The frontier of curse-land

Any moment the State receives more than 4% of GDP in fiscal income directly from any extractive industry or similar, then the State has become too independently wealthy and the balance of powers needs to be restored by paying out all exceeding revenues directly to the citizens.

A letter to the Extractive Industries Transparency Initiative (EITI)

Dear friends,

By now you must know that though I harbor some reservations I support most of your initiatives, and most specially their spirit. That said…

In the video “Making resources work for people” that is posted on your web Obiagely “Oby” Ezekwesili says that “It ought to be the case that these revenues [from natural resources] can transform the life of the citizens but then you see the opposite happen.. It is the challenge to move the benefits of the natural resources out of the hold of a smaller club of people and instead diversify the opportunity that it offers to a larger number of people that is what will reverse the curse and that is the most important issue of the day for mineral rich countries.”

I could not agree more. And that is why I hereby express my deepest reservation about your second principle that says:

“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

The management of natural resource wealth for the benefit of a country’s citizens should be managed by the country’s citizens... otherwise, how will they ever learn how to manage it? The role of the government is to provide government not manage wealth for the voters.

Also, in the same video, Peter Sutherland Chairman of the Board of BP, talking sort of both for the consumers and the producers of oil, expresses that a steady predictable supply of natural resources at a reasonable price is in the interest of everyone... and that stability and predictability is dependent on good governance... for which transparency is a very important component.

I agree completely, on the first part, but instead of transparency on the status quo, and which I have equated to being able to see when the torturer extract your nails, I would much rather prefer that Peter Sutherland would help intermediate between oil producing and oil consuming countries in order to offer directly to all the citizens of an oil producing country, the true shareholders of oil, long term take up contracts, which would provide them with equitable and stable dividends and the consumers with equitable and stable oil prices.

Sincerely yours

Per Kurowski

An oil cursed citizen.

We don’t need more transparency

A new group of well intention academicians who want to help those countries blessed with natural resources to transform these in development and wealth for their citizens has recently been created. This group will summarize its conclusions in something named “The Natural Resource Charter”.

Just like the Extractive Industries Transparency Initiative, EITI, one of its guiding principles is that helping make more transparent the information of the origin and destiny of the funds obtained from the natural resources, will make the citizens request better results. Forget it!

We Venezuelans do not need more transparency to be absolutely sure that we are anchored in an infamous oil feudalism where or feudal lord on duty keeps all the seeds and shares out what is left or what he has digested. More transparency would be like the tortured clamoring for their rights to also be seeing how they extract their fingernails.

We Venezuelans do not need more transparency to be absolutely sure that the most we can expect substituting for the feudal lord on duty with another from the same tribe of the getoutoftheway-toplacemyselfs is that he will hopefully do just what the previous did a little bit better, though always running the risk he will do it worse.

We Venezuelans do not need more transparency to be absolutely sure that our lives are wasted fighting among each other for a share in our own net oil results, wallowing in a sort of eternal piñata at the feet of the benevolent on duty who distractedly observes us with a sarcastic smile.

We Venezuelans do not need more transparency to be absolutely sure that instead of a feudal system that administers our own net oil results we need a normal government that governs our country.

We Venezuelans do not need more transparency to be absolutely sure that we are much better off trusting each one of us a little, instead of trusting a chief so much that we elevated him to be our feudal lord.

In conclusion we Venezuelans do not need the slightest bit of more transparency to be absolutely sure that what we most need is the strength and will to free ourselves from this feudal oil state in which we are trapped by requesting they give us our oil results directly, so that we can plant them… instead of discussing so many stupidities and believing in so many pregnant birds.

Translated from “El Universal” Caracas, Venezuela, April 9 2009.

Plain awful

It is plain awful to be a citizen where the government is independently wealthy because of income from national resources and does not really need the citizens.

EITI´s unacceptable principle.

The Extractive Industries Transparency Initiative states as its 2nd EITI Principle the following:

“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

That, to me, a resource cursed citizen, is an unacceptable principle.

