Venezuela's firebrand leftist President Hugo Chavez, re-elected in December, this week pursued his promised drive against “US imperialism” by nationalizing $30-billion worth of foreign-owned refineries, announcing his country’s withdrawal from the International Monetary Fund and World Bank and threatening to quit the US-based Organization of American States (OAS) if it censures him for closing Venezuela’s only independent TV station. It is what Chavez promised voters during the election. Venezuela has every right to renationalize its oil, power, telephone and hydrocarbon industries. Nevertheless, Chavez constantly makes it clear that virtually all these political moves are informed by distrust, if not indeed virulent contempt for everything for which the United States stands.
The nationalization of the four big oil refinery projects in the Orinoco Basin has been accepted with some reluctance by their foreign owners, which include French, British and Norwegian companies as well as US firms. The final temper of these oil companies will depend on compensation negotiations. The Venezuelans want to pay book rather than the higher market value and on some projects have said they ought to be paying nothing. A dispute over terms that ended up in the international courts could damage Venezuela’s hydrocarbon industry. The Chavez administration has clearly considered this problem and is turning to Chinese, Iranian and Belarusian companies to supply the technological input that will go with the departure of the former foreign project partners.
Chavez would rather use Venezuela’s oil wealth for his country’s poor and to fund his own plan for a Latin American bank that will finance key regional projects on less stringent terms than the IMF and World Bank. By rejecting the free markets that have come to dominant world finance and to a lesser degree its commerce, socialists like Chavez generally believe they are striking at Washington’s hegemony. (Nevertheless, Chavez also knows that he can’t hit so hard as to impose an oil embargo on the US because to fund his socialist vision he must continue to allow Venezuela to be one of the top oil suppliers of his northern nemesis.)
This can only be partially true. The fact is that for all the injustices inherent in capitalism, its does create growth and growth in turn makes available more wealth and resources to be focused on less fortunate parts of the world. Chavez, with his fellow socialist President Evo Morales of Bolivia, has chosen the opposing command economy model. It is an independent path that can be expected to succeed as long as the flow of hydrocarbon wealth is sustained. In changed circumstances however, Venezuela and Bolivia could find themselves on their own without the IMF, the World Bank or the world’s oil majors to help. It is an unfortunate reality that international business and finance have long memories. They may be reluctant to assist. The Chavez strategy, though legitimate, is therefore not without considerable risk.
