One
man is responsible for the trebling the price of crude oil in the past 18
months. Not only that, he is a leftist
opponent of globalisation and a bosom friend of Fidel Castro (with whom he
played baseball and sang a duet for the TV cameras recently). As such, he deserves a place in the pantheon
of demons alongside Saddam Hussein and Slobodan Molosevic. But far from being demonised, his name is
barely mentioned in the media here.
His
name is Hugo Chavez and he is the President of Venezuela, the country with the
largest oil reserves outside the Middle East.
He was elected President in late 1998, since when he has re-written
Venezuela’s constitution, got it approved by popular referendum and got himself
re-elected for a further six years. Not
even his worst enemies attempt to deny his popularity with the poor of
Venezuela, of which there are many.
Only in his mid-forties, he could be around for a long time, if he can
survive CIA-inspired bullets.
Oil
is Venezuela’s main source of wealth.
Chavez had the simple notion of financing his ambitious plans for
economic development and making the poor a little less poor by means of a hike
in the price of oil paid for by the West.
And what’s wrong with that? It’s
overseas aid without having to listen to Clare Short tell you what’s good for
you. So, he set out to revitalise
Organisation of Petroleum Exporting Countries (OPEC) and use it to drive up the
price of oil by restricting supply.
Although
we tend to think of OPEC as an Arab organisation, it was in fact conceived by
Venezuela and created at a conference in Baghdad in 1960, by Iran, Iraq,
Kuwait, Saudi Arabia and Venezuela. The
five founding members were later joined by eight others: Qatar, Indonesia,
Libya, UAE, Algeria, Nigeria, Ecuador and Gabon. The last two withdrew in the 1990s and OPEC now has 11 members,
which supply about 40% of the world’s oil consumption and have over 77% of known
oil reserves. Most important of all, the
OPEC countries have most of the world's excess oil production capacity, so if
they restrict the supply of oil, the difference cannot readily be made up from
elsewhere. (Also, Mexico and Russia,
two of the largest oil producing countries outside OPEC, seem to be
co-operating with it at the moment in restricting supply).
When
Chavez came to office in late 1998, the price of oil was less than $10 a
barrel. Production quotas set by OPEC
were not being stuck to. Earlier in the
1990s, Venezuela had been one of saboteurs in OPEC, ignoring the quotas set and
bringing in foreign companies to increase production through the development of
new fields.
OPEC re-invigorated by Venezuela
Chavez changed all
that. At an OPEC meeting in March 1999,
his oil minister, Ali Rodriguez Araque, was instructed to announce that
Venezuela would in future respect the cutbacks in production already agreed,
and would support a further cutback of 4%.
Ali Rodriguez is now OPEC’s president, and the oil price has risen from
$10 to over $30 a barrel. Other
factors, not least the continued expansion of the world economy, have
contributed to this rise. But a
re-invigorated OPEC has been primarily responsible. Chavez deserves to be named World Environmentalist of the Year.
In
August, Chavez toured all 10 of Venezuela’s fellow OPEC members, including Iran
and Iraq. He was the first foreign head
of state to visit Saddam Hussein since the end of the Gulf War. The US government opposed the visit publicly
but he went ahead anyway. He also
visited Libya and got on well with Gadaffi.
At the end of September, when protests over fuel prices were sweeping
Europe, he hosted the first OPEC summit in 25 years in Caracas. Thanks to Chavez, OPEC is a much more
disciplined, and more effective, body than it was 18 months ago, with the
relatively modest ambition of stabilising oil prices in the range $22 to $28 a
barrel.
The
Government has being trying hard to convince a sceptical public that recent
increases in fuel pump prices are not due to tax but to a rise in the world
price of crude oil. So why doesn’t
Chavez, as the person most responsible, figure as the villain in every story
about fuel prices? The only reasonable
explanation is that the Government, and the US Government, has decided to keep
quiet about the extraordinarily powerful position that Chavez, the President of
a small, underdeveloped country of only 24 million people, has carved out for
himself. (And since journalism barely
exists as a profession nowadays, his role has therefore not figured in
newspaper headlines).
To
get out of the present difficulty, the strategy of the UK, and the West in
general, has been to plead with their traditional friends in the Arab world to
increase oil production. Saudi Arabia
is the most important because it supplies around 30% of OPEC’s total output
(followed by Iran with about 13% and Venezuela with 10%) and has more spare
production capacity than any other state in the world. But, although Saudi Arabia has made conciliatory
noises, there is no sign of it breaking ranks.
OPEC is due to meet on 10 November to review and revise production
targets. In the meantime, the
undeclared war in Palestine has applied upward pressure on oil prices, driven
by the fear that the Arab world may apply the oil weapon to the West because of
its support for Israel.
The
emergence of Chavez must be a source of considerable worry to the US. Unlike his friend Castro, who has been a
minor irritant for the past 40 years, he has got economic clout and through
OPEC has a considerable influence on a massive amount of economic clout.
The
US economy is increasingly dependent on oil supplied by OPEC countries,
including Iraq. The US (with 5% of the
world’s population) consumes 25% of the world’s oil production, 60% of which
has to be imported. That proportion is
rising and will continue to rise because domestic oil production in the US is
falling – in the 1990s US production fell by 15% while consumption rose by 11%. It now consumes the bulk of the oil exported
by Canada, Mexico and Venezuela and is increasingly dependent on imports from
the Gulf, including Iraq, which is now producing nearly as much oil as
Venezuela. (Ironically, whereas US
companies are free to purchase oil from Iraq, they are forbidden under US law
from purchasing oil from Iran). The US
economy is now powered in part by OPEC oil, the availability and price of which
is influenced by Chavez.
(And
by Saddam Hussein. Iraq though a member
of OPEC is not subject to OPEC quotas, because its oil exports are governed by
regular oil-for-food deals supervised by the UN, in which about half the oil
revenue is confiscated as war reparations.
The current deal runs to 4 December.
If Iraq’s contribution to the world’s oil supply at nearly 3 million
barrels a day were no longer available, it is difficult to see how it could be
made up from another source in a hurry.
With OPEC restricting supply under the influence of Chavez, this is a
very powerful weapon in Saddam’s hands.
Even a suggestion from Bagdad that Iraq was not going to supply the West
with oil on the current terms might have a dramatic effect on Wall Street. Sanctions against Iraq may end very
suddenly.)
On
the political front, Chavez has ambitions to expand his influence in Central
and South America, which the US has long regarded as its fiefdom. His hero is Simon Bolivar – he has renamed
Venezuela the Bolivarian Republic of Venezuela – and he sees himself as the
leader of a movement to liberate Latin America from US driven
globalisation. He had better mind his
back.
Labour
& Trade Union Review
November
2000