I hold that the individual citizens will always be better, on average, at making the most out of any resource blessings than any government managing all of them.

A letter to The Natural Resource Charter from an oil-cursed citizen

Friends, you say in your precept 2 “Extractive resources are public assets and decisions around their exploitation and use should be subject to public oversight.”

Let me introduce myself. I am one of those millions of oil cursed citizens t and I do have some serious reservations with respect to this precept 2 draft. Let me explain.

Let us suppose that all the net results of the exploitation of any extractive resources placed by providence in a country had been equally divided among the citizens, those who arguably are the most legitimate owners of said funds. Let us then suppose that the central government requests the citizens to give to it all the net results in their possession... what would we have? We would have the mother of all the regressive tax systems, with the marginal tax rate for the poorest being 100%.

Would anyone of you in the Natural Resource Charter support such a regressive tax system? I don’t think so. And so why then do you take it as a big given, without even putting it up for discussion, that “extractive resources are public assets”?

In Venezuela, in 1974, the Oil Boom I of my time, Carlos Andres Perez´ time, as a rookie MBA I was appointed diversification manager in the Venezuelan Investment Fund that was being set up in order to safeguard the oil income that the country had no chance to digest in a reasonable way. It took me less than a month to discover that the whole set-up was doomed to fail and so I quit, the same day my new desk arrived. I thereafter worked as a financial and strategic consultant in Venezuela for 28 years.

In 2002 as a result of some almost inexplicable events, like being recruited for it on the web, I was appointed for two years an Executive Director at the World Bank. I have since suffered and witnessed in detail, though from a sufficient distance to see the forest, the Oil Boom II of my time, Hugo Chavez´ time. Frankly I know more than most what the oil curse is really all about and I pray for and do the most that I can in order to find a way for my country of not wasting Oil Boom III whenever it comes.

This week I assisted the “Improving Extractive Industries Benefits for the Poor” (those taxed at 100%) organized by the World Bank´s Oil and, Gas and Mining Policy Division. There were many interesting conferences but, with respect of how to avoid the oil-curse, I heard no new lessons derived from Oil Boom II that I had not previously learnt from Oil Boom I.

The main explanation for it might be very difficult for anyone who has not lived under the oil curse to really understand it.

Though it is great having transparency, like that promoted by EITI, whose efforts I fully support , the real oil curse is not about the lack of transparency; the real oil curse is about a nation of citizens sitting down and expecting their government to sow the oil revenues and harvest something good for them, without given the slightest thought about taking that responsibility upon themselves; the real oil-curse is the citizens handing over through elections the check book containing their own oil revenues to the chief in turn just in order to fight among themselves the next years for a larger share of these or to have to bow to the chief to get something of those net revenues back.

As I see it the only way we citizens have to escape the oil curse is by avoiding centralizing the net oil revenues in the hands of the government, at least during an oil boom. The way I, an oil cursed citizen, would start visualizing a solution, is in terms of having any net oil revenues that represents more than a percentage of GDP and that is distributed, being paid out in cash, directly to the citizens instead of to the government.

Friends, we oil cursed citizens have had enough with our government finding itself to be independently wealthy during an oil boom and therefore having no fiscal income incentive to even keep up the appearances of a responsible behavior.

May I therefore respectfully ask the Natural Resource Charter not to start tackling this issue as if the oil revenues were given to the States by God and instead try to side with the citizens. Frankly our politicians do not deserve having more policymakers endorsing their populist promises.

There is no such thing as an oil-cursed politicians, oil-cursed governments or oil cursed policymakers, on the contrary they are all most often shining examples of oil blessings... there are only oil-cursed citizens.

Please!

http://www.eluniversal.com/2009/03/12/opi_art_nosotros,-los-maldec_12A2250731.shtml

The only way

The only way we citizens have to escape the oil curse is avoiding the centralization of the net oil revenues in the hands of the government, at least during an oil boom.

