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Hugo Chavez: from one absurdity to the next


Caracas 30.08.06 | Since his return from his lengthy trip to China, President Hugo Chávez has been making much of Venezuela’s increased penetration in that market, as though it were a tremendous achievement. Not only that, when he was barely off the plane, he was talking about his plans to create a multipolar world with a view, among other things, to challenging the hegemony of the United States.

The President also announced a project aimed at increasing Venezuelan oil exports to China from 150,000 b/d to 500,000 b/d in the short term. There is nothing more absurd than replacing a reliable buyer practically on one’s doorstep with one as far flung as China. Sending oil to China costs Venezuela $11/barrel, whereas it costs only $3/barrel to send it to the United States, a difference of $8/barrel. That means that, if they manage to sell 1 million barrels a day to China, Venezuela will lose earnings of $4.3 billion a year just from the difference in freight costs.

The campaign to increase ties with China at the expense of the United States is what is behind the sale of CITGO’s 41.5% share in a refinery in Houston to Lyondell Chemical Co. Energy. Petroleum Minister Rafael Ramírez justified this sale, in part, because of a long-term contract under which they were under the “obligation to sell” oil at a discount, whereas now, with the new contract, they are apparently selling oil “at its fair price.” However, Lyondell Chemical, in a public announcement, claimed that, had that new contract been in force since the beginning of 2005, as the owners of the refinery, they would have earned $241 million more in 2005 and $190 million more so far in 2006, which suggests that the contract scorned by Minister Ramírez was not so disadvantageous for Venezuela.

But the figures have no relevance whatsoever for President Chávez, as the criteria that prevail in his running of the country are political not economic.

Source Veneconomy

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