Minus Manning

"There are countries who won’t sign the agreement today,’’ Chavez said at the closing ceremony at last week’s one-day summit in Puerto La Cruz, a direct reference to Prime Minister Patrick Manning and Barbados PM Owen Arthur.

"This saddens me and it’s difficult to believe,’’ he said.

The 50-year-old revolutionary leader claimed that US pressure had caused some countries to change their minds and was "indignant’’ over US interference in pressuring countries not to sign.

Although Arthur did not sign the agreement, the big disappointment for Caracas was the decision by Manning not to join in.

The view is that the deal could undercut TT’s own oil shipments. He also reminded colleagues attending the Caricom Head of Government meeting in St Lucia that they must not forget what TT had done for the region.

The signing of the agreements with the Caribbean countries was seen as a move that strengthened Chavez’s political challenge to the USA influence in the region.

Bloomberg News quoted Manning as saying that the twin-island republic needed more time to study the plan and measure the possible impact on existing agreements, some of which are with the USA. TT is the largest supplier of liquefied gas to the USA.

Trinidad and Tobago, the lone oil and gas producing country in the Caribbean Community (Caricom) currently supplies over 14 million barrels of oil annually to the region. Jamaica is by far Trinidad’s largest Caricom importer with 10,000,000 barrels a year.

Caricom imports some 37,000,000 barrels annually.

Under the proposed Petrocaribe deal, Venezuela may sell up to 34,000 barrels a day of oil to the eastern Caribbean countries. According to Chavez, Petrocaribe would meet once a year and those not attending could be eliminated from the organisation.

"We have to be serious and formal about this," said Chavez who would be Petrocaribe’s Executive Secretary. Other countries that attended the summit included Antigua and Barbuda, The Bahamas, Belize, Grenada, Dominica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines and Suriname.

The Venezuelans have also designed the Petrocaribe plan for oil supplies to be directed toward Cuba, including Jamaica and a route toward Haiti.

But the Petrocaribe initiative is being welcomed by the small island economies that are struggling to cope with soaring world oil prices.

Jamaica’s Prime Minister PJ Patterson said the Petrocaribe initiative would encompass several facets including the strengthening of the existing San Jose Accord and Caracas Agreement for providing crude oil and refined products at favourable credit terms.

Patterson told Caribbean leaders : "For the countries of the Caribbean, Petrocaribe represents a welcome lifeline."

Caribbean leaders hailed the energy pact as a move that would increase their collective sovereignty and economic independence in a region long dominated by US political and commercial power.

Patterson said that his island’s existing refinery infrastructure as well as those in Trinidad and Tobago, Dominican Republic and Cuba would be looked at to supplement Venezuela’s own system.

This, he said, would enable the provision of assistance for the revamping and upgrading of regional refineries.

Under the agreement, "there could be a joint distribution/marketing of petroleum products through a new commercial brand to be established, in an effort to deliver reduced prices to consumers in the region and enable security of supply to the regional market."

He said the opportunity would also be used to examine co-operation in oil exploration and the establishment and strengthening of the oil storage infrastructure regionally, and state-owned facilities.

Grenada Prime Minister Keith Mitchell who also signed the agreement, said with the rising price of fuel on the world market, this new development would enable small countries in the region to have a sustained supply of petroleum and/or petroleum- based products.

He described the agreement as being a cost-effective gesture which would give Caribbean islands access to concessionary rates on oil.

Venezuela, OPEC’s third- largest oil producer, already has deals with several countries in the Caribbean for preferential oil prices under the terms of the 1980 San Jose accord and the 2000 Caracas Energy agreement.

Venezuela, which has the largest oil reserves in Latin America, has daily output of about 2.5 million barrels a day. About two-thirds of the country’s exports or about 1.5 million barrels a day, now goes to the US.

Venezuela and Mexico have been supplying oil, derivatives and refined products to the Caribbean and Latin America at subsidised prices under the San Jos? accord. Currently, Mexico and Venezuela sell 160,000 barrels a day (b/d) of crude to 11 Central American and Caribbean countries at preferential prices.