The way I, an oil cursed citizen, would start visualizing a solution, is in terms of having any net oil revenues that represents more than a percentage of GDP and that is distributed, being paid out in cash, directly to the citizens instead of to the government.

The mother of all regressive tax systems

Let us suppose that all the net results of the exploitation of any extractive resources that were placed by providence in a country had been equally divided among the citizens, those who arguably are the most legitimate owners of said funds.

Let us then suppose that the central government requests the citizens to give to it all the net results in their possession... what would we have? We would have the mother of all the regressive tax systems, with the marginal tax rate for the poorest being 100%.

Would anyone of you support such a regressive tax system? I don’t think so.

My minimum minimorum on exiting Iraq!

I was never in favor of the invasion of Iraq but, once it occurred, I pleaded for a scheme that would put its oil revenues directly into the pockets of all the Iraqis, and thereby set an example that could help to empower the democracy in all the other countries that are cursed with the centralization of their oil revenues… the mother of all oil curses. Unfortunately, the supposed builders of democracy forgot to bring with them to Iraq such a fundamental building block. 

Now, when exiting Iraq, as a minimum minimorum, we should at least aspire that the next Saddam Hussein, whenever he will appear, should not find it easier to be the next Saddam Hussein.

Below, the link to one place where I pleaded

https://www.carnegiecouncil.org/publications/archive/policy_innovations/commentary/000083

The historical origins of Venezuela's oil curse

Translated from El Universal

1. The Ordinance of Alcalá (Spain) by King Alfonso XI, in 1348 established: "All mining of silver, gold, lead and any other metal, of any kind, belong to Us; therefore, no one dares to work without our special license and mandate".

2. The Ordinances of San Lorenzo, issued by Felipe II in 1584, which incorporated all the mines into the royal patrimony, were in force in America until 1783. Then these were repealed by the Mining Ordinances for New Spain, promulgated by King Carlos III, which precepted "The mines [including the bitumen or “juices of the earth”] are the property of my Royal Crown".

3. "In 1829, Venezuela’s “Liberator”, Simón Bolívar, promulgated a Decree in Quito that tacitly established that the mines passed from the Royal Spanish Crown to the domain of the Republic of Venezuela... whose government grants them ownership and possession to citizens who request them, under the conditions expressed in the Mining Laws and Ordinances, and with the others contained in this decree". As if wanting to reaffirm its origin, Congress, in the Law of 1832, resolved: "according to the Decree of October 24, 1829, the Ordinance that should serve as a rule for the Government in relation to mines, is that of New Spain of 1783".

4. The first Mining Code of 1854, which incorporates aspects of the French Mining Law of 1810, caused some confusion. Although it indicates that the property corresponds to the State, it also talks about the possibility of a perpetual ownership of a mine... a transferable property without the need for authorization from the Executive Branch. Between the Constitution of 1864, which establishes the federal regime, until 1909, we read that the property belongs to each Federal State. Between 1910 and 1925 seemingly "nothing was said about the ownership of the mines."

5. And in 1920 the first Law on Hydrocarbons and other Combustible Minerals was enacted and which to this day establishes that "the State can directly exploit... discuss freely, like a private owner, the conditions of the assignment. It is not obliged, however, to grant the assignment of his right".

That centralization of the net oil revenues in the state guaranteed, sooner or later, these would be captured by inept profiteers or simply by vulgar bandits.

Simón Bolívar was without doubt a Liberator, at least in a geographical and political sense, but sadly, when it comes to the economy, he de facto doomed us Venezuelans to not live in a nation but, sadly, only in someone else’s good business.

PS. Other governments too envious of our national resources, having none or little of these, decided to exploit/capture the resources provided by credit, and imposed risk weighted bank capital requirements with decreed weights 0% government – 100% citizens

Let us sit down and talk about oil!

On June 26, 2008 I published in Caracas an imaginary letter from Arnold Schwarzenegger to the citizens of Venezuela and in which he offers to buy, on a rolling five years average price, 2 million of oil barrels per day, so as to satisfy the needs of his California constituency and also to take the worst of that volatility out of the market that keeps his electorate running crazed between Hummers and hybrids.

