Chavez Threatens to Cut Off Oil to USA
Reuters News Agency February 9, 2008
CARACAS — Venezuela accused Exxon Mobil Corp. of legal “terrorism” yesterday after the giant U.S. oil company won court orders freezing $12-billion (U.S.) of the South American oil supplier’s assets in a dispute at the heart of a worldwide tussle for control of natural resources. Venezuela’s oil minister Rafael Ramirez played down the rulings, reassuring investors they had little impact on the supplies, operations or cash flow of the state oil company, PDVSA, which he said has about $100-billion in assets.
He said the largest American company hoped to destabilize the government of anti-U.S. President Hugo Chavez by using the legal battle over the nationalization of an Exxon project to create panic about the OPEC nation’s finances.
Exxon, which last week reported the largest profit yet of a U.S. company, sought the freeze to guarantee repayment, should it win arbitration over compensation for the project seized in a wave of Mr. Chavez’s takeovers last year.
Exxon “aims to subject us to a situation of judicial terrorism, of legal terrorism,” Mr. Ramirez told reporters. “We are not going to back down, we are going to beat them in this battle.”
The escalation of the dispute between the world’s largest oil company and Mr. Chavez, a leading proponent of resource nationalism, helped lift oil prices, because of investors’ concerns over sales from the No. 4 exporter to the United States.
Exxon has won court orders in Britain, the Netherlands and the Dutch Antilles, freezing assets of state oil company PDVSA.
The company said U.S. law made it too difficult to go after Venezuela’s most valuable overseas asset - Citgo Petroleum Corp., the eighth-largest oil refiner in the United States.
The value of Venezuela’s debt fell as investors worried the rulings would limit the activities of PDVSA, which is the main source of government income and has shown signs of cash flow problems as it finances Mr. Chavez’s programs.
But credit rating agency Fitch dismissed concern over any impact on the day-to-day operations and credit-worthiness of a company whose assets include refineries and storage terminals from the Caribbean to the United States to Europe.
“At the end of the day, as long as they have $12-billion in assets anywhere in the world, they are in compliance with this court order,” Gianna Bern, senior director at Fitch Ratings Latin America Corporate Finance, said.
Exxon’s move is the boldest challenge yet by an international oil major against any of the governments from Russia to Ecuador that have moved to increase their control over natural resources as energy and commodity prices have soared.