Financing is key lure of Caracas oil accord
By William Walker
The Caracas Agreement on Energy Cooperation signed on Thursday between Venezuela and members of the original San Jose Pact does not involve preferential prices. Venezuela simply offers an extra 80,000 barrels per day to ten countries with long-term financing and at more favourable terms than the 1980 San Jose agreement. The beneficiary customers are the same as those in the San Jose Pact--Barbados, Belize, Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama and the Dominican Republic. Several other CARICOM countries and Cuba are to benefit though Guyana says Venezuela is yet to clarify whether it can also be a part of the agreement. Guyana had protested its "exclusion" from the deal and had urged CARICOM countries to show solidarity with it and decline Caracas' offer. The bilateral agreement, signed on Thursday between Venezuelan President Hugo Chavez and Prime Minister of Jamaica P.J. Patterson, stated that Jamaica will receive an extra 7,400 barrels per day (bpd). "Bills of purchases made to public entities designated by Jamaica will be based on referential prices of international markets." The incentive to purchasers is the long-term financing arrangements. Whenever the average annual price of crude goes over US$15 per barrel, Venezuela will finance up to 25% of the bill. With crude oil now firmly over US$30, recipient countries will be able to finance 25% of their bills with a 15-year loan at only two percent per annum. This is an improvement on the four percent rate for five years of the original San Jose Pact. There is no provision in the renewable one-year agreement for credits which go towards the purchase of Venezuelan goods. With Venezuelan output at some three million bpd the purchases affected are relatively small. Guyana had protested the agreement after remarks in a Venezuelan newspaper attributed to Foreign Minister Jose Vicente Rangel. He referred to Guyana's exclusion from the deal because of the "different conversation" the two countries were having - seen as a reference to the border controversy between the neighbours - and had also remarked that throughout history oil had been used as a weapon. But the CARICOM Bureau which met in Barbados last week welcomed the accord and basically ignored Guyana's request to refuse the offer. The Bureau in the statement said it took note of the public statements made by Rangel which confirmed that access to the facility was open to other CARICOM states. Other countries within CARICOM including St Lucia and Suriname have reportedly been invited to join the second phase of the agreement when non San Jose members would be asked to join. Guyana has so far not received a clear signal from Caracas on its possible accession to the accord. Cuba will sign this week and this agreement will involve a barter arrangement whereby Cuba can pay in commodities such as sugar or even in medical services. Guyana already has a 15-year bilateral agreement with Venezuela that up to 1994 had a financing agreement. There was also a barter component which became redundant after Caracas tapped its own bauxite reserves. Last year former Ambassador to Guyana Hector Azocar told Stabroek News that Venezuela would welcome efforts to reactivate the financing component. Charge d'Affaires at the Venezuelan Embassy, Fernando Rincon, had said that Venezuela would consider any application by Guyana to join the Caracas Energy Agreement, but because each country has special needs there would have to be negotiations. A non-official translation of a letter sent this week from the Venezuelan Foreign Ministry to all the foreign ministries in CARICOM including Guyana, stated: "In taking into consideration the interest that could be expressed by other countries in the Great Caribbean to participate in a similar scheme of cooperation, the national government would be willing to examine the energy situation of each country and to arrange an agreement of this nature, with the sole purpose of contributing to mitigate the impact that the current international energy scenario, exercises on the economies... The Bolivarian Republic of Venezuela... as an energy exporter could never be absent from the current situation that the Great Caribbean faces."
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