Toward a ‘Multipolar World’: Using Oil Diplomacy to Sever Venezuela’s Dependence

April 10, 2008

In June, Venezuelan president Hugo Chávez made his sixth diplomatic trip to Iran. Discussions were held there, as well as in Russia and Belarus, further boosting international cooperation in developing Venezuela’s immense Orinoco Oil Belt. Iran’s participation in the Venezuelan oil industry dates back to September 2006, when President Mahmoud Ahmadinejad presided over the initial perforation of a well in Ayacucho 7, one of 27 blocks in the Orinoco Belt, which some believe may be the world’s largest oil deposit. The country’s state oil company, Petropars, is now exploring the Orinoco, together with counterparts from Brazil, Argentina, and Uruguay, as well as from India, China, and Vietnam.

At the 2006 ceremony, with Ahmadinejad at his side, Chávez declared: “The Orinoco Oil Belt is being converted into the ‘Universal Belt,’ since it is facilitating the development of the Venezuelan people, the consolidation of the union of countries of Latin America, and South-South integration.”1

Venezuela’s new partners provide the Chávez government with important leverage in its risky strategy of challenging the multinational companies that have traditionally dominated the nation’s oil industry. Most of these partners’ oil companies, like Petropars, are state-owned and as such do not systematically attempt to block the transfer of technology to other countries, as do private-sector companies. Citing this alternative source of technology, Venezuela has driven a hard bargain with multinationals, which have invested in costly technology upgrades to produce more than 600,000 barrels per day of the Belt’s unconventional oil. After Chávez’s reelection in December 2006, he moved to take control of 60% of the multinational-dominated Orinoco enterprises. Chávez also stripped these firms of the special tax incentives granted by neoliberal governments in the 1990s and decreed
that their workers would be on PDVSA’s payroll.2

While suggesting that the multinationals have the essential expertise that Venezuela’s new Third World partners lack, The Wall Street Journal recognized that “as long as oil prices stay high, Mr. Chávez can probably afford to give [Third World] state firms an opportunity to learn.”3 The article might have added that the prospect of eventually being displaced by countries like China in such immense reserves holds the multinationals back from snubbing the Venezuelan government.

Indeed, the participation of energy-hungry economic powerhouses China and India in the Orinoco Belt may represent a great leap forward in Venezuela’s attempt to diversify, which is itself a crucial part of the country’s long-term strategy to sever economic and technological dependence on the United States. Venezuela has greater reason to pursue this goal than its neighbors, since major oil-exporting states have always been subject to greater dependence on imported products, single-commodity exports, and sophisticated technology than elsewhere in the Third World. In Venezuela’s case, oil products account for almost 90% of exports, and its unconventional oil reserves require imported, state-of-the art technology.4

The effect of this strategy is already apparent. During the past two years, Venezuelan oil exports to the United States have declined 8.2%.5 Exports to China have spiked since 2003, from 12,000 barrels a day to 150,000; Chávez intends to increase the amount to 1 million by 2012.6 And diplomatic efforts have continued apace.


If economic diversification and international solidarity are the twin goals of Chávez’s diplomacy, the latter is often overemphasized in rhetoric and action. In “socialist” Venezuela, extending support to the underprivileged overshadows the practical consideration of implementing programs that are viable and workable.

The two goals are exemplified by accords Venezuela has reached with its neighbors, especially PetroCaribe, signed with Cuba, Jamaica, the Dominican Republic, and 10 other Caribbean nations in June 2005. Under the arrangement, Venezuela allows 40% of the current price of oil to be paid off in 25 years either in cash or with products like sugar, rice, and bananas.

The accord amounts to 198,000 barrels a day and has facilitated the deployment of more than 15,000 Cuban doctors to Venezuelan barrios as partial payment for the 90,000 barrels of oil Venezuela now exports to that nation under the agreement. The practice, however, may be feasible only for goods and services produced by the state. Chávez’s rhetoric notwithstanding, the bartering arrangement with socialist Cuba is proving difficult to duplicate with privately produced merchandise from the 12 other PetroCaribe nations whose economies are capitalist.

