Venezuela's Oil Giveaway

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When youíre a U.S. Congressman and 25,000 constituent families canít find affordable heating oil this winter, you tend not to care where help comes from. Thatís at least how U.S. Representative Chaka Fattah of Philadelphia felt last week when Citgo — the U.S.-based company owned by the government of Venezuelaís left-wing President Hugo Chavez — delivered 5 million gallons of heating oil at a 40% discount to low-income Philadelphia residents. Fattah says he doesnít understand the objections of many congressional conservatives who feel U.S. cities should not be helping improve the image of Chavez, one of President Bushís most strident critics. "The U.S. buys 1.5 million barrels of oil from Venezuela each day at full price," says Fattah, "so why would anyone complain about getting some at almost half price?"

Thatís a question the Bush Administration — whose feelings for Chavez are certainly mutual — has struggled to answer ever since Venezuela initiated the Citgo program last November. While the heating oil gesture has certainly allowed Chavez to tweak Bushís nose, it is also being recognized inside and outside of Washington as a public relations coup for Chavezís Bolivarian Revolution (named for South Americaís 19th-century independence hero, Simon Bolivar).

As a result, itís growing well beyond its original scope: Philadelphia, Boston, the Bronx and cities in Maine, Vermont and Rhode Island have received a total of 45 million gallons of the subsidized Citgo fuel, and other cities are slated for another 5 million soon. Thatís a small percentage of the heating oil Venezuela exports to the U.S. each year, but Citgo says it has set aside about 10% of its refined petroleum products for the program. Says Larry Birns, director of the Council on Hemispheric Affairs in Washington, D.C., "Unfortunately for the Bush Administration, Chavez is proving to be a more inventive thinker in terms of hemispheric politics."

Itís also good business thinking, says Venezuelaís Ambassador to the U.S., Bernardo Alvarez, one of the programís architects. When 13 U.S. Senators sent a letter to major U.S. oil companies last fall seeking heating fuel aid for lower-income residents in northern states, Citgo — a subsidiary of the state-owned Petroleos de Venezuela (PDVSA) — was the only one to step forward. "The U.S. is our biggest [oil export] customer," says Alvarez. "PDVSA is simply responding to that client the way any company should."

Critics suggest Chavezís oil diplomacy is simply a ploy to take consumersí minds off of record high oil prices, which are partly a result of his efforts to rebuild the power of OPEC, of which Venezuela is a founding member. Alvarez insists crude prices in the 1990s were "unfairly low" for producers like Venezuela — but says the Citgo program does give Chavez a chance to showcase "one of our revolutionís most important principles: the redistribution of oil revenues, especially for the poor." He adds it also reflects "the kind of cooperation mechanism weíre using with our neighbor countries in Latin America." Many of them — especially Cuba, whose communist leader Fidel Castro is one of Chavezís closest allies — get cheaper access to Venezuelan crude as part of Chavezís campaign to forge greater Latin American integration and less economic reliance on the U.S. Last Friday, in a move that further irritated the U.S., Chavez was awarded the United Nations' Jose Marti prize for promoting Latin American unity.

But the heating oil projectís biggest diplomatic coup, Alvarez concedes, may be the good will it generates among Americans at a time of deteriorating U.S.-Venezuela relations — strained ever since the Bush Administration was widely accused of backing a failed 2002 coup against Chavez (a charge it denies). Chavez, who has been democratically elected twice and is almost certain to win reelection this year, is convinced the U.S. is out to assassinate him or invade Venezuela for its oil; the White House, concerned about a growing wave of leftist victories in Latin American presidential elections, insists Chavez is a would-be dictator sowing instability in the region. Last week, as U.S. Secretary of Defense Donald Rumsfeld even likened Chavezís rise to Hitlerís in the 1930s, Venezuela accused a U.S. naval attachť of spying and expelled him from the country; a few days later the U.S. expelled Alvarezís chief of staff.

Amidst those tensions, says Alvarez, the Citgo program is proof that Chavezís revolution is still fond of Americans, if not their government. (Citgo, Chavez aides point out, is also a NASCAR sponsor.) "Weíll continue to support a people whose government is hostile to us," says Alvarez. "We have nothing against this country." Venezuelans and Americans might feel that way, but for the moment it seems that no amount of heating oil, no matter how deeply discounted, could thaw the enmity between their two governments.