PETROCARIBE AND THE ALBA
• The Cienfuegos refinery will make it possible for Cuba to dramatically reduce its dependence on fuel imports for vehicle transport • “The world needs many Petrocaribes so that these nations do not suffer so much” • The price of oil is set in New York and London • Speculators and futures markets have a pernicious influence • Cuba and Argentina have blocs for exploiting oil in the Orinoco Basin

BY LISANKA GONZALEZ SUAREZ and GABRIEL MOLINA

THE Caracas Energy Agreement and the Robinson and Barrio Adentro social programs are making it possible to balance the scales between Venezuela and Cuba. They are making it possible, for example, to provide free health care to 17 million people.

Alí Rodríguez Araque, former president of the Organization of Petroleum Exporting Countries (OPEC) and the Venezuelan oil company PDVSA, and now that country’s ambassador in Cuba, refutes certain accusations made by the mass media that describe his country’s exchange with Cuba and other countries in the region as subsidies or gifts, and explains that the benefit is mutual, in a special interview with Granma International.

“Venezuela has a stable market for its oil sales,” he said. “The media is talking about mercantile ideas, that we should take advantage of having that wealth and impose conditions on those who are thirsty for energy, no matter the fate of those peoples. That mentality is what most contributes to the division of Latin America into small portions, much easier to dominate by the national oligarchies and by the big international oligarchy. Therefore, it is a confrontation of principles, of ideas, of values that we have in front of us and not just a commercial problem like they would have it.”

ONE BIG DISTRIBUTION CENTER FOR THE ENTIRE CARIBBEAN

With respect to aspects that could be discussed at the upcoming Petrocaribe and ALBA summits, as well as the refinery that is to be inaugurated on December 21 in Cuba’s central region, Rodríguez, a former OPEC general secretary, said “It is worth noting that the materialization of the recuperation of the Cienfuegos refinery is a product of the spirit of these initiatives. They are no longer just speeches or good intentions; they are realizations. For Cuba, this refinery represents, in the first place, having a completely modern plant with cutting-edge technology with long-term prospects for supplying refined products for the country — 65,000 barrels daily in the first stage. And 50% of that oil can still be used; it is heavy fuel, with the rest gasoline and other derivatives.

“That is why the expansion of the refinery is now being designed, in order to take that crude to what is called deep conversion, so that each barrel of oil is better exploited, with the maximum amount of products extracted, and what is left is (petroleum) coke, which is also useful; that makes the refinery more profitable.

“This will enable Cuba to drastically reduce its dependence on fuel imports for vehicle transport, for example, and to have its correct refining, which in its subsequent increase could make us think about, say, the establishment of a petrochemical industry there. Work can begin with gas brought from Venezuela. There is already a project to fit out existing storage spaces in Matanzas and update the oil pipeline that goes from the Port of Matanzas to Cienfuegos, another factor that would contribute to being able to think about creating a large distribution center in Cuba for the entire Caribbean, which would bring costs down.

“There are number of enormous advantages that would even make it possible to begin to close down the capacity of old refineries that are very pollutant and have low yields. It is an extremely important step that is being taken with this refinery. The same thing is going to be done in Nicaragua, and in Jamaica, as well. Oil refining is being organized and expanded, so that one day the people will not have to pay what they are currently paying for fuel.”

Venezuela, for its part, has a stable market for its oil, which makes the relationship mutually beneficial.

ABSURD THAT VENEZUELA SHOULD HAVE MORE THAN 1.5 ILLITERATE PEOPLE IN THE 21ST CENTURY

One of the first precedents to that integration was the San José Agreement, signed by Venezuela and Mexico for exporting up to 120,000 barrels of oil between them to Central America and the Caribbean, Rodríguez noted. However, it was not oriented toward financing oil costs, but to granting credits for the equivalent of up to 20% of those costs, which is why the main problem continued to be the bill, above all when oil prices went up. Then, the Caracas Energy Agreement was drawn up, following others that had difficulties, and from 2002, several agreements were signed that were also linked to crude, including one via which Venezuela provided technology to the island to improve its recovery of heavy crude and other materials. At the same time, discussion began on the possibility of reestablishing the Cienfuegos refinery, and other aspects that were later incorporated.

