December 1, 2007

Chavez Threatens US Oil Supply (Update: He'll Boycott Himself?)

Hugo Chavez, facing a potentially embarrassing defeat on his dictatorship referendum this weekend, has declared the opposition a CIA operation. He now says those voting against a potential lifetime presidency for himself will have cast a vote for George Bush, and threatened to cut off oil sales to the US if the CIA continues its operations against him:

A threat by Venezuelan President Hugo Chavez to stop oil exports to the United States has raised the stakes over a Sunday referendum he has called in a bid to expand his powers.

Chavez told tens of thousands of supporters late Friday he was putting Venezuela's oil field and refineries under military "protection" and would halt the exports "if this (referendum) is used as a pretext to start violence in Venezuela."

He accused the US Central Intelligence Agency of preparing to spread unrest during the plebiscite in an effort to topple him, and said if its operation was activated "there won't be a drop of oil from Venezuela to the United States."

The menace was an escalation of anti-US rhetoric Chavez has long employed, and highlighted both Venezuela's pivotal role as South America's biggest oil producer, and the parlous relations between Washington and Caracas. ....

The referendum calls for a scrapping of term limits for the president, opening the way for Chavez to stay on past 2013, when he is due to step down. ... Changes to allow the government to take over the central bank and expropriate private property in the name of "economic socialism," and gag the media in times of emergency are also being proposed.

Fortunately, oil is a fungible market. If Hugo Chavez wants to sell his oil elsewhere, we would buy ours elsewhere. It might or might not raise the costs, but if it did, it wouldn't have a great effect on the price. Moreover, the type of crude Venezuela produces is more expensive to refine, and many nations would prefer to use the lighter crude available from other producers. Chavez may actually find his crude a little less valuable without the US as a trading partner.

The threat shouldn't bother the US, where people already avoid Venezuelan-owned Citgo, but the people of Venezuela. Chavez has tipped over the edge of paranoia and megalomania, and this example proves it. Even Chavez' fans among the poor have begun questioning his mania to turn their country into an homage to Fidel Castro, and his political allies have started to peel away from his spittle-flecked rants.

Can Chavez lose this plebiscite? It would take an extraordinary effort for Venezuelans to reject it. Chavez has all but called opposition to his proposal seditious. He told his now-friendly media that anyone voting against his referendum would be acting to further American imperialism and professing loyalty to Bush rather than Chavez. This kind of rhetoric should alert Venezuelans to the kind of dictatorship they would be approving in this plebiscite -- where dissent equals treason, as decided by a man who already has not hesitated to use firepower to intimidate the citizenry.

If Chavez loses, watch out for the explosion. Most likely, though, Chavez will "win" this election regardless of how the vote turns out.

UPDATE & BUMP: CapQ reader Janna B reminds me that PDVSA (Venezuela's state-owned oil company) bought Citgo years ago specifically for its capacity to refine the low-grade crude PDVSA produces. In effect, Hugo sells his crude to himself, mainly because few other refiners can handle his product. If he cuts off the US, he's cutting off Citgo, and there may be few markets left for Venezuelan crude outside of his own subsidiary.

Hugo may enjoy cutting off his nose to spite his face, but Venezuelans may not care to follow suit and dive into poverty.


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