Venezuelan oil official's version of decision to resume shipments to Cuba

Fred Feldman ffeldman at
Sat Aug 3 12:37:21 MDT 2002

Subject: [CubaNews] PdVSA Renews Cuban Oil Deal Amid Controversy

Friday August 2, 1:15 AM
Venezuela PdVSA Renews Cuban Oil Deal Amid Controversy
By Fred Pals

CARACAS -(Dow Jones)- Despite widespread domestic criticism,
Venezuela's state-owned oil monopoly Petroleos de Venezuela
SA (E.PVZ) plans to resume shipments to Cuba of 53,000
barrels per day of crude oil under preferential financial

Company president Ali Rodriguez said in a televised
interview Tuesday shipments would go ahead Thursday despite
Cuba's failure to make good on $142 million in payments for
oil previously shipped from Venezuela. "Shipments are ready
and we have agreed with the Cuban government on a payment

Due to a lack of crude, shipments may have to be delayed, a
PdVSA spokesman told Dow Jones Newswires Thursday, but the
decision to resume sending oil to the Caribbean nation has
stirred controversy.

The original pact was suspended by PdVSA officials, who
cited commercial factors, when Venezuelan President Hugo
Chavez was ousted from office for two days in April.

Rodriguez, however, always claimed the suspension was based
on politics. The suspension of shipments was a blow to Fidel
Castro as Venezuelan crude accounted for a third of the
island's energy supply. The Cuban government was forced to
impose measures to reduce energy consumption and had to seek
more expensive crude elsewhere.

Chavez's oil deal and close ties with Fidel Castro have
worried many Venezuelans, particularly the middle and
business classes.

"The deal is illegal since it was signed by the two
presidents but never approved by the National Assembly,"
said Jose Toro Hardy claims, a former director at PdVSA. He
added that Rodriguez simply overruled the company board and
ordered shipments to resume "with great loss to the industry
and the country."

According to PdVSA, from December 2000 until April 2002,
Cuba received a total of 25.5 million barrels, worth $675
million for which it only paid $439 million. Of the $236
million Cuba owes PdVSA, the payment of $142 million was far
behind schedule.

Under the deal, 80% of Venezuela's oil shipments to Cuba are
to be paid at market price within 90 days of delivery. The
remaining 20% is sold by Caracas on soft terms: payable in
15 years, with a two-year grace period and at an interest
rate of 2%.

Meanwhile some PdVSA top officials - who all decline to be
named - claim the company is giving its oil away while the
country is mired in a recession. Several white-collar
workers at various company departments are collecting
signatures opposing the move.

The terms of the Cuba deal are indeed slightly more
favorable compared to the San Jose Pact under which Mexico
and Venezuela supply 160,000 b/d of crude oil to 11
Caribbean and Central American nations. These nations only
have one-year grace periods and don't have the opportunity
to pay for oil by sending medical equipment and doctors.

Alejandro Turan, president of the National Association of
Jurists, has filed an injunction against the renewal of the
accord, stating that the Venezuelan government grants more
privileges to Cuba than it does to other Central American
and Caribbean nations. However, Chavez's government insists
the deal is similar to others in which Venezuela helps
neighboring countries.

Chavez's broader handling of the country's state oil
industry was one of the factors that contributed to the
attempt to overthrow him in April. His reshuffle of the
company board led to a protest march April which ended in
bloodshed and prompted some military officers to spearhead
the coup attempt.

The Venezuelan government now appears to have taken a
tougher stand on the payment schedule. Cuba can't afford to
delay on its payments, Rodriguez made clear. "The Cuban
government has six months to pay the debt. And if a delay
happens, shipments again will be suspended," Rodriguez said.
Venezuelan government officials have said the two
governments are working on a mechanism to keep Cuba from
falling into arrears again. No details were available.

"The idea of resuming these shipments is that it will have
to function this time. Because if not, important debt will
be accumulated and that can't be justified. PdVSA has clear
rules if that happens," former PdVSA President Luis Giusti
said earlier this week.

PdVSA expects to post a net profit of $2 billion this year,
compared to $3.39 billion in 2001, due to lower oil output
and volume.

-By Fred Pals, Dow Jones Newswires; 58212-5641339;
fred.pals at;

(This story was originally published by Dow Jones Newswires)

Copyright (c) 2002 Dow Jones & Company, Inc.

All Rights Reserved

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