Will Venezuelans be eating more rice or borscht or both in the future?

Will Venezuelans be eating more rice or borscht or both in the future?

by Kevin Rosner

Venezuelan threats to cut off oil exports destined primarily to US refineries, in response to a row which erupted last week between Columbia and that country, may end up backfiring on this South American petro-dictator.

On July 25th the BBC quoted Venezuelan President Hugo Chavez as stating, "If there was any attack on Venezuela from Colombian territory or from anywhere else, promoted by the Yankee empire, we would suspend oil shipments to the US, even if we have to eat stones."

In an article pending publication in the July 2010 issue of the Journal of Energy Security, Dr. Nancy E. Brune of US Sandia National Laboratory, outlines US-Latin American relations in energy.  She warns [the US] is "affected by domestic political and economic conditions in oil-exporting countries upon whom we depend." There is no doubt about the veracity of truth in this statement. Any disruption in markets that provide crude or refined products to the US are certainly unwelcome. But like the other misguided policies of the Chavez regime in the energy patch which have reduced Venezuelan oil exports over the last several years an abrupt slashing in exports to the US market may hurt rather than help his cause of liberating his country from 'foreign influence'.

The spat between Columbia and Venezuela broke out last week when Chavez ordered a cut in diplomatic ties to neighboring Columbia. This was purportedly, after the Columbian Ambassador to the Organization of American States (OAS),  presented documentation at an emergency meeting of the OAS on Venezuelan complicity in harboring FARC (Revolutionary Armed Forces of Columbia) and the avowed Marxist guerilla group  ELN (Ejército de Liberación Nacional) rebels opposed to the Columbian government on  Venezuelan soil. 

Under Chavez, Venezuela has sought to diversify its oil exports away from the US.  According to 2008 US Energy Information Administration analysis, "One of the fastest growing destinations of Venezuelan crude oil exports has been China. In 2008, China imported about 120,000 bbl/d of crude oil from Venezuela, up from only 39,000 bbl/d in 2005. Venezuela also exports fuel oil and other refined products to China." However Chinese imports are dwarfed by Venezuelan exports to the US Gulf Coast.  Overall it is estimated that the US imports 1 m/bd of Venezuelan crude and refined products. 

Should Chavez decide to suspend oil exports to the US, he would deprive CITIGO, a subsidiary of the Venezuelan National Oil Company (PdVSA), with some 14,000 retail outlets in the US product to sell.  In addition PdVSA has also financial interests in a number of US refineries which would presumably also suffer. A Chavez-proscribed buffeting of ‘US’ oil interests would therefore pummel its own interests in the country’s largest downstream market.  No one, perhaps with the exception Venezuelan President, assumes that this would force a change in the diet of the Venezuelan people to "eat stones". However it may accelerate a shift in energy relations towards rice. 

In short the  galvanization of closer interests between China and  Venezuela, only in part as a response to most recent events, bears watching by US policy makers. China’s involvement in Iran may provide an example of what a future Venezuelan-Chinese relationship may look like.  In this example, forget the oil.  Since the 1980s China has been a chief supplier of military weaponry to Iran. China has supplied ballistic and cruise missile related technologies to that country. It could do the same thing in Venezuela in spite of the saturation of a commitment by Russia to provide some $4 billion in weapons exports to Venezuela.  In short as Venezuela militarizes, to the consternation of neighbors, there are threats that go beyond significant US concerns about its own oil future and settle more broadly across the plain of stability across South America on the whole. 

For Chavez, it would appear that growing Chinese, Russian or even Iranian influence in the country is preferable to that of the US. How these deepening relations impact over the longer-term on strengthening Venezuelan national sovereignty is obviously not a factor in Chavez's short-term thinking.  On the contrary, it may be something that US policy makers may want to think about.