Venezuela Renews Threat to Cut Oil Exports to US, Says Us Market Not Vital

CARACAS (AFX) - Venezuelan president Hugo Chavez renewed his threat yesterday to suspend oil exports to the US if the US administration steps up its 'attacks' against his government.

'We do not want to sever links with the US government, but if the attacks keep increasing, as they recently did, this will put at risk the relations between Venezuela and the United States,' Chavez said in a speech yesterday.

Chavez added: 'The two oil tankers that ship oil everyday to the United States might go somewhere else.'

'We have no reason to cut supplies to the US unless Mr Danger (President George Bush) makes us do it,' Chavez said.

Chavez made the comments at a mock trial organised within the framework of a festival 'against imperialism and war'.

Venezuela, the only Latin American member of OPEC, which sends around half of its oil exports, about 1.5 mln bpd, to the US, accuses Washington of being behind a failed coup in Venezuela in April 2002, and recently Chavez has alleged the US intends to assassinate him.

Then how come the ChiComs have locked up Venezuelan and Iranian oil in long term agreements.

The Chinese are trying to do several things at once with these deals. First. they are trying to cut deals that will give them oil at a predictable cost, less subject to fluctuation than the spot price. Second, they are trying to obtain oil at a below market price by offering sellers the chance to have a stable long term deal. Third, they are trying to use their petro-purchasing power to leverage a geo-political advantage and to disadvantage nations they see as long-term strategic rivals - like the USA. Fourth, they are trying to substitute barter for cash whenever possible to ease pressures on their foreign excchange reserves.

All these actions are typical of a state-controlled economy and reflect weakness, not strength.

And yes, oil isn't PERFECTLY fungible. Thaat's why I said it is relatively fungible. There are big differences in the composition of crudes from around the world. Most refineries are optimized for particular crudes. Venezuelan crude, if I recall correctly, requires some special refining processes to deal with its high sulfer content. Still, I stand by my central point.

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