“Around that time,” he noted, “there was also discussion on Venezuela’s strategy for dealing with social problems, and one of these was illiteracy, because with the structures that we inherited from the Fourth Republic, the proposed goal of teaching 16,000 people how to read and write per year was much too modest. Therefore, it was necessary to create a special program to overcome that problem in the shortest time possible. It was absurd for a country with as many resources as Venezuela to have more than 1.5 million illiterate people in the 21st century. That’s where the idea came from for what we called Mission Robinson, which made it possible to rapidly solve the problem with Cuba’s strong support.

“At the same time, there was the mission Barrio Adentro (Into the Neighborhoods), which began with a small group of Cuban doctors in the nation’s capital. That produced a protest from the Caracas Medical Association, completely dominated by very reactionary sectors, but the population reacted very favorably and even protected the doctors. From then on, a whole other process subsequently opened up that led to the presence of thousands more health professionals, and which has made it possible for us to provide free health care to 17 million of the country’s poorest people, including a list of completely free medicines.

“And many other agreements in other areas that to a certain extent make it possible to balance the scales in this aspect between our two countries.

“Of course, because of oil prices there is always an imbalance favoring Venezuela, but just like the case of the Caracas Energy Agreement, a percentage of the oil bill is financed according to its price and interest, with a stable percentage; these are not subjected to the fluctuations of currency prices,” which, he said, would imply a heavy increase in exchange between the two countries.

Reflecting more on the spirit of integration, he explained that it is based on four major postulates: economic complementation instead of competition; solidarity and cooperation instead of imposition, and strict respect for every country’s sovereignty.

“This has facilitated an increasingly greater scale of exchange between Venezuela and Cuba, and of course signifies benefits in a win-win situation. Good business is good business when it is so for both parties and not just one; this is the schema that has been applied not only in Cuba’s case, but in others as well, such as the ALBA (Bolivian Alternative for the Americas) and beyond.”

PETROCARIBE AND PETROSUR: ENERGY FOR THE POOR

“It was in that type of framework that the idea for Petrocaribe emerged. This agreement facilitates the supply of oil to a group of countries which, without a flexible payment formula like Petrocaribe provides, would not have access to oil – or would but at enormous sacrifice – given the high costs that oil has had.

“Now the idea is emerging of a Petrosur with different conditions, given that it brings together producer countries like Bolivia, as well as those that have been able to stabilize their production with respect to consumption, as is the case with Brazil. Likewise, agreements have been signed with Ecuador and Nicaragua; it is a policy that we see spreading due to the number of advantages it provides.”

Therefore, Rodríguez believes that the initiative has not only rapidly been accomplishing the goal for which it was created, but has excellent prospects. In that respect, he noted that the experiences of integration processes in Latin America should been taken into account.

“While some have failed, others have come up against great resistance. That is the case with the Cartagena Agreement, which was an excellent agreement that led to the Andean Pact and later to the formation of the Andean Community. In one way, it has been put into check by the still-heavy presence of the neoliberal vision of integration. With the failure of the Free Trade Area of the Americas (FTAA) at the Mar de Plata meeting, there have been attempts to implement, with some progress, a number of free trade agreements, which is the case with the agreement between Colombia and the United States, Peru, etc., which caused Venezuela to leave the Andean Community (bloc).

“MERCOSUR emerged during a period when the neoliberal countries were in complete domination, and thus was born with a neoliberal concept. As a result of the changes that have taken place in the leadership of some countries, an exchange of opinions has also opened up on what the goals and procedures should be for reaching this process of market integration, and it is ongoing. In fact, because it has this viewpoint, Venezuela has had difficulties with the reactions of two countries, concretely, and very particularly in Brazil, reflected in the approval of agreements in their respective parliaments. However, even so, it is an idea that is opening the way, because it is not limited exclusively to Caribbean countries or to countries that are part of the ALBA; it is a concept for the reunification of Our America.”

The Venezuelan ambassador disagrees with any attempt to compare the current integration concept for the region with the European Community, affirming that it is very different.

“The European Union is a union of capitalist countries because they have adopted capitalism as the way to their development. In the case of Petrocaribe or the ALBA, (countries), the union is mainly to seek development together, in contrast to capitalism, which is what has caused the major problems being suffered by those countries today, particularly the neoliberal version of capitalism.

“Theoretically, opening up an area where the giant and very powerful corporations of the North compete freely and on an equal footing with our still very weak economies, one already knows perfectly well what the results will be, because it is about more than competing; it is a historic law that competition leads inexorably to monopoly.

