12 February 2008

Venezuela Cuts off Oil to Exxon

That's right folks. Exxon had the audacity to try to protect its assets in Venezuela in the face of the socialist scourge, a move completely in line with the free market, and the socialist hoard in Venezuela just stopped selling fuel to Exxon. Part of the reason that Chavez's people made this move was that Exxon recently had won a court order to freeze assets that belonged to their company after the socialists attempted to seize them. Exxon was essentially the last oil company to actively put up a fight against Chavez's goons and had proven in court that they were on the right side of international law, only to see Venezuela now stop the flow of oil to Exxon. Expect this to have a pretty large impact on the price per gallon of gas in the States very soon. Exxon was completely within their right to protect their assets. What the socialists claim is thus:

State-run Petroleos de Venezuela SA, or PDVSA, said in a statement that
it "has paralyzed sales of crude to Exxon Mobil." It said the decision
was made "as an act of reciprocity" for the company's
"judicial-economic harassment."

Reciprocity for Exxon's proving their case in various courts across the world that what Venezuela had done by attempting to hijack Exxon assets? The law is on Exxon's side here. The "judicial-economic harassment" that PDVSA speaks of is the international courts and rule of law among free nations. It's a typical left wing tactic of ignoring existing laws and doing what you feel like doing in order to shore up your personal bottom line while claiming it's a move "for the people." As if losing a major purchaser of your main export will actually help the people of Venezuela. The only person profiting off of this is Chavez and his inner circle. Since various reforms from the thug Chavez went into effect the economy in Venezuela has decreased, and this move will only add to their woes, and most likely ding us a bit too as the price per gallon of gas will impact us. Chavez has essentially engaged in an economic form of terrorism and acted in open defiance against courts of law, which had already handed them defeats, so Chavez's folks are simply making a play for as much cash as humanly possible in the short the run while doing serious damage to themselves in the long run.


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Anonymous said...

These insane socialists need to get taught a lesson. If they don't de-nationalize their oil, we should blockade them and teach them who is boss, using *all* force that is necessary.

Anonymous said...

You seem to be talking on news rather than knowing what the actuality of the discussion between the parties entails. Exxon was offerend a concession that valued the project and took into concideration the speculative profits from such a project. Exxon was even offered joint partnership in the project. PDVSA wanted to work with Exxon and asked Exxon to remain in negotiations to reach agreement. All oil companies in Venezuela agreed to the terms except Exxon. Exxon didn't even take a risk, because they would have gotten all their money back plus some profits if they had agreed with PDVSA.

The arguement was never about finances, especially with the 40 billion dollars they have made in profits this year, Exxon is simply resentful and sour that PDVSA changed the contract. Therefore, they went through legal means in order to send a political message for countries to stop changing contracts.

Furthermore, they did not freeze 12 billion dollars in active PDVSA accounts. They froze 300 million of inactive PDVSA money. It is illegal internationally to freeze assets of a foreign country. PDVSA offered Exxon joint accounts on the project, and before the freeze, was still concidering doing bussiness with Exxon. PDVSA could have simply nationalized the project, abolished the accounts, and Exxon wouldn't have been able to do anything. However, since PDVSA was generous, Exxon used this agreement of joint accounts as a legality to freeze them (which is Exxon's money), in order to have a price range high enough for bargaining in court.

In other words, Exxon froze its own money as a precursor to legal claim in court. PDVSA's money is in tact, and the 300 million they were able to freeze, is not actively involved in operations of PDVSA.

The courts will probably reach a midpoint, not the 4 venezuela initially offered, but not the fantastical 12 Exxon bluffed for bargaining power court.

The reason its illegal to freeze assets of a country, to prevent china and its companies, for example, from freezing federal reserve assets because its being paid in weakend dollars on its treasury bonds, the largest default in history. Or China claiming compensation for this by appropriating citigroup, morgan stanley, if it won a court order, etc. This is tampering with the finances of a sovereign nation. This is why Chavez has seen it fit to send the message that an international company should not be messing with the finances of a nation. OPEC nations in turn ahve taken note, although have not said anything publicly wanting to stay out of the mess. And Chavez has threatened to cut oil supplies, yes, to Exxon, and possibly to the US, as a reprimand for Exxon's petty attitude.

Anonymous said...

they are sour about the contract change, because they could have potentially made a lot more money with the oil price surge, and therefore they are sour and presumably angry.

For example, its like if you had invested in google when it had come out, and then someone appropriates the stocks, it goes up 700%, and they give you back your initial investment and 200% in profits. Its frustrating, but they have to just face the reality that when your an international company and you take a risk, you should be willing to concider the possibility of a downside.

Its not a very big issue, and not a lot of people want to associate themselves with the mess. It will be resolved at midpoint in court, not concidering any radical actions.

Hugo Chavez said...

I hate you Americans!

Anonymous said...

It is evident to me that the law is not on Exxon Mobil's side. In order to get a world-wide freezing order, which the courts of New York and Venezuela cannot do, the English court must have some connection with PDVSA. It does not - PDVSA is neither present in England through a branch, nor does it have any assets in England by legal definition.

The $12bn figure claimed by Exxon is grossly overinflated, based on an erroneous application of contractual compensation principles.

That the Venezuelan government acted sovereignly and expropriated Exxon's interest is not in dispute here. What Exxon have to prove is that their counterparty breached the contract...which I believe they did not.