Venezuela's Next Leader Faces Tough Choice On Oil Program During his presidency, Hugo Chavez gave Venezuelan consumers cheap gasoline. He propped up the Cuban regime, and he offered oil on preferential terms to 18 regional countries. But Chavez died before he had to confront the economic and political problems certain to plague his successor.
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Venezuela's Next Leader Faces Tough Choice On Oil Program

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Venezuela's Next Leader Faces Tough Choice On Oil Program

Venezuela's Next Leader Faces Tough Choice On Oil Program

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This is MORNING EDITION, from NPR News. I'm David Greene.


And I'm Steve Inskeep, at a gas station in Caracas, Venezuela. You can smell the fumes here. And you can also see one of the signs that Venezuela is one of the world's largest producers of oil. Prices for gasoline are incredible low, around 20 American cents per gallon, one the benefits that Venezuela's late President Hugo Chavez was able to confer to his people. Chavez also conferred benefits on his allies across Latin America, such as Cuba, providing incredibly cheap oil.

Now, Venezuela's next president who will succeed Chavez after election this weekend will face a dilemma: Continuing oil diplomacy costs a lot of money. Stopping it could cost Venezuela friends.

Here's NPR's Tom Gjelten.

TOM GJELTEN, BYLINE: As Venezuela's president, Hugo Chavez thought in grandiose terms, and his country's vast oil riches enabled him to act on his vision. Venezuelans got ridiculously cheap gasoline and generous social programs. Chavez propped up the Castro regime in Cuba. Plus, he offered his country's oil to 18 of his Latin American and Caribbean neighbors at bargain prices, through an energy alliance he called Petro Caribe, an alliance Chavez said would free its members from U.S. energy imperialism.



GJELTEN: No one will be able to stop us from reaching our great historical objectives, he said.


UNIDENTIFIED MAN: Petro Caribe (Spanish spoken).

GJELTEN: An energy union with Venezuela on top.

For poor countries, the Petro Caribe deal was irresistible. Typically, they only had to pay cash for half the oil they receive. The rest they got on credit, financed over 25 years at 1 percent. Among those who eagerly signed up was Haiti. On the line from Port-au-Prince, the earthquake-ravaged capital, Energy Minister Rene Jean Jumeau says it was an easy call for his government.

RENE JEAN JUMEAU: Any country that would benefit from such a credit would take advantage of that. There's not even a need to justify this.

GJELTEN: To be sure, there were strings attached: Chavez wanted the Petro Caribe countries to support his ideological crusade against the United States. Some did so enthusiastically. Others largely ignored the Chavista rhetoric.

Jeremy Martin runs the energy program for the Institute of the Americas at the University of California, San Diego.

JEREMY MARTIN: A lot of these countries looked at this thing in a much more practical manner. And I think, you know, they were able to stomach the ideological as long as they could get such a wonderful financial deal.

GJELTEN: For countries like Haiti, Jamaica, and the Dominican Republic, the cheap oil from Venezuela could not have come at a better time, Martin says, with energy prices rising and the world economy in crisis.

MARTIN: Most of these countries we're talking about have no domestic supplies of oil and gas. Or if they do, it's minimal. These are energy-starved countries. And so they became absolutely addicted to it.

GJELTEN: But whether the deal is good for Venezuela is another question. The Dominican Republic is actually repaying its oil debt to Venezuela partly in string beans.

Jorge Pinon, who previously worked in Latin America for the Amoco and Shell companies, notes that all that oil that Venezuela provides on easy credit terms to other countries could have been sold for cash on the global market.

JORGE PINON: To Venezuela, from a cash flow point of view, this represents close to $5 billion a year of revenue that they're missing.

GJELTEN: And that's not all. The state0owned oil company, Petroleos de Venezuela - PDVSA in Spanish - donated oil to low-income families in the United States and sent oil to Cuba. Plus, there's all the oil PDVSA uses to give Venezuelans their cheap gasoline.

ROGER TISSOT: So in reality, PDVSA makes money from a small proportion of the oil it produces.

GJELTEN: Independent analyst Roger Tissot follows the Latin American energy scene.

TISSOT: Now, can that continue? I don't think so.

GJELTEN: It can't continue, Tissot and other analysts say, because overall, oil production in Venezuela is declining. Jorge Pinon, now at the University of Texas, cites some reasons: money that could have been reinvested in the industry went instead for those social and political programs. Skilled technicians and managers left as Chavez filled the oil company ranks with political loyalists.

PINON: In 1997, he was producing 3.5 million barrels a day. And today, they're about 2.8 million barrels a day. It shows you what a bad job the Venezuelan government has done in managing their national oil company.

GJELTEN: Venezuela's next president won't be able to maintain the oil industry, subsidize gasoline at home, spend oil revenue on social programs and share Venezuela's oil wealth with his Caribbean and Latin neighbors. Something has to give. Tom Gjelten, NPR News, Washington.

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