Venezuela: Refining its Allegiances

Venezuela's state-owned oil company, Petróleos de Venezuela (PDVSA), after already having sold its assets in German oil company Ruhr Oel, is now going to back out of US oil company Citgo, which has long been owned by PDVSA. In addition to selling its assets in Germany and the United States, Venezuela is also planning to shift its sales to Belarus and Syria. The president of the state-owned oil company, Rafael Ramirez, made clear, "We are aiming at reducing the spot market... We are signing long-term supply agreements." Both Ramirez and Hugo Chavez (who appointed Rafael Ramirez to be the president of PDVSA), not surprisingly agree and have called their stake in the American market "bad business." This process of selling their stake in Citgo is made complicate further by contracts with the company that will not allow them to outright sell Citgo, which will prove to make the process of leaving the American marketplace all the more drawn out.

I believe Venezuela is choosing to leave the American marketplace, not because it is purely "bad business," but rather because it is looking to further distance itself from American politics and Western interests. Venezuela reported that it was leaving Germany because of profitability reasons; but, this is hard to entirely believe, given the fact that , overall, Germany's economy is strong and is doing very well in spite of the current state of the global economy. In lieu of the economic powerhouses of Germany and the United State, Venezuela is focusing business further in Syria and Belarus; not exactly the nations that come to mind when considering profitability. But the most compelling reason of all to believe that this company, that is no doubt under Hugo Chavez's thumb, is acting on politics rather than economics is its shipments of oil to Iran that were intended to circumvent the effects of US and EU sanctions against it. These shipments were enough to sustain any shortages that Iran had and were recently discontinued because Iran no longer needed Venezuela's assistance. 


Sources: Reuters, WSJ, Photo