ONCE again, Venezuela's self-declared 'Bolivarian' leader, Hugo Chávez, is in a fight with US oil interests - this time with the biggest company on the face of the earth. Last June, Venezuela nationalised the operations of foreign oil companies operating in the Orinoco belt. The move included projects part-owned by ExxonMobil and Britain's BP, and another US company, ConocoPhillips.

KEEBLE McFARLANE

Some companies, such as Petro-Canada of Calgary, successfully negotiated compensation with the Venezuelans, but the two big US companies refused. Exxon took Venezuela to court and this week secured rulings from courts in Britain, the Netherlands and the Netherlands Antilles as well as the United States, which temporarily freeze some US$12 billion in assets held overseas by the Venezuelan oil company, Petróleos de Venezuela SA, more commonly known as PDVSA.

This triggered Chávez off into full-attack mode, charging the United States once again with scheming to depose him, and threatening to turn off the tap on its oil supplies to the US. As you are aware, Venezuela is the fourth-biggest supplier of petroleum to the US and PDVSA owns a big US oil refiner and distributor, CITGO, which runs gas stations from coast to coast.

This was the instrument the Venezuelan leader used to supply heating oil to thousands of poor Americans some time back when the price of oil zoomed up and he wanted to thumb his nose at Uncle Sam on his own turf. On Tuesday, Venezuela did in fact cut off oil to Exxon, but those who watch the oil industry say Exxon buys very little crude from Venezuela these days, and can quite easily find supplies elsewhere to make up for that shortfall - about one per cent of its total imports.

Chávez got into the oil business five years ago after employees of PDVSA went on strike in protest against his efforts to direct the company's policies. He took over full control of the company and began his plan to nationalise all foreign operations in Venezuela, ratcheting up the conflict between his government and Washington, which had already designated him as a prime adversary. As the years have passed, the decibel level of the rhetoric between Caracas and Washington has climbed to levels guaranteed to cause deafness to those in the immediate vicinity.

When it comes to cussing the folks who run the US, the Venezuelan leader has never been one to hold back, and in his quarrels with the giant to the north he has won more often than he has lost. But this time Hugo doesn't appear to hold many cards. For one thing, petroleum is the South American country's only important export. The thick black liquid it pumps from the ground brings in nearly all of Venezuela's foreign earnings, and the United States is by far its biggest customer. Furthermore, the crude it produces is a particularly heavy type, and the US refineries to which it is shipped were designed specially to process it.

Finding alternate markets in a hurry is not a practical proposition, and what would happen is that third-party brokers would buy the crude and then sell it back to the US anyway.

Ironically, too, everytime Hugo gets into a shouting match with the Americans, the price of oil goes up and the big American oil companies rake in extra profits. The price went above US$100 a barrel right after New Year's among jitters about a possible recession in the US, but it's settled down a bit and now fluctuates around the $90 mark.

This week's contretemps caused only the slightest blip in that fluctuation. Most oil analysts discount the threats emanating from Caracas and suggest that if Washington pays too much attention, it would end up playing into Chávez's hands. But that doesn't mean Washington is ignoring him. The most sobre statement to emanate from Washington comes from the chair of the Senate Foreign Relations Committee, Richard Lugar, who suggests it would be in Venezuela's best interests to deal with Exxon through the courts than by any other means. Others are not so measured - Representative Ileana Ros-Lehtinen of Miami is one of the super-hawks when it comes to Cuba, and by extension, views Chávez as a new incarnation of her old bête noire, Fidel Castro. She suggested that the US consider adding Venezuela to its list of terrorist states because Colombian guerrillas sometimes cross into Venezuelan territory in sparsely populated jungle areas whenever they need to hide.

What sticks in the craw of those people is the fact that Venezuela is no longer a tame regime which toes any line laid down by Washington. Chávez plays up his bad-boy image by being friendly to places like Iran, which is one of the countries in the Bushling's 'axis of evil', and by developing close ties with China, which wants to buy Venezuelan oil to feed its burgeoning and voracious industries.

But setting up supply lines, building refineries and such take time and won't make any difference to the US supply for years. The big problem with most of the world's major oil producers is that they rely almost totally on petroleum for export earnings and this completely distorts their economies.

Venezuela, which imports much of its food and just about everything else, and pays ridiculously low prices for the fuel it consumes, is a classic case. Some people suggest that Hugo is using a classic technique of demagoguery to focus the attention of his compatriots on outside enemies whenever domestic problems come to the fore. Venezuela does have its share of these, with growing unrest among poor people in urban areas who have to pay more for their food, even though the government subsidises basic commodities. Chávez has also threatened to nationalise two big food companies -Parmalat of Italy and the Swiss giant, Nestlé. He accuses them of conspiring to sabotage Venezuela's dairy industry, which is suffering shortages of milk.

What Chávez needs to do is move quickly to diversify his economy and wean his country away from its almost total dependence on one product. That's easier said than done, but it's a task which has to be tackled if he really wants, as he constantly claims, to improve the lives of his fellow-citizens through his "Bolivarian socialist" revolution.

keeble.mack@sympatico.ca

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