CUBA-VENEZUELA: Even ‘Friendly’ Oil Generates Debts

By Patricia Grogg Reprint | | Print |

Patricia Grogg and José Zambrano

HAVANA/CARACAS, May 27 2002 (IPS) - Cuba is negotiating payment of a debt to Venezuela in order to continue receiving oil shipments that were suspended when a coup d’etat briefly overthrew President Hugo Chávez last month.

The regulations of the state oil monopoly Petróleos de Venezuela (PDVSA) stand in the way of resuming shipments until a financial agreement is reached to settle Havana’s delay in meeting payments, the business attache at the Venezuelan Embassy in Cuba, Olga Fonseca, told IPS in Havana.

According to Fonseca, “there has been no suspension or revision” of the Caracas Oil Accord, signed in late 2000, which guarantees Cuba supplies of 53,000 barrels a day of Venezuelan crude on preferential terms – one-third of Cuba’s oil imports.

But Cuba owes Venezuela 100 million dollars, a PDVSA executive who preferred not to be identified told IPS in Caracas. He added that if Havana pays off its debt, the company “could promptly resume” deliveries to CUPET, Cuba’s oil company.

The bilateral accord stipulates that 80 percent of the shipments to Cuba are to be paid at market price within 90 days of delivery.

But the remaining 20 percent is payable in 15 years, with two years grace period, at two percent annual interest.

One of the first measures announced by PDVSA managers when Chávez was ousted for two days on Apr 12 was the cancellation of shipments to Cuba.

“And now, a piece of good news: we are not going to send one single more barrel of oil to Cuba!” the company’s then-director of refinery, supplies and marketing Edgar Paredes said at that time, addressing an assembly of company employees involved in a long-running dispute with Chávez.

However, after Chávez reclaimed the presidency, Venezuelan Minister of Energy and Mines Alvaro Silva Calderón said his country would continue to live up to its international obligations in oil, including the agreement with Cuba.

Nevertheless, Cuba “has not received oil” from Venezuela since the coup, and “we have had to import from other countries,” said Cuba’s Minister of Basic Industries, Marcos Portal, who did not provide additional details.

It was a strike by PDVSA managers and white-collar employees who accused the president of running the oil company as “just another ministry” that sparked the mass anti-Chávez protests which surrounded the Apr 12 coup.

But Chávez returned to the presidential palace on Apr 14 thanks to the backing of his supporters, who poured out onto the streets, and of key military units that refused to obey de facto president Pedro Carmona and the military high command.

One of the first measures Chávez took once he was back in office was to replace the PDVSA board of directors as demanded by the dissident managers, to signal that the state enterprise would be run on the basis of the merit system and business criteria rather than political interests.

The government and the oil company’s new board of directors, headed by the secretary-general of the Organisation of Petroleum Exporting Countries (OPEC), Alí Rodríguez, said the agreement for supplying oil to Cuba under preferential terms was still standing.

According to the pact, Cuba is to pay for part of the oil by sending doctors, coaches and sugar industry experts to provide their services in Venezuela.

However, the opposition in Venezuela complains that the oil agreement is part of an attempt by Chávez to “Cubanise” Venezuela. They point to supposed similarities between Cuba’s 1959 socialist revolution and the “Bolivarian social revolution” that Chávez launched when he took office in 1999.

Castro and Chávez have professed a close friendship since they first met in 1994 in Havana, shortly after then-lieutenant-colonel Chávez spent two years in jail for staging an aborted coup in 1992.

PDVSA spokespersons say the suspension of oil shipments to Cuba does not reflect any cooling off of political ties, but arises from new policy guidelines aimed at ensuring that the company is run on strictly business criteria.

The high-level PDVSA official in Caracas told IPS that although oil deliveries to Cuba were temporarily cancelled, sales to the island through intermediaries – the mechanism used for exports to Cuba prior to the Caracas Oil Accord – have not been suspended.

Alí Rodríguez defended the agreement as a mutually beneficial arrangement, pointing out that in the past Cuba purchased the same volume of crude and by-products from Venezuela through middlemen, which drove up the cost.

“Now Havana benefits because those intermediaries have been left out of the picture,” and Venezuela gained “an important market,” the new head of PDVSA said last week.

The interruption of shipments forced Cuban authorities to once again purchase crude and by-products through intermediaries, at a price up to 15 percent higher than what it pays Venezuela under the oil agreement.

Cuba hopes to extract 3.3 million tons of oil and 600,000 tons of natural gas this year. The total needs of the Caribbean island nation of 11.2 million are estimated at nine million tonnes, with consumption rising during the summer months (July and August).

Once the thermoelectric plant in Matanzas, 101 kms from Havana, is upgraded, 90 percent of Cuba’s power will be generated by domestic crude, which is lighter than Venezuela’s.

That should provide more stable supplies this year, said Minister Portal, who added that “Without that possibility, the financial situation in the second half of the year would be a bit more difficult.”

Cuba’s oil imports are its biggest financial headache. In 2001, the government spent one billion dollars on the fuel consumed by the thermoelectric plants alone.

In the past few weeks, the government has stepped up its campaign to encourage families to save energy, while new restrictions imposed on government enterprises are aimed at cutting consumption by 10 percent.

“The power we save in one house is the power we provide for another…saving energy is also part of the revolution,” states a document read out in small neighbourhood rallies in Havana in recent weeks.

The document, which carries the stamp of the Committees for the Defence of the Revolution, pro-government groups that link the residents of the various neighbourhoods and towns, underlines that the country spends one million dollars a day to generate electricity.