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Fuel Deal Has Slow Start

Most of the Caribbean nations that agreed to buy Venezuelan oil last year have yet to get any.

July 11, 2006|Miranda Leitsinger | The Associated Press

SAN JUAN, Puerto Rico — One year after 13 Caribbean countries signed a deal with Venezuelan President Hugo Chavez to buy oil under preferential terms, a majority of them have not received a single drop of fuel, and those that have received supplies are still paying high prices at the pump.

Cash-strapped Caribbean countries have welcomed the pact, known as Petrocaribe, as a way to counter soaring prices for crude oil. But eight nations say they have yet to receive fuel shipments, largely because they are figuring out how to handle them.

The program has become bogged down because many of the governments lack state-owned docking or storage facilities or the know-how to run an oil business -- a task they had previously left to private companies.

Although Chavez's critics say he is using "oil diplomacy" to build anti-U.S. political alliances, many Caribbean leaders say they believe the program will be genuinely helpful and are determined to take advantage of it.

"We're charting uncharted waters here. It has to be done right," said Earl Bousquet, a St. Lucia government spokesman. "You don't want to go into an agreement and then you have the Venezuelans knocking on your door saying, 'Well listen, we have all this oil -- where are you going to put it? And how are you going to get it from Antigua to St. Vincent?' "

Under the Petrocaribe plan signed in June 2005, countries pay market prices for Venezuelan fuel but are required to hand over only part of the cost and can finance the rest over 25 years at low interest rates. Governments also can pay partly with services or goods, while Venezuela helps provide storage tanks and docking facilities.

The deal is widely seen as a bid by Chavez -- long at odds with the United States -- to make inroads in the Caribbean, where the U.S. is a major trading partner. Chavez calls his pact an alternative to U.S.-backed free-trade deals, and he has sought new oil markets worldwide to reduce reliance on the U.S., which remains his biggest customer.

Some countries are still negotiating specific supply deals, and the Petrocaribe pact has continued to grow, with Haiti recently signing on as the 14th recipient.

"It looks like a very real attempt to find a regional solution to the problem of energy," said Anthony Bryan, a specialist in Caribbean energy cooperation at the Center for Strategic and International Studies in Washington. But, he added, "a great deal is going to depend on the capacity of Caracas to deliver the program effectively."

Six countries say they have begun receiving some fuel, including crude and diesel, and Venezuela has also shipped asphalt to Dominica.

Some leaders say they plan to use eventual savings for social programs and have warned their people not to expect cheaper gasoline as pump prices have soared on the back of a surging world market.

Jamaican Foreign Minister Anthony Hylton said the deal had allowed the island to ensure "a decent price given what is happening on the oil market."

Venezuela, which signed a second round of more specific deals with nine countries in September, has pledged to sell as many as 190,000 barrels a day to participating nations.

Venezuela doesn't have a problem meeting the region's needs because the volumes are relatively small, said Asdrubal Chavez, a cousin of the president who heads PDV Marina, the shipping arm of state-run Petroleos de Venezuela. He denied that delays were because of Venezuela's overextending itself or that private companies were causing problems by having a stranglehold on distribution.

"Basically, it's been storage. The countries don't have storage. And they don't have a culture of managing, administrating fuel," Chavez said.

Analyst Patrick Esteruelas of Eurasia Group said Petroleos de Venezuela was increasingly being used as a political tool "to buy diplomatic support abroad." Venezuela is seeking a seat on the U.N. Security Council, over U.S. opposition, and could use the Caribbean's support.

Esteruelas said Petrocaribe's slow start seemed attributable to "run-of-the-mill logistical delays" but also "Venezuela's over-stretched production and delivery capabilities."

Venezuela, the world's No. 5 oil exporter, disputes claims that its production is sagging and says it has plenty of output.

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