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ENERGY-SPAIN: Calm, Rational Dialogue with Bolivia

Alicia Fraerman

MADRID, May 4 2006 (IPS) - Bolivia’s nationalisation of its energy resources goes well beyond domestic political, economic or business considerations, raising major international issues, as seen by the reactions from Spain and other countries whose companies are affected.

The decision announced on Monday by the administration of leftwing President Evo Morales has caused particular concern in Spain, Brazil, Argentina and the United States, the countries of origin of some of the largest investments in the Bolivian oil and natural gas industry. But so far, reactions have been moderate.

Following conversations between Morales and Spanish Foreign Minister Miguel Ángel Moratinos, Spain’s socialist Prime Minister José Luis Rodríguez Zapatero decided to send a mixed delegation, headed by Bernardino León, the Secretary of State for International Relations and Ibero-America, to Bolivia for negotiations.

“From what we know at the moment, things do not bode well, but we hope that as a result of the talks, the Spanish firms will be able to remain in Bolivia on reasonable terms,” León told IPS when asked about his expectations for the mission.

A negotiated solution will be sought in this matter, which goes beyond a straightforward nationalisation, according to the moderate reactions from Madrid and from the Spanish-Argentine oil company Repsol-YPF, which stands to lose its controlling interest in its Bolivian subsidiary, and therefore faces a reduction in earnings.

Morales’ move came at a time of diminishing fossil fuel reserves, steadily rising prices of oil and natural gas, and the struggle over their control between traditional powers such as the United States and Russia, and emerging powers like China.

While Washington’s stance towards La Paz has hardened, in Europe the mood is one of negotiation, as shown by Zapatero’s reaction to Morales’ presidential decree which reasserts state ownership and control over Bolivia’s energy industry. Private companies are to be merely transient operators in the chain of production, distribution and sales.

The Brazilian state oil firm Petrobrás, the Franco-Belgian company Total Fina LF, and British Gas and British Petroleum are among the main oil companies operating in Bolivia, which has the second largest reserves of natural gas in South America, after Venezuela, amounting to 53 trillion cubic feet and valued at approximately 100 billion dollars.

The decree announced on International Labour Day puts natural gas and oil production in the hands of the newly strengthened state-owned Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), which will also handle sales, fix refining volumes and set prices for the domestic and export markets. Foreign oil companies willing to negotiate new contracts within the next six months will be able to continue operating in the country as partners of the Bolivian oil company.

Zapatero said on Wednesday that his government will make “political and diplomatic efforts” to successfully overcome what he termed “an isolated problem” between the two countries, and that the incident will in no way affect “Spain’s development aid to Bolivia.”

He added that “above and beyond this specific problem, Spain will always support the Bolivian people.”

The Spanish prime minister acknowledged that there was a conflict, but said that diplomatic channels would be pursued. There was no hurry, he said, as “we have 180 days,” the deadline for foreign investors to adjust to the new conditions.

The six-month deadline leaves sufficient margin “to listen calmly to the Bolivian government, understand what it is offering the companies involved, and take calm and rational decisions,” he said.

Over the next six months, the Spanish government will be in close contact with other countries that are also affected, especially Brazil, said Moratinos, who has already been in touch with his Brazilian opposite number, Celso Amorim.

Madrid has called a meeting of representatives of all Spanish companies doing business in Bolivia, to be held in the next few days, in order to listen to their views and gather their input to the negotiations.

This meeting “demonstrates that the administration is concerned, not only about the workers, but also about the interests of Spanish companies overseas,” said Deputy Prime Minister María Teresa Fernández de la Vega.

Meanwhile, Repsol-YPF executives are “worried” about the new scenario, and said that the company is prepared to enter into dialogue with Morales to renegotiate the production contracts, in the hopes of reaching a solution.

Repsol-YPF shares were 2.03 percent down at the start of trading on the stock exchange on Wednesday, after having fallen 0.63 percent on Tuesday.

According to the decision announced in La Paz, Repsol-YPF will lose three percent of its shares in its subsidiary company in Bolivia, retaining 48 percent. In spite of this and the new conditions imposed, the firm may continue to operate in the South American country, and it wants to negotiate the best possible terms under which to do so.

As for the negotiations, after the delegation headed by León visits Bolivia, talks at the highest level are expected to be held in Vienna, where the European Union-Latin America and Caribbean summit will be held on May 12.

In government circles in Spain it is assumed that there will be a meeting between Morales and Zapatero on that occasion, as well as meetings between the Spanish prime minister and other Latin American presidents, including Luiz Inácio Lula da Silva of Brazil, Néstor Kirchner of Argentina and Hugo Chávez of Venezuela, all of whom are directly or indirectly concerned.

The problem – or the crisis, as others call it û has been made use of by the leader of the opposition, Mariano Rajoy, head of the centre-right Popular Party, who said that Morales’ decision was “very bad news for Spain and for Bolivia.”

“It’s a blow” to Zapatero, because he prided himself on his good relations with Morales, Chávez, and Cuban President Fidel Castro, Rajoy commented, while urging Zapatero to re-think his foreign policy.

In contrast, the environmental organisation “Ecologists in Action” was delighted by the step taken by Morales, and expressed its support for oil and gas nationalisation in Bolivia “with a view to their more eco-friendly management.” The organisation called for the measure to be implemented “for the benefit of the whole of society, while aiming at environmental equilibrium.”