A PROJECT OF PROSPERITY FOR ALL

“It is what you can observe today in global economic development. For example, in the case of the global oil economy, something that I know a little bit about, the most powerful companies in the world are merging and colossal monopolies are appearing. And if you go to the areas of telecommunications or informatics, you can appreciate even more quickly the hyper-concentration of capital, and of course the formation of huge monopolies in the world; that’s where competition leads. What’s more, that is the historic law that rules the movement of capitalism within one country or in the world. And, as that process advances, it leads to a greater concentration of wealth, and as a consequence, more profound and more widespread poverty in the world.

“It is what is forming the greatest contradiction on a planet-wide scale today, a great concentration of wealth in the North and a great extension of poverty in the South, which is what explains the uncontainable spread of that human wave of the poor from the South to the North, and conflicts that are even being generated internally in the Northern countries. In the United States, there are now 40 million poor people. That country, whose prosperity is based on immigration, is repelling immigration at this time, and as much as it criticized the Berlin Wall, it has now built a wall many times longer. We can see those problems as well in Europe: an increase in poverty in prosperous countries like Germany. For how many weeks were the immigrants burning cars in France because of discrimination? That conflict is moving right into the heart of the most prosperous countries.  

“What we are proposing in response to that scheme of competition and that type of economic Darwinism, where the strongest swallows up the weakest, is a project where it is possible, using formulas that are different and are within reach, for everyone to prosper.

THE ALBA WITH ARGENTINA AND BRAZIL

“In April 2003, as president of Petróleos de Venezuela (PDVSA), I was in Montevideo where they were expanding the capital’s refinery. President Chávez called me and told me to go rapidly to Argentina, because at that point, the country was on the verge of a very serious energy crisis. I saw a very simple solution. Venezuela is a great energy powerhouse, with a large exportable surplus, but we had never exported oil to Argentina. We signed an agreement, and in 15 days, for the first time ever in our relations, the first oil tankers were reaching Argentina’s coasts. That enabled us to make much more progress, because we discovered something that was obvious: that nation is a great agricultural powerhouse, with a large amount of exportable surplus, and we complemented each other perfectly. Venezuela began sending oil tankers there for their maintenance instead of sending them north, which helped them to revive their shipyards, where there were some 2,000 people unemployed because they were shut down.

“It is a win-win scheme; the same that we’re doing with Cuba, Bolivia and Nicaragua, what we’re doing with other countries, even outside of the ALBA pact. It’s happening with Brazil, too, and of course it is beginning, still timidly, with Caribbean and Central American nations. If we have certain facilities in a specific economic area, and another country needs that, and also has some possibility of development, we can cooperate, and if they don’t have it, we work in solidarity with each other.

“There are nations in the Caribbean that, as a result of neoliberal policies, saw their export income fall abruptly. One of them, which I’m not going to name, used to export $100 million in sugar and bananas, and that fell to $8 million. What do they do to pay for oil at current prices? For us, it is not a sacrifice to contribute to solving this problem, and to avert a terrible crisis. Today, no society can function without energy, and to be able to pay its high costs, all of them have to sacrifice everything else.

CREATING OTHER PRICE-SETTING MECHANISMS FOR PRODUCERS AND CONSUMERS

Responding to a question from Granma International about his opinion on how rising prices for crude oil are influencing the world economy, the Venezuelan expert said:

“There are certain questions to be considered. First, there are measures that are in the hands of the Organization of the Petroleum Exporting Countries (OPEC), but there are others outside of its reach. The OPEC has undeniably contributed to stabilization of the market via increased production; when prices go very high, that is because there is insufficient supply, or when production is cut because there is excessive oil on the market. Oil investment is extremely high. It is very expensive to find it, extract it, transport it, refine it and take it to the market; that means it has to have a certain price. For example, in the United States, where there are 600,000 wells, when the price goes down they have to close down a large number of them —in 1970, they had to close down hundreds of thousands. Today, they cannot withstand it if the price approaches $18.

“It is not just the supply of oil that affects its price, but other factors as well – consumption, in the first place. That is why Fidel is right: there is a lot of energy wasted. The United States, with 5% of the world population, consumes 25% of the total energy consumed today in the world. There have to be measures for greater energy efficiency, to eliminate waste and make consumption more rational, so that energy sources, above all the ones that are becoming exhausted like oil, can last longer.

“But there is one fact that has a very pernicious influence on oil prices: the so-called futures markets. Oil prices are not set by OPEC, they are set in New York and London. As a consequence, when speculators perceive that there may be a hike in prices or demand, or that inventories are going to fall in the United States, they begin to buy contracts, so that when, for example, the physical exchange of oil is from 85 to 86 million barrels, in the futures markets they are negotiating 140, 160, 180 million, and that artificially raises the budget; they are the ones that set the prices. But, in reverse, when there is a threat that prices will fall, they begin selling contracts and enormously depress prices; that is to say, they gain profit through speculation wherever they can find it.