To provide the Venezuelans with the incentives to entering into such a contract Arnold is offering to pay an equal share of the proceeds, to each one of the 26 million citizens of Venezuela, in the currency and in the account each one of them would order… instead of giving all that money to chávez.

Economics is about making the most out of scarce resources and so when seeing the oil suppliers in OPEP exercising their powers successfully, which is OK since oil in a non renewable resource and since the world at large should benefit from consuming less of it, one cannot help but ask why the consumers do not exploit their powers as consumers. I suspect because there are some not wanting them to do that.

I wonder what the Venezuelans would say if they would formally receive such an offer from Arnold since today the primary reason for which Venezuela is not exporting more oil, even though its citizens might need the money, is that its government gets more oil revenues than it can handle… in fact so much that they even give away some of the oil to London and Boston.

Fellow citizens from oil supplying and oil consuming countries, why do we not sit down and talk about it all, without intermediaries like oil companies or oil dictators?

Please... while you are busy leaving Iraq

Four Years and Counting in Iraq: Regarding "Lessons of War"

The Post should be commended for not describing the extremely difficult way forward in simplistic terms. Having said that, the editorial should have given more attention to the role of oil, not because of its obvious energy significance but because it is an obstacle to good governance in Iraq.

The editorial said, "We may have underestimated the impoverishment brought about by misrule and sanctions and the brutalization born of totalitarian cruelty." But the sentence should have continued: ". . . that thrives especially well in countries cursed by large amounts of oil revenue flowing to a central government, eliminating any chance for a sustainable democracy."

Coming from Venezuela, where oil revenue is centralized, I know that loyalties to country, tribe and sect are all irrelevant compared with the unnatural loyalty that can be purchased by those in control of a checkbook fattened by oil. If the United States wants to achieve anything going forward, it had better find a way to distribute Iraq's oil revenue directly to the Iraqi people.

Per Kurowski, Bethesda

PS.https://www.carnegiecouncil.org/publications/archive/policy_innovations/commentary/000083

Published in Washington Post 

The desire to fail

SOMETIMES WE MUST teach students not to be afraid of success, said a teacher of color, with 32 years of experience in public schools in Washington. He is right, but in Venezuela we sometimes have to fight against the desire to fail. 

Globalization is something irreversible. Even the United States has had to give its arm to twist (or so it seems) and disconnect the subsidies, which artificially had kept a few of its cotton growers alive, at the expense of many other farmers in poor countries. 

For being a strong critic of the way Venezuela has handled globalization, it may be labeled as global-phobic, both by the inept, who do not realize their dangers, and by the snobs, who only see it as something elegant. However, the truth is that among those who fight, for Venezuela to succeed with globalization and those who believe that the country can have a better future, by turning its back on it, there is a world of differences. 

Recognizing that globalization is difficult and brings risks, we who accept the challenge of swimming with the currents and seeking to get the best for our nation, can feel some sympathy and understanding for those who truly believe we would be better off as hermits. Those who do not deserve our sympathy, understanding, or forgiveness though, are those who oppose globalization, only to ensure the failure of the country so to ensure that mediocrity that allows them to maintain their own share of power. 

In the long run, failure is not sustainable, neither in a globalized world, nor in a colonized one, or we succeed in our Venezuela, or some strangers will do so. In this sense, the failure-searchers, among which we will always find some who say they are acting on behalf of our nation, are cynically dedicated to losing it.

To those who on account of their good intentions believe the failure of their revolution is impossible, let me remind them that while it is difficult to maintain [the spirit of] a revolution without resources, it is much more so with an abundance that attracts all kinds of ilk.

To those who believe that everything will be fixed by just getting out of the process, beware! We can once again end up in total disillusion, not for fear of success, but for the desire to fail. 

To all those who believe that globalization will only leave losers, don't worry, every day there are more of us who want to make winners out of all. Let's not be afraid of success!