Chávez justifies the PetroCaribe deal by appealing to humanitarian sentiment. In the process he plays down the pragmatic argument that discounts or special terms of payment to clients are a viable strategy for any company interested in penetrating new markets. Venezuela is selling oil for the first time to various Latin American nations like Argentina and Uruguay, which along with Brazil signed an agreement with Venezuela called PetroSur that promotes cooperation among state oil companies.7

Another important hemispheric precedent for Venezuela’s international strategy is the Bolivarian Alternative for the Americas (Alternativa Bolivariana Para las Américas, or ALBA), which may indeed serve as a model for South-South relations in general. ALBA systematically critiques globalization, specifically the Bush-sponsored Free Trade Area of the Americas (FTAA), whose promotion of cutthroat competition is the very antithesis of solidarity. Venezuela and Cuba launched ALBA in Havana in 2005, and Bolivia and Nicaragua have recently become members, while Ecuador and various Caribbean nations have also drawn close to the project.

At ALBA’s fifth meeting held in April, Chávez offered to extend the PetroCaribe oil deal to ALBA affiliates. He also proposed cooperation among member nations to implement the Cuban-inspired mission program whereby doctors and educators provide free services to impoverished neighborhoods. In this way, ALBA proposes preferential treatment for Southern nations and the underprivileged throughout the world as a corrective to the asymmetric relations between developed and underdeveloped countries. While ALBA criticizes the protectionist measures of the North, it defends the right of the South to protect farm production. Its Fundamental Principles affirm that “agriculture is a way of life and cannot be treated as just any form of economic activity.”

ALBA also rules out the participation of the World Bank and other financial bodies in designing integration plans and proposes the creation of “compensation funds” for those displaced as a result of international agreements. In another proposal that goes against the grain of neoliberalism, ALBA calls for giving priority to national firms and cooperatives and for exempting state companies from anti-monopoly legislation. Finally, disputes with foreign corporations are to be resolved in national courts, and only as a final resort can they be brought to international tribunals.

These programs could be seen as a wish list were it not for Venezuela’s oil wealth, which enhances the feasibility of some of its proposals. It also converts Chávez into a major actor on the international stage to a degree unmatched by Latin American leftist and radical populist governments in the past. Referring to Chávez’s initiatives and strategy, the president of a Washington-based think tank commented, “He’s playing treaty chess, whereas Cuba’s Fidel played checkers.”8


From the beginning of his presidency, Chávez has advocated a “multipolar world” as a corrective to the “unipolar world,” a euphemism for U.S. hegemony. After two U.S.-supported attempts to oust him in 2002, Chávez began using the term imperialism, and forging alliances with other nations became a political imperative. By “multipolar world,” the Venezuelan president envisions the transformation of nations of the South into blocs, bound together geographically or economically, with political and economic clout. For Venezuela, these formations include both the hemispheric Common Market of the South (Mercado Común del Sur, or Mercosur) and, most significantly, OPEC.

Chávez’s OPEC policy and his positions on Middle East politics exemplify the two sides of his diplomacy with other nations of the Global South: promoting government-to-government ties and using fiery rhetoric to appeal to the general population. On the one hand, Venezuela has strengthened OPEC by playing a major role in winning over other governments to measures that stabilize oil prices at upper levels. Ideological distinctions have been set aside in the process. Chávez’s multipolar world concept—like the Non-Aligned Movement organized in the 1950s by Yugoslavia’s Tito, Ghana’s Nkrumah, Egypt’s Nasser, and India’s Nehru—presupposes submerging political differences in order to put up a united front to defend the South’s common interests. Thus, for example, even the governments belonging to OPEC’s conservative wing have been receptive to Chávez’s initiatives.

On the other hand, Chávez has taken political positions that have made him a popular figure among much of the general population in the Middle East. He immediately condemned the U.S. bombing of Afghanistan and subsequently lashed out at the invasion of Iraq. More recently he has defended the Iranian nuclear energy program and denounced Israel’s bombing of Lebanon. In the words of Venezuela’s ambassador in Washington, Bernardo Álvarez, Chávez’s popularity in the Arab world “strengthens his hand within OPEC.”9

Until Chávez, Venezuela had traditionally assumed a moderate position within OPEC. Sectarian religious conflicts, often expressed along political lines, did not draw in Venezuela, one of the few non-Muslim member countries (and the only one after Gabon dropped out in 1995). Venezuela was thus well positioned to play the role of conciliator between radicals like Iraq, Libya, Iran, and Algeria, which supported big price hikes, and conservatives like Saudi Arabia and Kuwait, which were predominately concerned with maintaining stable prices.

