Truemors
Exxon Mobil has won court orders freezing as much as $12 billion in petroleum assets controlled by Venezuela's government in an escalation of a dispute over efforts by President Hugo Chávez to assert greater control over the country's oil industry.
Venezuela's dollar-denominated bonds suffered their steepest drop in six months on Thursday on concerns that Chávez's government could face a protracted legal battle with Exxon, preventing the government from raising cash through the sale of refineries abroad if the economy here slows after years of torrid growth...
In recent days, Exxon won a court order from the High Court of London prohibiting Petróleos de Venezuela from selling assets worldwide up to a value of $12 billion, Margaret Ross, an Exxon spokeswoman in Houston, said in a statement. Exxon won similar orders in the Netherlands and the Netherlands Antilles for assets worth up to $12 billion.
And in New York, Exxon won an order freezing $300 million of Petróleos de Venezuela's assets. Despite a deterioration of political relations between Caracas and Washington, Venezuela remains a major trading partner with the United States, ranking as its fourth-largest supplier of imported crude oil.
Last year the Venezuelan government took over the Orinoco Belt oil project, of which Exxon owned 41.7%. In September 2007, after failing to reach agreement with Venezuela on compensation for their stake in the project, Exxon took the case to the International Centre for Settlement of Investment Disputes, an arbitration body associated with the World Bank.
"Exxon Mobil has worked with the Venezuelan government to reach an agreement regarding compensation based on the fair market value of the assets," company spokesman Len D'Eramo said.
"We are disappointed these discussions have not been successful."
While it might make sense to an adolescent ideologue to confiscate assets to redistribute wealth to the poor, the the real effect of such nonsense is negative.
Not only has Chavez discouraged investment in Venezuela and its oil industry (who would risk investing there now?) but his "redistribution" policies are starving Petroleos de Venezuela (the state-owned oil company) of capital:
PDVSA is already facing growing debt and increasing operational problems that analysts attribute to underinvestment caused by the company's massive contributions to Chavez's social programs.
Social development in PDVSA is a process of formulating and executing projects in alignment with the Community Development plans of the State. In order to put oil resources to the service of the wider population and create a new economic model, putting an end to the social inequalities so apparent in Venezuela in the last decades, PDVSA promotes Fondespa (The Fund for Social and Economic Development within the Country), which has the task of promoting social development through a transparent and fair distribution of oil revenues.
Backing the social missions promoted by the National Executive is one of the ways in which PDVSA gets directly involved in the lives of ordinary Venezuelans. The company, as part of its revolutionary, corporate responsibility program, encourages groups to take part in their own development projects by first considering the specific conditions (cultural, productive, etc) of each region in the country. By doing so, the corporation acknowledges and respects the constitutive plurality of Venezuelan society. That is how the Endogenous Development Nuclei (Núcleos de Desarrollo Endógeno or NDE) are established, allowing each community to become aware of its potential and is also capable of strengthening and transforming itself so as to generate benefits for the community and eventually become self-supporting.
PDVSA is 100% committed to the eradication of both rural and urban poverty. The company promotes an extensive network of endogenous development projects throughout the country. It also actively discourages every kind of discrimination and is dedicated to supporting minority groups within Venezuela, through a wide range of different programs.
The social programs organized by PDVSA:
* Offer the means, possibilities, and real resources to enable citizens to improve conditions in personal, social, cultural and professional aspects of their own lives. This is carried out in a way that educates individuals to develop a communitarian consciousness, whilst upgrading their skills and allowing them a greater participation in the economic, political, and social life of the country.
* Establish the strategies and programs that conform to the regulations of the National Executive and PDVSA, and enable information, resources, assets and document exchanges between PDVSA and other sources of social development that contribute to satisfying community requirements and expectations.
* Align and communicate, together with PDVSA’s main organizations social and economic programs; guaranteeing an improved coexistence and greater understanding between PDVSA and the communities it serves.
We suspect that Chavez has little grasp of the fact that wealth is accumulated over time through investment in productive activity. An ordinary business grows and prospers through accumulation of profit and reinvestment in itself. Many businesses engage in community investment in recognition of the benefits and of their social responsibility. But PDVSA is engaged in a much broader project: "the eradication of both rural and urban poverty." The "endogenous development" program seems as much ideologically led social engineering as investment. Such efforts would seem to be beyond the means of any business, even a national oil monopoly, and especially one bound by a discredited ideology that has led to the freezing of its assets.
If Chavez had a grasp of reality he would understand that by cooperating with foreign investors he could preserve Venezuela's credit, keep PDVSA profitable and healthy, and free up more capital to reinvest in his social programs (whatever they may accomplish). But he seems to prefer his class warrior status to the actual achievement of his stated goals.
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