CUBA: Venezuelan Oil Strike Takes Toll on Cuban Economy

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jan 9 2003 (IPS) - Cuba lost more than 200 million dollars in 2002 due to interruptions of Venezuela’s oil deliveries, the government of Fidel Castro said Thursday.

A communique issued by Cuba’s Foreign Ministry confirmed that imports of crude from Venezuela were cut off on Dec 2, due to the walkout declared by the managers of the state oil monopoly Petróleos de Venezuela SA (PDVSA), and only began to arrive again early this month.

Venezuela’s oil industry is the sector that has been hit hardest by the ongoing general strike declared 39 days ago by the main business and labour organisations and a coalition of opposition parties and civic groups in that country, to force President Hugo Chávez to step down.

”For over a month, not one single barrel of Venezuelan oil reached Cuba of the one and a half million barrels we should have received based on the cooperation agreement” signed by Havana and Caracas in 2000, said the statement.

Among the damages suffered by the Cuban economy, the ministry mentioned the virtual shutdown of the oil refinery in Santiago de Cuba, 967 kms east of Havana, and the fact that the government was forced to purchase oil from intermediaries at a high cost to cover the gap left by the suspension of deliveries from Venezuela.

In recent statements to IPS, Vice-President Carlos Lage explained that this country of 11.2 million currently consumes just over eight million tons of oil a year, half of which is produced in Cuba.

Of the rest, the largest portion is imported from Venezuela, and the remainder is purchased on the global market, said Lage, who admitted that the political turmoil in Venezuela and the possibility of a U.S. attack on Iraq would give rise to difficulties in Cuba.

Venezuela and Iraq produce a combined total of five million barrels a day of crude, which covers seven percent of global consumption.

The Foreign Ministry refuted assertions by private media outlets in Venezuela that the Chávez administration was ”giving away the country’s most important heritage” to Cuba, by sending oil shipments even when payments were not forthcoming.

The statement clarified that every barrel of oil had been paid for under the terms of Cuba’s accord with Venezuela. It also pointed out that the oil arrangement was part of a broader cooperation agreement that entailed assistance provided to Venezuela by Havana in the field of health care.

The cooperation agreement signed Oct 30, 2000 by Chávez and Cuban President Fidel Castro included an arrangement under which Venezuela promised to sell Cuba 53,000 barrels a day of crude for five years.

The ”terms and conditions set for Cuba are the same or less advantageous than those agreed with the rest of the countries of the Caribbean and Central America, the other beneficiaries of the Caracas accord,” stated the Foreign Ministry communique.

Havana pays 80 percent of the oil imports from Venezuela at market price, within 90 days of delivery, while the remaining 20 percent is payable in 15 years, with a two-year grace period, at two percent annual interest.

Havana received 25.6 million barrels of crude from Venezuela between December 2000 and early April 2002, when a failed coup d’etat against Chávez caused the first interruption of imports of Venezuelan oil.

”Up to that time, in accordance with the agreement, 439.7 million dollars were paid in cash and at market prices. The remaining payments, as per the formula that was agreed, will begin to be honoured in late 2003,” said the statement.

The first suspension of the agreement, which lasted until September 2002, forced the Cuban government to purchase crude and by-products at higher prices, which were driven up even further by the cost of transport, because some of the contracts were arranged in Europe and Africa.

According to the communique, another 4.4 million barrels were received from September to November 2002, for which Cuba paid 96.4 million dollars, ”the exact amount that Havana was committed to paying in that period, which it did without even a one-minute delay.”

”The incompliance by the state-run Petróleos de Venezuela caused more than 200 million dollars in damages to our country” in 2002, the statement added.

The Foreign Ministry said the two shipments sent in the first few days of January were equivalent, according to conservative estimates, to less than five percent of the crude exported by Venezuela when that country’s oil output began to recover slightly from the plunge in production caused by the strike.

In addition, it said that Cuba had paid hundreds of millions of dollars to PDVSA, ”assiduously meeting its obligations month by month, cent by cent, with great efforts and sacrifices.”

Finally, the ministry underlined the benefits of Cuba’s assistance to ”its sister nation of Venezuela,” which include services provided free of charge by 748 Cuban health professionals in Venezuela and the treatment given to 3,042 Venezuelan patients in Cuba.

In addition, of the thousands of young Latin Americans studying in the Latin American School of Medical Sciences in Havana, with all costs paid, 380 are Venezuelans.

In 2002, Cuba spent one billion dollars on the fuel consumed by its seven thermoelectric power plants, similar to the previous year’s total.

But the situation could worsen with the rise in prices triggered by the threat of a U.S. war on Iraq and the oil shortages caused by the crisis in Venezuela.

Under normal conditions, Venezuela is the world’s fifth-largest producer of crude, pumping 2.8 million barrels a day and exporting 2.4 million.

Cuban authorities warned last month that even without a war on Iraq, the situation in Venezuela could give rise to serious complications in terms of fuel purchases, which would put this country in ”a very difficult position.”

”You go out today to buy fuel with cash in hand, and it’s hard to find it immediately,” the president of the Central Bank, Francisco Soberón, warned late last year in a meeting in the Cuban parliament.

Soberón also pointed out that Cuba does not have ”the additional hundreds of millions of dollars” that would be needed to import fuel in the midst of ”a wild race towards astronomical prices.”