“And this is a result of the futures markets, just like non-economic questions, such as conflicts in the Middle East for example, have an influence on higher prices.”

OPEC HOLDS 40% OF THE OIL MARKET

One anecdote illustrates his explanation.

“On September 11, when the Twin Towers fell, I had left my OPEC office to go out to lunch. When I got back, the price had gone up by five dollars. I barely had time to issue an OPEC statement guaranteeing the presidents, etc., etc., and it went down again, to four dollars per barrel.

“In 1972, the price per barrel was at $50 to $60. With the crisis in the Middle East, plus the explosion of demand in the United States, demand shot up, and the price went up to $81. Of course, what was created was a big energy famine; that was how the International Atomic Energy Agency was founded, and other sources like atomic energy became commercial.

“OPEC has been recovering slowly. Before, it held two-thirds of the world oil market, and after that crisis it went down to one-third. Now it is at 40% of the world’s oil supply. So, a lot has been learned through this whole experience, and that is why price stabilization policies are being applied. If prices were ruled exclusively by supply and demand, they would be stabilized at a much lower figure than what it is now, because, moreover, excess prices also have a negative impact on producers and exporters.

“I particularly think that today what is being proposed is a major agreement between producers and consumers, to create other price-setting mechanisms that better reflect the relationship between supply and demand, so that above all, the developing countries do not have to suffer so much and have such difficulty in improving their economies, which is the case with these countries.  The world needs many Petrocaribes so that these nations do not suffer so much.”

With respect to present and future possibilities for the Caribbean Basin, Ali Rodríguez says Cuba has a very promising future.

“The United States has been able to slightly increase its [oil] production thanks to that basin in the Gulf of Mexico and likewise so has Mexico. Cuba has had success, and the zone that belongs to it is virgin, and by simple deduction, you may conclude that there, as part of the same geological formation, there must be oil. Of course, that’s also what those who are making the investment think, because nobody is crazy enough to invest in something where they’re sure they won’t find anything, and I think quite considerable amounts are being invested there.”

According to a PDVSA press release, its affiliate CVP and Cuba’s CUPET have “initiated exploration in six blocks of Cuba’s exclusive economic zone in the Gulf of Mexico.”

“What is demonstrated by that scheme in our case, now that the issue of the Basin has come up, is that it is accompanied by other mechanisms. Cuba, for example, now has a bloc for exploring oil in Venezuela; Argentina has a bloc, too. One of the guiding principles of our policies is to diversify investment and diversify markets. That is something that José Martí was very clear on, by the way; so, we are diversifying markets and we are diversifying sources of financing. We cannot depend on just one or two.”

Alí Rodríguez, from farmer to government minister

• IT is not easy to see, behind this simple man with very correct manners who seems like he was born to be a diplomat, the farmer, worker, oil workers’ leader and guerrilla that Alí Rodríguez Araque used to be. But they are there, part of the irrepressible life that chose the path of Bolívar.

The Bolivarian Republic of Venezuela’s ambassador in Cuba is from a region with a capital whose motto is “Nobody can hide a city on a mountaintop”: Mérida. With time, he went from being a farmer to a government minister. After living in several cities, including in the state of Lara during a terrible natural disaster, he began studying law and economics. During those years, he learned to look at oil as a decisive factor in understanding Venezuela, because he studied the oil industry, and had very good professors, particularly a comrade from Germany who had made an exhaustive study of Das Capital. His political and ideological ideas led him to the guerrilla struggle.

From 1983 to 1999 he was a member of Venezuela’s national Congress, where he was chairman of the Energy and Mining Committee in the Chamber of Deputies from 1994 to 1997. Later, after Hugo Chávez won the presidential election, he was minister of Energy and Mines. He was elected as senator for the state of Bolívar for a mandate of 1999 to 2004.

He was named president of the OPEC conference, and the following year he became the organization’s general secretary. Once he returned to his country in 2002, he was made president of PDVSA, stepping down in 2004 when he was appointed foreign minister of Venezuela. In October 2006, he was appointed extraordinary and plenipotentiary ambassador of the Bolivarian Republic of Venezuela to the Republic of Cuba. He has written about energy policy issues.

Granma 20-12-2007