Chávez: Trading Oil For Influence

Venezuelan President Hugo Chávez has been a thorn in Washington's side since taking office in 1999. He has threatened to interrupt vital oil shipments to the U.S. and claimed that President George W. Bush is planning an invasion to gain control over Venezuela's oil reserves, the largest outside The Middle East. Alarm bells went off recently when Chávez said he wanted to obtain nuclear technology from Argentina. But what worries Washington most is the way Chávez is spreading his strident anti-American message throughout the hemisphere, winning hearts and minds from Buenos Aires to the Bronx.

Flush with billions in windfall oil profits, Chávez, 51, is embarking on an ambitious campaign of petro-diplomacy that is rapidly increasing his clout in the region. U.S. officials have said they believe Chávez is channeling funds to the campaign of Bolivia's presidential front-runner, socialist Evo Morales, although Morales has publicly denied it. A self-described "anti-imperialist," Morales has pledged to end a U.S. program to eradicate cultivation of coca leaves, the raw material for cocaine, if he wins the Dec. 18 elections. Morales has also threatened to nationalize the natural gas industry -- a move that could deal a blow to companies that have invested heavily there, including Exxon Mobil Corp.

"Castro with Oil"

Backing for Morales is just the latest of Chávez' oil-greased moves. Since the start of this year he has bought around $1 billion of Argentine government bonds. That earned him the gratitude of President Nestor Kirchner, who now could have an easier time ignoring restrictive International Monetary Fund rules. Chávez recently agreed to provide around 200,000 barrels a day of heavily subsidized oil to Cuba and 12 other Caribbean and Central American nations. Earlier this year, he inked a deal with Brazilian oil company Petrobrás (PBR ) to jointly build a $2.5 billion refinery near their shared border, and he has offered to buy some of Ecuador's debt to help shore up that politically unstable nation. "Chávez is a very influential, active leader with enormous resources who is trying to build an anti-U.S. coalition. If he succeeds, that would present enormous problems" in the region, says Michael Shifter, vice-president for policy at Washington's Inter-American Dialogue, a non-partisan think tank.

Chávez has even taken his public relations machine to the U.S. He ordered state-owned oil company Petróleos de Venezuela to provide through its U.S. subsidiary, CITGO Petroleum Corp., 12 million gallons of heating oil at 40% below market prices to needy residents in Boston and the Bronx.

No wonder some pundits refer to Chávez, who is a close friend and disciple of Cuban leader Fidel Castro, as "Castro with oil." After training guerrilla movements in Latin America in the 1970s and 1980s, Castro shifted to sending teachers and doctors to neighboring countries to spread his socialist message. But those countries were loath to alienate the U.S. government and investors, and they were turned off by Castro's repression of his own political opponents. But Chávez has managed to tap into growing discontent throughout Latin America, where citizens have lost faith in traditional political parties and feel that U.S.-advocated market reforms have benefited only the elite.

Strongman Syndrome?

What's worrisome is that Chávez, though democratically elected, has consolidated his grip on power by packing the Supreme Court, electoral council, and Central Bank with his followers. When dissident parties boycotted the Dec. 4 congressional elections to protest a possible breach in vote secrecy, pro-Chávez forces won all 167 seats. That will allow him to change the constitution to stay in office until 2021. "Chávez has an inflated sense of importance because he's had an unbroken series of successes," says Eduardo Gamarra, the Bolivian-born director of the Latin America & Caribbean Center at Florida International University. "The only thing that can slow him down would be a dramatic drop in the price of oil."

For Washington to counter Chávez' influence, it would have to start paying attention to the region after virtually ignoring it following September 11. "There has been a sense that Latin America can take care of itself, but Washington needs to start repairing the tattered relations," says Shifter. Instead of focusing U.S. aid so narrowly on drug eradication and security, Washington might boost its standing if it channeled more aid to programs to improve education, health-care, and justice systems in fragile Latin democracies. In the meantime, as long as oil prices stay high, Chávez' following is likely to grow.

By Geri Smith in Mexico City

Edited by Rose Brady

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