I'm hopelessly naive.
Complain about this post
You can't talk about coherently about the present without understanding the past ("those who forget history are comdemned to repeat it"). One of the most important witnesses to the truth about what the USA has meant to Latin America is the late USMC Brigadier General Smedley Butler, who served from about 1900 to about 1930. A good example of what he saw is expressed in statements of his such as "I spent 33 years in the Marines, most of my time being a high-class muscle man for big business, for Wall Street and the bankers. In short, I was a racketeer for Capitalism.".
What the Monroe Doctrine really meant was that the southern border of the USA was not the Rio Grande but rather the southern tip of South America. For about 150 years, Latin America was in effect one big plantation under Corporate America masters, and Latin Americans were all either slaves or overseers for those masters.
Western criticisms of Latin American leftists are nothing but double standards and red herrings. Latin Americans are perfectly justified in turning to leaders who promise socialism and divorce from the vampire-nation USA.
To paraphrase Paul Krugman in his recent book "The Great Unravelling": speaking the truth sometimes requires saying some very rude things.
Complain about this post
Almost all countries, certainly all poorer countries, depend on foreign investment and technological and commercial knowhow for economic development and higher living standards. The biggest negative for investors is sovereign risk, whereby the host government changes the rules and parameters on which investment decisions were made. With high sovereign risk, many investors will no longer consider your country as an option. The remainder will demand a high risk premium for any projects in that country - they will only invest with very high rates of return, which reduce the chance of serious losses. Bolivia's action is a recipe for lower living standrards.
Complain about this post
There certainly is a lot more to come. Read 'Confessions of an Economic Hitman' which explains in some detail (as the author was one of those doing it) how the US/IMF/World Bank tried to get these economies seriously indebted so that they were under American control (and if that didn't work then fomenting a coup or as a last resort invading like they did with Panama).
With the US bogged down in Iraq, and weaker than it has been for some time in terms of its ability to apply military force to ensure it gets its way, the countries that have suffered for years under these policies have a better chance than they have had for ages to do something about it. The US cannot take on Iraq, Iran, Venezuela, Bolivia and Russia all at the same time. My prediction is that we will see more countries joining the 'energy nationalisation' party whilst they feel they can.
Complain about this post
Considering that the other candidate in Bolivian elections was running on a platform promising "zero tolerance on social unrest", those soldiers would be out on the streets anyway. Only, they would most likely be shooting at the angry masses. I would say that Bolivia is still better off with Evo Morales.
Complain about this post