Venezuela also exports an additional 80,000b/d to the same countries under the Caracas Energy agreement.

More recently, Venezuela has signed agreements with the Dominican Republic and Cuba to provide up to 50,000 and 90,000 barrels per day, respectively, at special rates.

Venezuela also has several oil for goods or services deals with countries such as Cuba and Argentina, in which Argentina provides Venezuela with beef in exchange for petroleum and Cuba provides doctors and educators.

Venezuela’s Foreign Minister Al? Rodr?guez said Petrocaribe proposes to go beyond the earlier commercial agreements in that "the initiative aims to foster integration of this geopolitical bloc through a plan for the rational use of energy."

Rodriguez told reporters in Caracas at the recent summit that preliminary studies show oil prices might fall by up to US$6 a barrel in the region, if third-parties were cut out.

During last week’s meeting with Caribbean leaders, Chavez promised highly preferential oil pricing for the 14 Caribbean members, with Venezuela picking up 40 percent of the cost if oil is selling over 50 dollars a barrel.

If it should hit US$ 100 a barrel, Chavez said, "We would pay 50 percent for signatory countries, with a grace period extended from one to two years." So, if the price of oil per barrel hits $100 at the New York Mercantile Exchange, the Petrocaribe countries will have to pay Venezuela only $50 per barrel or 50% of the market price and Venezuela will finance the remaining $50 on a long-term basis.

Again, if the price hits $50 per barrel, as it has, Petrocaribe countries will have to pay only $30 or 60% and Venezuela will finance remaining 40% or $20 dollars per barrel. On the agreements signed Chavez noted that as prices have already passed US$40 a barrel "we have decided here to propose to extend that scale (of the Caracas Agreement)."

If the price rises to US$50 a barrel, the financed balance would go to 40%, however, should prices pass US$100 a barrel the interest rate would drop from 2% to 1%.

According to the agreement, Venezuela may accept (with regard to the long-term financed portion of the price) either goods — sugar, bananas, nutmeg, avocados, corn, etc — or services for which Venezuela agrees to pay preferential prices. This means that if the market price is below the value of these commodities, Venezuela promises to pay above the market price.

The barter component of the "Petro" deal could not have come at a better time for the participating countries because of the US’ pushing the European Union to eliminate preferential quotas for Caribbean-produced agricultural commodities.

Rodriguez also pledged to foot the bill for shipping oil to Petrocaribe participants directly, and to help set up local storage facilities across the Caribbean. Countries were given 17 years to pay back fuel bills with prices up to US$40 a barrel taken into account.

Modelled after its South American sister project, Petrosur, Petrocaribe will sell Caribbean nations oil and its derivatives under preferential payment conditions as well facilitate endeavors in exploration, refining and distribution of the raw material.

Another of the agreement’s elements is the creation of the ALBA-Caribbean fund, whose purpose is to provide development grants to less developed Petrocaribe member nations. The fund is modelled after the European Union’s regional equalisation fund and was previously been proposed by the Chavez government as a key part of ALBA.

This was seen by critics as an alternative for the US-touted Free Trade Agreement of the Americas (FTAA).

This fund would be partly financed out of the savings the countries generate from being members of Petrocaribe. Venezuela launched the fund with an initial contribution of US$50 million.

The Petrocaribe agreement says that the fundamental objective of Petrocaribe, the new international energy company of Caribbean governments, is to contribute to the energy security, the social and economic development and the integration of the countries of the Caribbean based entirely on the principles for the integration referred to as the Bolivarian Alternative for the Americas (ALBA).

Cuban President Fidel Castro, neither oil buyer nor seller and one of the signatories on the deal expressed optimism that differences with Trinidad and Tobago and Barbados could be resolved.

"We’ll overcome this," said the 78-year-old dictator whose country gets about 90,000 barrels of Venezuelan oil a day in exchange for doctors and educators in Caracas.