Monday, February 11, 2008
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Should the U.S. call Chavez's bluff?
Last week, Exxon-Mobil won a court ruling against Venezuela's state oil company, PdVSA, over Hugo Chavez's expropriation of oil facilities. Bloomberg's Joe Carroll and Steven Bodzin explain: Exxon Mobil Corp. won court orders in the U.S., U.K., the Netherlands and the Caribbean freezing more than $12 billion in Venezuelan assets amid a battle over the government's seizure of oil projects.Chavez has responded to the ruling in typical Chavez fashion: President Hugo Chavez on Sunday threatened to cut off oil sales to the United States if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.If Chavez were to attempt an embargo, there's no doubt that the United States would feel a twinge of pain. On the other hand, whatever twinge the U.S. felt would be mild compared to the massive spasms that would rip through Venezuela's economy from such a move -- especially since the only refineries that can handle Venezuelan oil are based in the United States. Furthermore, it's not like Venezuela's economy is all sweetness and light these days: These should be the best of times for Venezuela, blessed with the largest conventional oil reserves outside the Middle East and oil prices near record highs. But this country’s economic and social problems have become so acute lately that President Hugo Chávez is facing an unusual onslaught of criticism, even from his own supporters, about his management of the country.This is one of those situations where, if economic warfare breaks out, the U.S. holds most of the cards. I strongly suspect that Chavez's self-preservation motive will force him to back down -- but it would be kind of amusing if he believed his own bluster. posted by Dan on 02.11.08 at 08:59 AMComments: Oil is fungible. If Venezuela refuses to sell oil to the US, US oil purchasers will just buy oil somewhere else. posted by: Tracy W on 02.11.08 at 08:59 AM [permalink]To have any real impact, Venezuela would have to refuse to sell at all, not just to the United States, because, as noted in another comment, oil is fungible. To have any real impact, Venezuela would have to refuse to sell at all, not just to the United States, because, as noted in another comment, oil is fungible. Amusing? I certainly hope he backs down, but it's unlikely. Chavez is turning Venezuela into Zimbabwe. Even granting that Chavismo has some appealing elements, the way he has refashioned a stable middle-income country into a one-party (even one-man) machine is pretty dangerous. If the economy is held together with duct tape and baling wire now, imagine what it will look like if/when oil prices fall. posted by: George Wolf on 02.11.08 at 08:59 AM [permalink]Furthermore, it's not like Venezuela's economy is all sweetness and light these days I thought that point was that Venezuela's economy was never sweetness and light... it's sourness and heavy, right? ;) /bad joke posted by: John Thacker on 02.11.08 at 08:59 AM [permalink]I would pay real money to see Bush do his best Eastwood impression: Go ahead, make my day. posted by: Peter on 02.11.08 at 08:59 AM [permalink]Peter, He's already done that shtick with his "Wanted Dead or Alive" comment about bin Laden, who is probably still alive and href="http://www.whitehouse.gov/news/releases/2002/03/20020313-8.html">hasn't seemed to be wanted by the Bush administration for some time. Chavez is a blowhard who spends much of his time crying wolf. He did cut oil exports to the Dominican Republic briefly in 2003 when Carlos Andre Perez, the kleptocrat ex-president of Venezuela was living there, but that's the metier of a bully: picking on the little guys and merely talking trash to the big ones. While your post looks economically sound, I think you may have missed one small consideration: while the U.S. holds most of the cards, the currently ruling U.S. party does not. Making a decision that would exacerbate the current recession during an election year is something I suspect that they would try to avoid until there was no other option. Post a Comment: |
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