Monday, May 01, 2006

Bolivia: Evo Orders Seizure of Oil and Gas Fields.

This is silly, the army was ordered to seize gas and oil fields, and did so with big fanfare.

Before I go into hysterics, I will say that this has ample precedent in Bolivian history, going back to the seizure of Standard Oil's holdings by a military government in 1937, and the later expropriation of Gulf Oil in 1969. In both cases it was military regimes in power that did this, and like Evo's actions were also done with a lot of flash.

Both were US owned companies. And as a result, the US government, under FDR, and then Nixon pretty much did....... nothing. Actually, FDR's government got Standard to reduce its claim, and then brokered the deal that effectively settled Standard's claims. Bolivia paid a minimal amount, and in return received millions of dollars in US credits, with which it set up Yacimientos Petroliferos. There was of course, an issue about the US simply wanting Bolivian tin supplies during WWII.

The seizure of Gulf's holdings, which were much more substantial, provoked a collective yawn from the Nixon administration which continued to engage the left-leaning military government of Torres and then Ovando. The military government,from the beginning indicated it would indemnify the company, and reached a settlment with Gulf eventually. While the Banzer regime which overthrew Ovando's government, was more to the right, it happily kept the oil fields, and actually negotiated a reduction in the indemnification amount.

All in all, the Nixon and Kissenger team had little concern for Bolivia, their big issue in South America was Allende, which in the greater scheme of things was insignificant considering Vietnam, detente with the Russians and the opening of China.

So in the present case the seizures affected European and Brazilian companies. US interests affected here include mainly Exxon holdings. Given prior US policy towards Bolivia, I do not see that much of a backlash in the US about this.

But, Petrobras and Repsol-YPF, are pretty ticked off, and Lula and Zapatero's governments have already shown a lot of displeasure. I would think that they would have been forewarned - particularly Petrobras, and this appears to not be the case.


CandiaMan® said...

Today is a historic day said evo, no doubt about it.

What were they thinking, all this time they set meetings with all the companies, "negotiating" that's the result? i don't think so.

I´m begining to belive that those meetings were actually "decoys", time savers, while they were doing their own thing...

darkest hour has finally arrived to this country

Boli-Nica said...

I think Evo thought this would be viewed outside as largely symbolic, to fire people up...

Nahu said...

and lets not forget the implication this has with the recently formed alliance between venezuela, cuba and bolivia.

Michael Moretti said...

Evo's biggest obstacle in this process will be his own government. The bureaucracy he'll need to establish to support the "nationalization" will be modeled, and have the same success (lack of) of most government ministries. His actual intent may be financial, but ultimately it is a political maneuver and will suffer the same consequences of most economic plans driven by ideology. Incidentally, today he announced that nationalization of forestry, mining and land sectors will follow shortly. It will be interesting to see what develops also in the face of the fragmenting trade blocs here. Venezuela's Chavez has recently announced that Venezuela will pull out of the Andean Community on account of Colombia's and Peru's signing free trade agreements with the US. (Note that Venezuela is one of America's top oil suppliers.) Bolivia, too, may follow suit, and in the process jeopardizing their Mercosur associate status: Evo's deed this week will primarily impact Brazil, the largest member of Mercosur, and Bolivia's main customer for natural gas. Tensions are already palpable, as Bolivia just last month thwarted a $150 million Brazilian metals project near their common border in eastern Bolivia.

eric said...

this was the best move he could have done. big public opinion victory, and although the petroleras will bitch and moan, he is really only doing two things:

making them pay the 50% taxes already approved last may 2005

making sure they don't lie about production or sales, and setting the price of internal and external sales. so of course Petrobras would rather sell itself gas across the Bolivia Brazil border at a cheaper price, to pay less taxes. but that is not fair and this Decree fixes this.

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