Translated from El Universal

The search for transparency in an oil-consuming world

Sir, There has been a lot of talk lately about a curse that, through corruption and other distortions, is stopping oil-rich countries from turning income into development. The Extractive Industries Transparency Initiative, championed by the United Kingdom and endorsed by the World Bank, has been named an exorcist and is starting the rites by applying a much-welcomed transparency to projects such as the Chad-Cameroon pipeline.

In the name of that same transparency, let us also remember that for every $1 received by any oil-producing country (which forever sacrifices a nonrenewable asset), the public treasury of many oil-consuming countries receives, net, at least $4 and is therefore a likely victim of the same curse, albeit stricken by different symptoms. For instance, in many oil-consuming developed countries, the curse has now created such an addiction to petrol taxes that their whole fiscal structures would be completely unsustainable without them.

Transparency would also, perhaps, not be a bad rite to use to exorcise this tax man’s curse, since most of the gasoline consumers in these countries are not remotely aware of the real extent of the taxes and much less of how the proceeds are used.

For instance, having been told that these taxes were environmental, they would be surprised to learn that probably less than 0.5 per cent of the 100,000 million dollars collected yearly in Europe, just in taxes on lead-free gasoline, goes to the environment; and, worse, that much of it goes in subsidies to the even less environmentally friendly coal.

Also, today, as the possibilities of satisfying the world’s demands for energy seem quite uncertain and the world becomes more aware that the ultimate cost of cutting, or not cutting, the trees of the Amazon will be paid by all, whether they like it or not, it is clear that the world needs to become much more penny-wise when developing alternative energies; and we all know that the best and only companion of the penny-wisest is transparency.

So, after the pipelines, when do we start with the Exchequer’s bag?

The Financial Times

The curse

 The curse

Lately, articles that analyze the supposed curse that weighs on countries rich in oil resources have been published like rice. At first glance it would seem that there is a certain basis of support for these theories of obscurantism, however, for proper reading, it is important to clarify one or another detail.

First of all, and judging by the immense number of existing offers to free ourselves from this cursed burden, it is obvious that we are not talking about a common curse. There are even those who generously offer to assume their risks, even paying us for the right to such sacrifice.

A suggested exorcism is to leave OPEC to sell oil at its marginal extraction cost, thus guaranteeing that we avoid earning the dirty rent for oil. Another way is to privatize it, against a tasty and tempting initial payment, to cancel the current public debt... and get into debt again? As you can see, both methods have a strange similarity with selling the sofa.

Finally, considering that the European treasury earns about 100 dollars net per barrel, while those who sacrifice the resource only get 25 dollars, gross, it is not very obvious who is the cursed one.

The indisputable thing is that oil revenues have not been used well, but as you can understand, this has less to do with the abundance of resources and more to do with the damn system used to distribute them. Currently, the entire oil revenue enters the government's coffers alone and effortlessly, thus unbalancing the democratic system, since we all know that the happy holder of a full oil checkbook has little incentive to pay attention to the citizen.

How do we get out of this? To begin with and due to the obvious and incurable lack of talents of our rulers, we must apply the parable of the talents in reverse and bypass them, delegating a greater part of the administration of oil revenues directly to the citizens.

However, since we civil society members are not very different from our politicians, like-minded, like-minded, perhaps we should, just in case, pay the oil dividends with educational tickets.

Chances of it? Few, due to that true curse, the one that leads our leaders to believe that everything bad in the past is miraculously cured with their arrival in power (with the checkbook) and, us, to believe them.

Translated by Google

https://petropolitan.blogspot.com/2003/11/la-maldicion.html

On Transparency and Curses

Lately there has been a lot of talk about a curse that, through corruption and other distortions, is stopping oil-rich countries from turning income into development. The Extractive Industries Transparency Initiative, championed by the UK and endorsed by the World Bank, has been named exorcist and is starting its rites by applying a much welcomed transparency to projects such as the Chad-Cameroon pipeline.

