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Chavez threatens to cut US oil sales

President Hugo Chavez has threatened to cut oil sales to the United States if ExxonMobil succeeds in getting billions of dollars in Venezuelan assets as compensation for expropriated oil fields.

world Updated: Feb 11, 2008 17:04 IST

President Hugo Chavez has threatened to cut oil sales to the United States if ExxonMobil succeeds in getting billions of dollars in Venezuelan assets as compensation for expropriated oil fields.

In his weekly radio and television show on Sunday, Chavez condemned the US oil giant "bandits" and "white-collar criminals", and said the clash with the company was "the tip of an iceberg that is economic war".

Venezuela, one of the world's top 10 oil producers, is the fourth largest US supplier of foreign oil, with daily exports of some 1.3 million barrels.

Venezuela also depends heavily on its oil exports: it gets 90 percent of its export revenue from oil, and uses oil profits to fund half of the government budget. The United States is the market for half of its oil output.

Chavez has made threats to cut off the US supply before, but this threat comes after ExxonMobil, one of the world's four largest oil companies, won international court orders freezing up to 12 billion dollars in assets of Venezuela's state oil firm Petroleos de Venezuela (PDVSA).

The US oil giant filed the case after Chavez nationalised foreign oil operations in the Orinoco basin in 2007, including two ExxonMobil operations. The two sides failed to agree on compensation terms.

ExxonMobil said it had won court orders in London, the Netherlands and Netherlands Antilles freezing PDVSA assets in those jurisdictions.

A New York court has also frozen 300 million dollars worth of the state oil firm's assets.

Venezuela's Energy Minister Rafael Ramirez denied on Friday that any such freeze had taken place.

"Never again will they rob us, these ExxonMobil bandits, they are imperialist thieves, white-collar criminals, corruptors of governments, they supported the invasion of Iraq ... and they continue to support the genocide in Iraq," Chavez said on Sunday.

"Well, I tell the US empire because it is the master -- keep it up, and you will see that we will not send a drop of oil to the US empire.

"If you really manage to freeze (the assets), if you do us damage, we are doing to cause damage too. We are no longer going to send oil to the United States."

If this "economic war" continued against Venezuela, "the price of oil will reach 200 dollars" a barrel, Chavez said.

"More than one country is ready to join us in this economic war. We are not going to be frightened, we are not going to be dissuaded," he said.

Chavez passed a law in 2007 forcing multinationals to give at least 60 percent of the capital in their Venezuelan operations to PDVSA.

He has said Caracas would pay compensation based on the book-price for the assets left behind, and not on the current prices on the oil market.

ExxonMobile and another US-based company, ConocoPhillips, rejected the demand and resorted to international arbitration.

In early September ExxonMobil filed a request for arbitration with the International Center for Settlement of Investment Disputes (ICSID), an autonomous body within the World Bank which works to resolve disputes between government and foreign private investors.

Venezuela is the only Latin-American member of OPEC, the main oil producers' cartel, and four companies accepted Chavez's terms of staying in the country -- France's Total, Norway's Statoil, British Petroleum and US company Chevron.