Monday, April 17, 2006

The Road to a U.S.-Venezuela Breakup

Hugo Chavez wants Venezuela to separate from the U.S., but breaking relations with a country that is your main revenue generator is not simple. That doesn’t mean that Venezuela is not setting the ground for an eventual breakup. There is evidence showing that Chavez may be moving faster than analysts think:

-The latest data from the Energy Information Administration shows Venezuela moving down from fourth to fifth place in the U.S. oil suppliers ranking. Venezuela is selling 182,000.00 barrels a day less to the US than a year ago, that is a 11% decrease.

-Venezuela is selling one of its U.S. based CITGO refineries for US$ 4.5bn. The refinery processes 268,000 barrels a day.

-Venezuela is aggressively investing in new refineries based in politically friendly markets. For instance, last week Cuba and Venezuela announced the reactivation of Cuba based Cienfuegos refinery.

-Venezuela has offered wide access to its oil reserves to energy thirsty China.

What is the earliest Venezuela can afford breaking relations with the U.S.?

An educated guess is early 2007, just after Chavez’s re-election. In that way he could radicalize his political project without a U.S. Ambassador making troubles at home.

However, Chavez is full of surprises. With US$ 25bn in his current account and US$ 21bn in foreign reserves he has enough cash for the country to afford a sabbatical. A breakup with the U.S. could generate political dividends for a leader skilled at leveraging Anti-Americanism. If Chavez is willing to use his piggy bank the breakup could happen anytime.


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