In the name of that same transparency, let us also remember that for every single dollar received gross by any oil producing country (who forever sacrifices a non-renewable asset), the public treasury of many oil consuming countries receives, net, at least four dollars, and is therefore a likely victim of the same curse, albeit stricken by different symptoms. For instance, in the oil-consuming developed countries, the curse has now created such an addiction to gasoline taxes, that their whole fiscal structures would be completely unsustainable without them.

To exorcise the taxman’s curse transparency would also be a good starting point as most of the consumers in these countries are not remotely aware of the real extent of the gasoline taxes, and even less of how the proceeds are used. For instance, having always been told that these taxes were environmental, they would be surprised to learn that probably less than half a percent of the US$100 billion collected yearly in Europe, just in taxes on lead-free gasoline, goes to the environment and, worse, that much of it goes in subsidies to the even less environmentally-friendly coal.

Also, today, as the possibilities of satisfying the world’s demands of energy seem quite uncertain and the world is becoming more aware of the final cost of cutting or not the trees of the Amazon will be paid by all, whether they like it or not, it is clear that the world needs to become much more penny-wise when developing alternative energies… and we all know that the penny-wisest best and sole companion, is transparency.

So, after the pipelines, when do we start with the Exchequer’s bag?

El Universal, Caracas

The Oil Referendum

WOULD YOU BE IN AGREEMENT if the Bolivarian Republic of Venezuela were to sign an oil contract with the United States of America (U.S.A.) under the following conditions?

The U.S.A. and Venezuela agree that starting today and for the next 50 years, the U.S.A. would buy and Venezuela would sell three million barrels of oil per day with Venezuelan characteristics. The Reference Price (RP) would be US $25 per barrel, indexed to the U.S.A. inflation rate, plus or minus an adjustment equivalent to 50% of the difference between the RP and the spot-market price.

As a consideration, Venezuela would also keep an additional 2 million barrels per day at the preferential availability of the U.S.A., which could be bought by the U.S.A. at spot-market prices, provided there were an emergency that made those prices exceed the RP by at least 100%.

In order to guarantee to the U.S.A. that Venezuela would always be in a position to meet its supply obligations, Venezuela would agree that it would not, under any circumstances, contract a new public debt, so as to make sure that the oil revenues to be received over the next 50 years would not be given as guarantees for new fresh loans today, and thereby risk wiping away the value of those reserves in a mere 50 days.

In order to ensure the enthusiastic applause of environmentalists, Venezuela would earmark 3% of oil revenues to planting trees in our country, trees which would capture carbon from oil emissions.

In order to ensure that the Venezuelan citizenry would get its fair share of the revenues (and vote “YES”), 30% of Venezuela’s gross oil revenues would be directly distributed in equal amounts to each Venezuelan. That distribution could be made in cash or in vouchers for health and education services.

If the “YES” vote were to win the hypothetical referendum described above, Venezuela would have macroeconomic stability, enabling it to formulate a true development plan, and the U.S.A. would have a larger, more secure supply of energy.

But so long as the natural market for our oil, the United States of America, remains incapable of gauging its interests beyond the current quarter, and doesn’t care if oil falls to 7 dollars a barrel, and prefers to create costly strategic reserves by burying crude oil or exploiting environmentally delicate areas, then any Venezuelan president trying to defend his or her country and keep the price of oil somewhere above the miserable marginal cost of extraction has no alternative but to strengthen OPEC and seek alternatives elsewhere, if for no other reason than to incite jealousy.

To the best of my understanding, this is what geopolitics is all about; and that’s why it might not be such a bad idea for the United States to study realpolitik—especially when, as happened forty years ago on a Caribbean island, they flunked that subject royally.

Published in El Universal, Caracas, June 7, 2001 (The links to my articles have been erased)

P.S. The above is what I wrote in 2001, but no one in the U.S.A. picked up on the idea or proposed anything similar. That is why today, when oil is up around 60 dollars, I don’t care a lot about some of the crybabies.

P.S. Now, in 2009, after having seen another oil-boom gone to naught in my country I would as a citizen not settle for the 30% mentioned above but request 90%, not in vouchers but in cash!

