Venezuela-U.S. Standoff Brewing Over Exxon Battle
MICHELE NORRIS, host:
From NPR News, this ALL THINGS CONSIDERED. I'm Michele Norris.
MELISSA BLOCK, host:
And I'm Melissa Block.
A feud between the government of Venezuela and Exxon Mobil heated up this week when Venezuela announced that it would not be sending anymore crude oil to Exxon's refineries.
Exxon has been seeking compensation after Venezuela unilaterally changed the terms of Exxon's main contract. Venezuelan leader Hugo Chavez even threatened to stop all exports of oil to the United States if Exxon wins this battle.
Oil prices went up on this news and many are wondering just how seriously they should take that warning from Chavez. NPR's global business correspondent Adam Davidson is following the story.
And Adam, why are Exxon and Venezuela so mad at each other in the first place?
ADAM DAVIDSON: It all started around a year ago. Venezuela's president, Hugo Chavez told six foreign oil companies including Exxon that he would demand that they give a majority stake to the Venezuelan government. This is - I guess, you could call it, kind of a nationalization. They would that Venezuela would own the projects that Exxon and these others had invested in.
Four of those companies, those foreign oil companies, all of them from Europe agreed to the deal but Exxon Mobil and the other American company Conoco-Philips said, no way, we're not going to do that. This is an illegal expropriation and they have been fighting it in court for the last year.
BLOCK: And in this week, things escalated further.
DAVIDSON: Yeah, what happened was Exxon Mobil won a big victory last week. They got a court in the U.K. and a court in the Netherlands to agreed to freeze Venezuela's assets around $12 billion in assets, and actually just a couple of hours ago, a court in New York also froze some assets here in New York of Venezuela's. This really outraged Hugo Chavez. He was furious at this. And in a very impassioned speech on Sunday, he said that he was going to cut Exxon off right away, no exports to Exxon. And that if things got worse, he was going to cut off all oil exports to the United States.
BLOCK: Now, what would that mean actually if Chavez were to follow through on the threat and cut off all exports to the U.S.
DAVIDSON: I think, you had to understand the mismatch that's going on. Now, you might think Venezuela is a country; Exxon is just a company, so Venezuela is more powerful. Exxon is much, much bigger than Venezuela. I found this kind of amazing. Exxon's revenues are two or three times bigger than the entire economy of Venezuela. Venezuela's entire oil sector is around $25 billion. That's how much Exxon has in the bank. Exxon has $30 billion in the bank. Exxon handles more oil than Venezuela. Exxon is just a much bigger player.
And so the stakes for Exxon are not terribly high. They can very quickly make up the oil that Venezuela stops producing. In fact, the stakes for the U.S. don't seem to be that high. Venezuela is our fourth largest oil supplier but it's a global market. We could get that oil from Nigeria or from the Middle East. Venezuela, though, doesn't have as many options as the U.S. does because Venezuela has this really smelly, thick, sulfur-rich oil that not many places can refine. The U.S. can, so Venezuela, it seems pretty clear they need us a lot more than we need them.
BLOCK: Now, the U.S. government has said that it supports Exxon's efforts to settle things but it said it won't get directly involved. What happens from here, do you think?
DAVIDSON: It seems that Chavez - and this is essentially have is trying to make this a battle between the two countries. He's hinted pretty clearly that he thinks the State Department and the U.S. government is really behind Exxon actions and that this is a global political battle. So far, the State Department hasn't bit. They say they support Exxon's efforts to pursue it legally but they're not going to get involved at that level.
BLOCK: Okay. NPR's Adam Davidson, thanks a lot.
DAVIDSON: Thank you, Melissa.