In the 1990s Venezuelan neoliberal governments made plans to drastically increase the nation’s productive oil capacity, thus threatening to undermine OPEC’s efforts to control output for the sake of price stability. Toward the end of the decade Saudi Arabia reacted to Venezuela’s unrestrained violation of OPEC quotas by dumping even larger amounts of crude on the world market. Venezuela’s posture both as a moderate and a strikebreaker changed abruptly with Chávez’s advent to power. Saudi Arabia favorably viewed Venezuela’s shift, thus ensuring the success of the decision at OPEC’s March 1999 meeting to withdraw 2.1 million barrels a day from the world market.10 The new quotas signaled the beginning of price recovery after a two-decade slump.

The following year, Chávez made a historic trip to all 10 OPEC countries to personally invite the heads of state to OPEC’s second summit held in Caracas in September 2000. Never before had an OPEC government played such a proactive role on behalf of the organization. The summit approved Venezuela’s proposal of a band in which prices were allowed to oscillate between $22 and $28 a barrel. When prices exceeded $28, OPEC nations were to increase production by 500,000 barrels a day, and to do the opposite when prices went below $22.

Thus during his first two years in office, Chávez mainly challenged U.S. interests through his concept of a multipolar world as applied to OPEC. Four events during these early years demonstrated Chávez’s leadership capacity within OPEC and the respect he earned from the organization’s other governments: First was his effort to shore up prices at the 1999 OPEC meeting; second, his trip to personally invite the heads of state to the OPEC summit; third, the unanimous approval by member nations of Venezuela’s price band; and fourth, Venezuelan minister of energy Alí Rodríguez’s appointment as OPEC secretary-general, three months after the 2000 summit.

The latter was particularly significant in that Iran, another OPEC radical, has unsuccessfully attempted to obtain the no. 1 OPEC position for more than 25 years. Fellow OPEC nations have blocked Iran’s request on grounds that a polemical figure at the helm of the organization would undermine efforts to convince the world that its decisions are made on the basis of economic as opposed to political criteria.

As has always been the case with Third Worldism going back to Nkrumah, Nasser, and Nehru, Chávez’s multipolar world has signified neither uniformity nor harmony within Third World blocs. Tension between OPEC hardliners and softliners has hardly subsided in recent years. Differences came to light when oil prices suddenly declined in August 2006, as the fighting in Lebanon began to abate and mild weather was forecast for the upcoming winter. In subsequent months OPEC conservatives Saudi Arabia and the United Arab Emirates favored a wait-and-see policy. After OPEC finally withdrew 900,000 barrels per day from the international market in November and December, both nations opposed additional cutbacks in early 2007 on the grounds that the market had already responded favorably.

In contrast, on both occasions Venezuela was at the forefront in calling for reducing production quotas to maintain prices between $50 and $60 per barrel. Minister of Energy Rafael Ramírez assured fellow OPEC nations that “unlike in the past, the cost of energy is not affecting the economy of the industrialized nations.”11 He added that, if anything, higher prices would force the North to reduce consumption and in doing so avoid an economic crisis. “As producers of a natural resource that is drying up,” he said, “we hope that the economies of the world will rationalize their use of energy.”12

At the same time, Ramírez argued that asserting state control over the oil industry was a necessary step to shore up prices. At a speech at the OPEC meeting in September 2006, he referred to PDVSA under neoliberal management as having been a “Trojan horse” for the multinationals. He added that the Chávez government’s struggle to regain control of PDVSA was a “contribution” to OPEC and urged fellow member nations to take a close look at that process.13

At an OPEC meeting three months earlier in Caracas, Chávez pushed for the organization to incorporate new members, including Angola (an important and growing oil producer), Ecuador (which left in 1992), and the polemical Sudan.14 At the time, OPEC’s expansion was not at all a foregone conclusion. Angola was later admitted. Ecuador’s president, Rafael Correa, who maintains close ties with Chávez, is also committed to joining. If he succeeds, Ecuador and Angola will restore OPEC’s size to 13 nations, after it lost two members in the 1990s.


