Economy & Trade, Headlines, Latin America & the Caribbean

TRADE: Venezuela Oil Deal Ruffles Caribbean Unity

Peter Richards

PORT OF SPAIN, Jul 13 2005 (IPS) - The first hint of public disagreement over a new regional plan to increase oil imports from Venezuela came during the opening of the Caribbean Community (CARICOM) summit in St. Lucia on Jul. 3.

Trinidad and Tobago’s Prime Minister Patrick Manning, departing from his prepared speech, blasted his regional colleagues for signing an accord that he said had the potential to "erode the economy" of his country, which provides 60,000 barrels of oil daily to the region.

"In the Caribbean, no one country is able to stand alone. All countries are inter-dependent, and united we will stand and divided we will fall," Manning warned, noting that, "For us therefore, Caribbean unity is sacrosanct."

At the end of the four-day summit, he claimed ¬that he and his Caribbean colleagues had "kissed and made up", but Manning knows all too well that his open criticism will continue to send ripples throughout the region.

Political scientist Selwyn Ryan said Manning’s complaints about the "seeming ungratefulness of some Caribbean countries" were reminiscent of the position adopted by then-Prime Minister of Trinidad and Tobago Eric Williams more than three decades ago.

"Williams was angry with the behaviour of Jamaica, Guyana and the Eastern Caribbean states who made deals with the Venezuelans, notwithstanding the fact that he had bailed them out following the energy crisis of 1973 which drove up the price of oil," he said.

Manning, using the "unity" theme that had prevailed during the Jul. 3-6 Caribbean Community (Caricom) meeting, said it would have been better if the regional leaders had met before the Venezuela initiative was signed to consider its implications.

He agreed that the offer to benefit the Caribbean region through lower energy costs as well as the development of supply infrastructure, joint refining and coordination of hydrocarbon supply and distribution was too good an offer to pass up.

"Naturally, countries in economic circumstances such as the Caribbean today would find it very difficult to walk away from an arrangement like that. It is very attractive," he said, but insisted that his country had been doing its share.

He said Port of Spain had established the Petroleum Stabilisation Fund to assist the region predicated on a formula that takes into account oil prices above 32 dollars a barrel.

"It is a function of Petrotrin’s (the state-owned oil company) gross product sales to the region with a cap at the level of 25 million TT dollars a month for a total of 48 million U.S. dollars a year (to) Caricom countries only," he said.

Under the Caracas initiative (PDVSA), Venezuela’s state-owned energy company will supply signatories with 185,700 barrels a day of oil. Some Caribbean states import oil from the Persian Gulf at prices similar to those paid by developed countries. Over the past few months, the price per barrel of oil has hovered near the 60-dollar mark.

As part of the agreement, a fund has also been established for social and economic programmes, with Caracas making an initial contribution of 50 million dollars. Additional contributions will flow through savings from direct trade or contributions from the financed portion of oil purchases.

The Caribbean countries will also be allowed to defer payments for 30 percent of their imports for 15 years at an interest rate of two percent per year. If oil prices go above 50 dollars per barrel, the interest rate will fall to one percent per year, with payment for 40 percent of the imports being spread over 25 years.

Fourteen of the 16 Caribbean countries that attended the region’s first Heads of State Energy Summit in Venezuela on Jun. 30 agreed to the creation of PetroCaribe, a component of Venezuela’s overall PetroAmerican concept, which targets the larger Latin American region and includes PetroSur and PetroAndina.

Trinidad and Tobago and Barbados were the only two Caribbean states that failed to sign the Caracas initiative and both have dismissed suggestions that their positions were due to pressure from the United States.

Barbados Prime Minister Owen Arthur told reporters that his island’s constitution forbade unilateral executive action on the initiative.

"Our collective responsibility is that the cabinet has to be party to any decision binding upon the government," he added.

Arthur added that Bridgetown has a deal with Port of Spain requiring that latter to process its crude oil in exchange for petroleum products.

In the address that some Caribbean observers described as "clinical assassination", Manning spoke of Trinidad and Tobago’s efforts to establish natural gas pipelines to some Caribbean states and the provision of cheap electricity to others, if the gas pipeline is considered too expensive.

He said that one of the biggest recipients of assistance from his country was Guyana, and that Port of Spain had so far written off 532 million dollars which, at today’s exchange rate amounts to 553 million dollars.

But Guyanese President Bharrat Jagdeo said Manning was out of place to go into such details at the Caricom opening ceremony, which is used more for general statements on Caribbean unity.

"Frankly speaking, Trinidad sells oil to the region at prices higher than it sells to the United States. We could have gotten up and said so, but this is not the forum for this," Jagdeo told reporters.

Caricom chairman and St. Lucia’s Prime Minister Kenny Anthony said that Trinidad and Tobago had benefited most from intra-regional trade over the past years.

"Trinidad’s share of intra-regional exports far exceeds its share of imports. That is to say the rest of Caricom continues to source a high proportion of its material needs within the region, (but) the same is not true of the Trinidad economy," he added.

Jamaica, which has also signed an agreement with PDVSA to expand capacity at its Petrojam facility by 42 percent, did not want to publicly comment on Manning’s statement.

Prime Minister PJ Patterson said it was not his habit or practice to comment publicly on speeches given by other colleagues. "I think it is too late and unwise for me to depart from that practice now."

But his Commerce Minister Phillip Paulwell said the Caracas initiative "opens an avenue for increasing trade between Jamaica and Venezuela in commodities such as banana and sugar which are now under threat from current trade policies."

Paulwell said the new agreement would allow Jamaica up to 90 days to pay for each shipment of oil from Venezuela. Additionally, Kingston will be able to access up to 50 percent of the value of purchases as long-term loans if the barrel price of oil hits the 100-dollar mark.

Ryan said that the offer being made by Venezuelan President Hugo Chavez threatens the market share of the state-owned company, Petrotrin, and "Manning was obliged to remind his Caricom colleagues that Trinidad and Tobago had committed itself to making close to (166 million dollars) available to Caribbean countries annually to subsidise their oil imports."

On his return to Port of Spain, Manning said it was likely that discussions would soon be held with Venezuela on PetroCaribe, and that experts at Petrotrin were "were going to have an essential input in any proposals that we put to the Venezuelan government."