Chavez Warns about Shutting Down Oil Sales to the U.S.

The courtroom battle between Exxon Mobil and Venezuelan state-owned oil company Petroleos de Venezuela SA took on a distinct political hue today with Venezuelan president Hugo Chavez declaring a judgment in favor of Exxon Mobil could trigger an economic war that could possibly result in Venezuela shutting down oil sales to the U.S.

Exxon Mobil is currently engaged in a legal battle with Petroleos de Venezuela in courts in the U.S., Britain, and the Netherlands. The legal fracas arose when Chavez’s government nationalized a multibillion-dollar oil project. Already, there has been an injunction by a British court, requiring the ‘freezing’ of assets worth almost $12 billion.

Other foreign oil majors such as the Chevron group from the U.S.A, Total from France, BP PLC from Britain, and StatoilHydro ASA from Norway have worked out arrangements with the Venezuelan government that enable them to continue as minority partners in the multibillion-dollar Orinoco Oil Project, which consists of four projects in the Orinoco River Basin.

Two other companies, Exxon Mobil and ConocoPhillips, have not accepted the steep terms that the Venezuelan government has offered them, with Exxon Mobil choosing to go the legal way.

Rafael Ramirez, the Venezuelan Oil Minister, has been saying that any court orders that Exxon Mobil may win would not impact PDVSA. He called such rulings ‘transitory’, even as Venezuela is putting forward its case in the New York and London courts.

In the course of his weekly television and radio program Hello, President, President Chavez said, “If you end up freezing (Venezuelan assets) and it harms us, we’re going to harm you. Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger.”

The United States is Venezuela’s biggest client when it comes to oil. Latest data from the Energy Department of the U.S. government indicates that Venezuela accounts for almost 12% of all American crude oil imports. The U.S. imports 1.23 million barrels of crude oil a day from Venezuela, placing it fourth, behind Canada, Saudi Arabia, and Mexico in the list of crude oil suppliers to the U.S.

President Chavez has been taking full advantage of this fact; repeatedly stating he would shut down oil supplies to the U.S. should there be a move from Washington to have him removed. His Sunday statement indicates he is using the same ploy to deal with oil companies that have taken legal recourse to challenge his nationalization drive.

In his program Sunday, Chavez further said, “I speak to the U.S. empire, because that’s the master: continue and you will see that we won’t send one drop of oil to the empire of the United States.” He also alleged that Irving, Texas-based Exxon was working in tandem with Washington.

Margaret Ross, spokeswoman for Exxon, said the company had no comments to offer in this regard. A call to the spokeswoman at the U.S. Embassy in Caracas also did not receive an answer.