High oil prices form weak base for state power

Bob Tippee

Most Americans base their distaste for foreign oil on presumed instability in the Middle East. They should note recent events in Moscow and Minsk.

Venezuelan President Hugo Chavez visited Russia and Belarus to sign energy deals and, as usual, chatter about US "aggression" and "imperialism."

This is the despot who has embraced truculent Iranian President Mahmoud Ahmadinejad and supported terrorists in Colombia.

In Moscow he signed separate deals with TNK-BP, Lukoil, and Gazprom for exploration and development in Venezuela's Orinoco heavy oil region, where his government has expropriated interests of western oil companies in existing projects while raising taxes.

He also sought a second agreement to buy Russian military equipment and proposed, according to Fox News, an alliance with Moscow through which "we can guarantee Venezuela's sovereignty, which is now threatened by the United States."

As though to hedge his bets, the Venezuelan leader stopped in Minsk to schmooze with Belarusian President Alexander Lukashenka, who called him a "brother."

Lukashenka also regularly denounces the US and, like Chavez, holds office by virtue of elections widely regarded as rigged.

Belarus, though, has squabbled with Russia over oil and other matters. So when Chavez agreed in Minsk to expand an energy cooperation agreement that the governments entered last year, he might have been playing his chums against one another.

After Chavez left Moscow, meanwhile, fractures widened between the 50-50 partners in TNK-BP: BP and Alfa Access Renova. BP responded to pressure from AAR by withdrawing its seconded employees. Then Robert Dudley, the British head of the joint venture, left Russia citing harassment from the four Russian billionaires that make up AAR.

The partners had been calling for Dudley's resignation since a board meeting in Cyprus earlier this month. After the meeting, the government did its part for the home team by refusing to renew Dudley's 1-year visa.

So goes business in Russia and Venezuela, where citizens seem to like the immoderate exertion of state power. The power of the moment, of course, owes much to oil prices that have defied the laws of economic gravity—until recently.

What was that about "instability?"

(Online July 25, 2008; author's e-mail: bobt@ogjonline.com)

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