Chávez’s foreign policy victories, like his campaign against the Bush-promoted FTAA, have been made possible by tolerance toward, and friendly relations with, heads of state who adhere to a diversity of ideological positions. These diplomatic efforts avoid the errors committed by the Castro government in the 1960s, when it encouraged insurgency throughout Latin America and in doing so forfeited the possibility of winning over, or neutralizing, democratic governments. Castro himself has abandoned that strategy and has indeed advised Chávez, as well as Bolivian leftist leader Evo Morales, to follow a more pragmatic approach to international relations.15

On the other hand, Chávez’s zealous rhetoric in favor of thoroughgoing change and his glorification of Che Guevara and other revolutionary icons have generated widespread support among social movement activists and rank-and-file leftists throughout the hemisphere. Chávez’s firebrand side sometimes complements and other times undermines his diplomatic efforts to build ties with governments of the South.

Verbal clashes with Venezuela’s neighbors are an example of how Chávez’s aggressive style can negatively influence outcomes in concrete ways. Following Mercosur’s approval of Venezuela’s membership request in July 2006, the congresses of Brazil and Paraguay delayed ratifying the decision. After returning from his trip to Iran, Belarus, and Russia, Chávez blamed the right in both countries for blocking Venezuela’s admission to Mercosur and announced that his government would withdraw its request for membership if the two congresses did not reach a decision within three months. In another statement that hurt Venezuela’s case for membership, Chávez criticized the organization’s largest member, Brazil, for failing to lend a helping hand to tiny Uruguay and Paraguay.

Adversaries at home attacked the president for distancing Venezuela
from democracies to its south while drawing close to nations in other continents, like Iran. Henry Ramos, president of Venezuela’s traditionally largest party, Acción Democrática, warned of “the high degree of danger” associated with Venezuela’s close relations with Iran, especially in light of possible sanctions by the international community.16

Chávez’s outspoken positions in favor of Arab causes in the Middle East has struck a responsive chord throughout the region, but is also not without its potential dangers. Chávez labeled Israel’s July 2006 incursion in Lebanon “mass genocide” and ordered the withdrawal of Venezuela’s chargé d’affaires from Tel Aviv.17 Arab nationalist leaders applauded Chávez’s decision to suspend diplomatic relations and implored other nations of the South to follow suit, while also rebuking Middle East nations for not taking similar measures. By way of underlining the popularity of Chávez’s move, Al Jazeera reported that many Palestinians have posters of the Venezuelan president in their homes, alongside those of Che.18 According to one Israeli Communist activist, “Arabs throughout the Middle East are comparing Chávez’s generosity in distributing oil income to the needy with the self-serving behavior of their own leaders.”19

On the other hand, Chávez’s virulent attacks against Israel, his uninhibited style, and the efforts of his adversaries to isolate Venezuela could endanger his ambitious efforts to group the nations of the South into a bloc. Chávez justifies his close relations with Iranian president Ahmadinejad—an anti-Semite and Holocaust denier—on the grounds that the nations of the South need to place political differences aside for the sake of unity.20 But his friendly relations with the repressive government of Iran, combined with any “slip” on the part of a chavista leader or spokesman, will play into the hands of his enemies in a major way. It is not enough that Chávez recognizes Israel’s right to exist and that he has told members of the Venezuelan Jewish community that he will not tolerate anti-Semitism in his movement.21 These positions have gone virtually unreported in the media.

One example of such a “slip” was a statement made by Roger Capella, Venezuela’s ambassador to Argentina and a controversial former minister under Chávez. Capella claimed that the decision of Argentine prosecutors ordering the arrest of eight former Iranian ministers for their alleged participation in the 1994 bombing of a Jewish community center in Buenos Aires lacked solid evidence. Capella’s remarks were inappropriate for a foreign diplomat, particularly in light of the cautious and discreet attitude Argentine president and Chávez ally Néstor Kirchner assumed on the matter. Chávez recalled Capella shortly thereafter.

Combining diplomatic moves to achieve national objectives with rhetoric for popular consumption is never an easy mix. And for a leader of Chávez’s persona, subordinating discourse to fulfilling national goals is especially challenging. His spontaneous impulse often manifests itself, such as when he threatened to withdraw his Mercosur membership application. But too much is at stake to risk providing ammunition to those intent on isolating Chávez from his neighbors and the South in general.

Chávez’s South-South strategy has positioned Venezuela to achieve the all-important goal of economic diversification. And as in the case of ALBA and Mercosur, the blocs that Chávez promotes explicitly exclude the United States and thus serve as a corrective to the unipolar world of U.S. domination. Both objectives are worthy of hard-headed diplomacy that steers clear of unnecessary confrontation with secondary actors on the world stage. Until now, Chávez has avoided the isolation that Cuba was subjected to in the 1960s, as shown by the diverse heads of state who attended a Caracas-sponsored South American Energy Summit held in Venezuela in April. Indeed, diversity and pluralism are the keys to reviving third worldism in the 21st century’s globalized world.

