COMMODITIES: Towards a Strategic Cuban-Venezuelan Alliance in Oil

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Nov 19 1999 (IPS) - Venezuelan President Hugo Chávez’s two-day official visit to Cuba brought progress in negotiations towards a joint venture in the oil sector, the Achilles’ heel of the Cuban economy.

“We will work for the refinery in Cienfuegos in a strategic alliance with Cuba,” said Chávez, who admitted however that several technical aspects of the project were in need of finetuning.

A joint venture for operating the installations for refining crude oil in Cienfuegos, 336 kms southeast of Havana, would give the Caribbean island nation a needed respite in terms of its power supply, one of the weakest points of the local economy since Cuba lost its largest supplier, the Soviet Union.

According to technical studies carried out by the state company CUPET, the refinery has a capacity to process up to three million tonnes of crude a year, and will be able to refine a mix of several crudes.

Up to the late 1980s, Cuba had all the oil it needed thanks to its trade privileges with the Soviet Union, which it lost in the early 1990s with the collapse of the eastern European socialist bloc.

The Cienfuegos refinery is one of several Cuban-USSR projects that were left incomplete, like the Juraguá thermonuclear plant in the same city.

Cuban authorities confidently spoke of the joint Venezuelan- Cuban running of the installations, although the president of Venezuela’s public oil company Petróleos de Venezuela, Héctor Ciavaldini, expressed himself in more cautious terms.

Ciavaldini, who accompanied President Chávez on his visit to Cuba, said the project was still being studied, and that it would involve “minor changes” in the plant.

He said the upgrading that would allow the plant to produce kerosene as well as diesel and airplane fuel would require an initial investment of “less than five million dollars.”

But “there is nothing until we have the numbers clear,” said Ciavaldini, who added that a feasibility study could be ready in the next 10 days.

“But this is in earnest,” he added, after Cuban Foreign Trade Minister Ricardo Cabrisas confirmed that an agreement had not yet been signed.

In August, the Chávez administration made an unsuccessful bid to extend to Cuba and other nations the San Jose pact, through which Venezuela and Mexico sell oil in favourable conditions to 11 Central American and Caribbean nations.

Caracas, however, announced that it would insist on its proposal, and Foreign Minister José Vicente Rangel expressed his government’s interest in using oil as an “instrument” of foreign policy – “in the positive sense of the word.”

Cuba expects to produce 2 million tonnes of crude this year and 500 million cubic metres of gas, with which it would cover 30 percent of national demand. Although insufficient to meet the country’s needs, that volume compares favourably with the 526,800 tonnes produced in 1991.

The increase in production was the result of an ambitious plan to develop Cuba’s oil industry, including the adoption of state-of- the-art technology and associations with foreign capital.

The government of Fidel Castro is also keen on attracting foreign investment for joint ventures in prospecting in Cuba’s 112,000-square kilometre exclusive economic zone in the Gulf of Mexico.

Chávez and Castro held a series of official conversations Wednesday, and on Thursday evening were the stars of an original baseball game in which the Venezuelan president played outfield and Castro coached the hometeam. Cuba won five to four.

Castro was at Chávez’s side during most of the two-day visit, read as a clear demonstration of the close ties between the two governments.

Chávez said the political cooperation between the two countries should be extended to the economy. The two countries are arranging cooperation mechanisms for the sugar industry, the energy sector, and the production of rice, other foodstuffs, and farm equipment.

Venezuela is one of Cuba’s main trading partners, with trade between the two nations amounting to 360 million dollars last year.

On his two-day official visit, which took place after the ninth Ibero-American Summit held in Havana Monday and Tuesday, Chávez was awarded the José Martí Order, the highest decoration bestowed by the Cuban government.

Shortly before heading home, Chávez described his visit as “very intense and profound.”

On more than one occasion, the Venezuelan president criticised those who demanded that Cuba follow “the route of democracy – a false democracy.” Chávez defended a concept of democracy that provided the people with “the greatest possible social security, political stability and happiness.”