Is Chavez, Fidel's New Sugar Daddy???

Gustavo Coronel seems to think so:

After leading a bloody but inept and unsuccessful coup in 1992, Hugo Chavez was sent to prison but after a few months he received a pardon from Venezuelan President Rafael Caldera. One of the things that he did after coming out of prison was to pay Fidel Castro the first of what would become a long string of more than 30 visits.........This modest investment by Castro in an obscure and ignorant Venezuelan demagogue paid handsomely. Today, Chavez .....is now paying back Castro’s hospitality with a largesse both beyond Castro’s imagination and disastrous for the Venezuelan nation.

Venezuela has become a political satellite of Cuba and the main contributor to the fragile Cuban economy. Venezuela represents today much or even more of what the Soviet Union was to Cuba during the early stages of the Castro dictatorship. Today, there are about 50,000 Cubans in Venezuela,

read the complete article at Petroleum World.




I disagree with Coronel, as far as Cuba increasingly running Venezuela, I characterize the relationship as more one of co-dependency. Chavez gets "street credibility" after all he was a high ranking Army officer with all the stigma attached to it in Latin America. Castro on the other hand gets reinvigorated by the injections of money, that allows him to relive his old glories by playing power politics outside of his failed utopia, and yanking the gringos chains. Fidel is getting too old to fully concentrate on these things, maybe his hyper child, Hugito gets to play lead as I said in another post.






Where the article gets cooking is when Coronel, with years of experience in the oil business, breaks down the deal for oil that Chavez and Fidel have:

III.

Under the terms of an arbitrary oil supply agreement to Cuba, Chavez is giving Castro a subsidy of between $3 and $4 billion.

The main contribution Chavez is giving Castro is in the form of oil. In an agreement signed by the two heads of state in October 2000, without proper consultation with, and approval by the peoples of the two countries, 53000 barrels of Venezuelan oil per day started to be sent to Cuba. This agreement was for 15 years. The Cubans can pay 25% of the oil shipments over the 15 years of the agreement, at interest rates of 2% and 2 years of grace. Payment requires no international guarantees, as is the case in normal commercial transactions of the Venezuelan petroleum company. Since commercial rates that Petroleos de Venezuela pay international lenders are substantially greater, it is easy to conclude that much of the Venezuelan oil going to Cuba under the terms of this agreement represents a gift from Chavez to Castro. On the basis of what we know of the details of the agreement, its favorable economic terms and the fact that an important portion of the oil can be paid in services, it is possible to estimate that no less than 10-13,000 barrels of oil per day are being given to Castro for free. At the current prices of oil, this handout of Chavez to Castro is already of the order of $3 - 4 billion during the 15-year term of the agreement. This is a considerable amount of money, taken away from a country where poverty afflicts more than 80% of the population.

IV.

But, since early 2005 the situation is much worse!

Since early 2005 the handouts from Chavez to Castro have almost doubled! In December 2004, a new agreement was drawn up between Chavez and Castro, again without the Venezuelan people being consulted since they only found out the details after the fact. In the context of this broader agreement, it was announced that the supply of Venezuelan oil to Cuba had been increased from 53,000 barrels per day to 90,000 barrels per day. Since there is no detailed information on the conditions of this new arrangement, we have to presume that the conditions are the same ones as before. This means that the gift from Chavez to Castro for the next 15 years will now be in the order of $6 to $8 billion.

V.

But wait…. there is more.

This unwarranted of Venezuelan oil and money to Castro has another probable and equally criminal component. According to Cuban official figures the domestic oil production in Cuba is already of the order of 80,000 barrels per day. This volume, claim the Cubans, is already sufficient to meet the industrial and electricity requirements for the island. Government and independent observers coincide in saying that the frequent power outages in the island are due to faulty maintenance of the electrical distribution system rather than to lack of domestic oil supplies. This means that the Venezuelan petroleum going into Cuba is only required for domestic transport. The Cuban government also claims that the oil consumption in Cuba is of about 160,000 barrels per day. Is this true?
If we accept that Cuba is consuming 160,000 barrels of oil per day this means that their consumption is of almost 15 barrels per day per 1000 inhabitants, consumption higher than Ecuador’s or Poland’s. It would represent consumption twice as large as Costa Rica’s or that of Egypt, Colombia, Peru or El Salvador and three times higher than that of Nicaragua, Bolivia or the Philippines. It would be six times higher than Nigeria’s and thirty times higher than Bangladesh’s. If this level of consumption were true it would also be higher than Norwegian or Irish or Puerto Rican oil consumption, all of which are countries with a considerably higher level of industrial and transport activity than Cuba. Cuban oil consumption, as claimed by the government, must therefore be highly doubted.

To judge by the level of transport in the island and by the general profile of the industrial and electrical consumption in a country where sugar production has declined to a third of what it used to be and where electrical supply is very erratic, it seems more likely to estimate oil consumption in no more than 120,000 barrels per day. If this estimate were close to being correct, it would mean that Castro could be re-exporting between 40,000 and 50,000 barrels of Venezuelan crude oil and products per day. In terms of additional income for Castro, at current prices, this would represent between $1.5 and $2 million per day, some $550-700 million per year.

In summary, therefore, the Venezuelan supply of oil to Cuba, under the terms of an illegal agreement that was never properly ratified by the nation, represents a total handout from Chavez to Castro of between $1.2 and $1.3 billion per year, for a total of some $18 to $20 billion during the 15 year duration of the agreement.

And those hypocritical hard-leftists who bitch and whine, about "the people" not having "a voice or were not consulted", in deals involving multinationals, now are silent.