Steve Ellner teaches at the Universidad de Oriente in Puerto La Cruz, Venezuela. He edited, with Miguel Tinker Salas, Venezuela, Hugo Chávez and the Decline of an “Exceptional Democracy” (Rowman & Littlefield, 2007). His Rethinking Venezuelan Politics: Class, Conflict and the Chávez Phenomenon will appear in 2008 from Lynne Rienner Publishers.

1. Ministerio del Poder Popular Para la Energía y Petróleo, “Noticias,” May 17, 2007.

2. Exxon, unlike other foreign companies, publicly criticized the new policy and pulled out of a smaller oil field. It also threatened to sue the Venezuelan government in international tribunals. Minister of Energy Rafael Ramírez reacted by declaring that with Venezuela’s fallback strategy of relying on Third World state oil companies, the nation was no longer dependent on the multinationals. After considerable negotiation, Exxon and Conoco Phillips refused to accept the new conditions, in contrast to Chevron Texaco, British Petroleum, and several other European firms that did.

3. David Luhnow and Peter Millard, “How Chávez Aims to Weaken U.S.,” The Wall Street Journal, May 1, 2007, p. A-2.

4. Tal Cual (Caracas), February 27, 2007, p. 10; Terry Lynn Karl, “Petroleum and Political Pacts: The Transition to Democracy in Venezuela,” Latin American Research Review 22, no. 1 (1987): p. 90.

5. Luhnow and Millard, “How Chávez Aims to Weaken U.S.” El Universal (Caracas), February 2, 2007, p. 1–13.

6. Luhnow and Millard, “How Chávez Aims to Weaken U.S.” Fulfilling the 1 million-barrel goal hinges on China’s decision to downplay coal and to finance the construction of a pipeline from Venezuela to Colombia’s Pacific Coast.

7. Initiatives along the lines of PetroCaribe and PetroSur have been a political liability for Chávez. Indeed, Manuel Rosales, Chávez’s rival in the presidential elections of December 2006, raised the slogan “The oil will no longer be given away.” Rosales’s electoral cry resonated with Venezuelan voters (although not enough to threaten Chávez’s reelection) in large part because government spokespeople failed to drive home the point that PetroCaribe makes commercial sense. Not only is the sale of oil at 60% the going price still highly profitable, but the government-to-government agreements save money by eliminating the middleman, namely the private oil companies. In their public statements, chavista leaders have also generally failed to explain how economic diversification makes sense for Venezuela from an economic viewpoint.

8. Paul Michael Wihbey (president of GWest). Quoted in Deborah Yedlin, “Chavez Gives Boost to Oil Sands,” The Globe and Mail, December 8, 2006,

9. Author interview, May 17, 2007, Washington, D.C.

10. Fareed Mohamedi (consultant for PFC Energy), author interview, November 10, 2006, Washington, D.C.

11. El Nacional (Caracas), September 12, 2006, p. A-19.

12. Últimas Noticias (Caracas), September 12, 2006, p. 12.

13. Panorama (Maracaibo, Venezuela), September 13, 2006, p. 2-3.

14. The New York Times, June 2, 2006, p. C-2.

15. Daniela Spenser, “New Partners and Old Limits,” NACLA Report on the Americas 39, no. 5 (September/October 2005); Brooke Larson, “The Cuba Connection in Evo’s Bolivia,” paper delivered at the Institute of Latin American Studies, Stockholm University, Sweden, April, 4, 2007.

16. El Tiempo (Puerto La Cruz, Venezuela), July 3, 2007, p. 12.

17. One year later, Venezuela still has no diplomatic representation in Israel, although in June a delegation of Venezuelan government officials and business representatives visited the nation.

18. The Jerusalem Post, August 6, 2006; Financial Times, August 20, 2006; Dima Khatib,, August 21, 2006 (reposting of Al Jazeera article).

19. Efraim Davidi, author interview, June 12, 2007, Tel Aviv.

20. Bernardo Álvarez, author interview, May 17, 2007, Washington, D.C.

21. The Jerusalem Post, May 19, 2006.

Tags: multipolar, Venezuela, oil, diplomacy, Hugo Chavez, Iran, south-south

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