Wednesday, July 4, 2007

Two Energy Giants May Abandon Venezuela’s Chavez

Last week, Conoco-Phillips and Exxon Mobil refused to meet Venezuela’s deadline to reach an agreement on ceding control of their major oil production ventures, possibly indicating their imminent separation from billions of dollars in investments in that country.

The possible exit of two major American oil companies from Venezuela is not expected to have an immediate impact on American energy supplies.

Moreover, most energy experts believe that the Venezuelan state oil company will be hard pressed to sustain production levels without American expertise.

Oil is the centerpiece of a broader nationalization effort that includes telecommunications and electricity companies. Hugo Chávez is seeking a stronger hand for his government in Venezuela’s economy even as the oil industry, by far the country’s largest source of revenue, struggles to maintain its current, anemic production levels.

The possible abandonment by Conoco-Phillips and Exxon Mobil could be troublesome for Venezuela, what with public spending surging under Mr. Chávez and with oil companies from Brazil, China and India hesitant to make major investments in Venezuela while legal uncertainty persists, energy analysts have cautioned that Venezuela’s government may risk allowing prized reserves to remain underdeveloped.

“The Venezuelans have increased the cost of developing this resource,” said Roger Tissot, director for Latin America at PFC Energy, a consulting firm, in Washington. “At the end of the day, the Venezuelan people will pay the price for these decisions.”

In a similar move Zimbabwe’s government has put forward legislation that would require virtually all publicly traded companies to cede controlling interests to “indigenous” citizens, raising the possibility of a sizable redistribution of the country’s remaining wealth at a time when its economy is collapsing.

The draft legislation, which was published Monday, would mandate that a 51 percent stake in the companies be transferred to Zimbabweans who were “disadvantaged by unfair discrimination on the grounds of his or her race” before April 1980, when the nation won independence from white rule.

The government calls it a plan for black empowerment, while critics label it a bid to shore up crumbling political support for Zimbabwe’s president, Robert G. Mugabe. Given that Mr. Mugabe’s party dominates Parliament, the measure will almost certainly pass.

It was unclear, however, how Zimbabwe’s bankrupt government, beset by hyperinflation and a currency crisis, would finance the transfers.

At the same time, the government began an effort to rein in Zimbabwe’s hyperinflation, officially about 4,500 percent, but described by private economists as approaching 20,000 percent. A cabinet-level task force on price controls ordered factories and sellers to cut the prices of certain basic goods and services by as much as 50 percent — to levels that existed roughly one week ago.

the legislation evokes the specter of Mr. Mugabe’s seizure of thousands of white-owned farms early this decade, mostly without compensation, in what was then called a redistribution of land to poor blacks. Instead, many of the best farms were awarded to leading figures in Mr. Mugabe’s government and his ruling party, the Zimbabwe African National Union-Patriotic Front. Once “the breadbasket of Africa,” Zimbabwe today, can’t even feed it’s own population.

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