No, thanks

No, thanks

The following paragraph is extracted verbatim from the UK Energy Report 1999, published by the Department of Trade and Industry of England.

“The retail price of products is largely determined by taxes, especially for fuel. The attached figures ... illustrate the increasing proportion of the price of gasoline attributable to taxes. The incidence of taxes, ...explains around 85 percent of the final price of unleaded gasoline..." Prices are expected to continue growing, given the commitment of the English Government to increase taxes on petroleum by an average of 6 % annual, above inflation.

The report's figures indicate that the price of petrol before tax fell from 15 to 10 pence per liter between 1980 and 1999, a decrease of 33%. However, for the same period in England, the consumer price went from 26 to 68 pence per liter, increasing 162%. The explanation for this phenomenon is found in the various taxes on gasoline, which rose from 11 pence in 1980 to 58 pence per liter in 1999, an increase of 427%.

Taxes, applied in a discriminatory manner to oil, which favor coal, for example, affect both the volume and the sales price of our main export product and therefore directly harm our country. All of Europe applies taxes of the same order and the other consuming economies, except the United States, are evolving in the same direction.

It was only a few months ago that the magnitude of these taxes was understood and the consequences, at least in Europe, were serious protests by consumers. It will be necessary to observe whether in 2001, countries like England and Germany, even when stripped, continue with their pre-programmed increases.

The relative silence of Venezuela and other oil-producing countries, the truly aggrieved ones, is surprising. Sometimes I wonder if such passivity has its origin in the fact that in this globalized world, everyone is still dying for the possibility that one day The Queen will invite them to have tea in her palace.

In November 2000, the president of the European Energy Foundation of the European Union, with great cynicism, announced that in the dialogue between oil consumers and producers, everything could be discussed, except taxes, since these did not significantly affect consumption.

In December 2000, the European Union announced a donation of 55 million euros for the reconstruction of Vargas, to be disbursed over two years.

In a world that preaches free trade, oil taxes are hypocrisy. I, being a Venezuelan of European descent, may react in particular, but I am convinced that we have to place our protest in its correct dimension. In this sense, and even if I had never rejected the help offered by the United States during the tragedy in Vargas, today I would not hesitate to respond to Europe: No thanks, we do not want your donation, that amount is equivalent to what Venezuela would obtain each week if You, on the basis of false environmentalism and real fiscal voracity, do not apply taxes that discriminate against oil. We will not help calm their institutional conscience by accepting some insolent barter with begging mirrors.

(Translated by Google from an Op-Ed published in Venezuela February 1, 2001)

Kohlenweiss 1979

It’s been twenty years, and the deadline established to keep the minutes of the European Union (EU) Inter-Ministerial meeting secret has elapsed. At last, we can read what was agreed to in the small German town of Kohlenweiss during a rainy autumn weekend in 1979, when EU Energy Ministers met in conclave to draw up a strategy on “how to defend oneself from the crude rent aspirations on crude of OPEC countries.”

One debate registered in the minutes seems particularly horrible with all its prejudices against oil-exporting countries. However, because of lack of space, I will limit myself to summing up the approved plan, as originally presented by German minister Grüngelde, a plan that allegedly hinged on the following five key actions.

The first measure (the most innocuous) was to strengthen the relations between European governments and the environmental organizations to such a degree that the latter could be used to apply pressure in favor of diminishing oil consumption without its affecting the more contaminating coal, which Europe happened to possess.

Secondly, a program of continued hikes in taxes on oil and its derivatives, especially gasoline, was established to ensure not only a drop in demand but also that day after day the oil producers would receive a lesser and lesser proportion of oil's real value in the final market, namely, the price paid by the consumer. In this respect, the countries pledged themselves not to allow a lowering of gas prices to the consumer so, each fall in the price of crude should set off an immediate increase in taxes.

The third course of action was aimed at weakening OPEC's internal cohesion and in that sense, using Cold War tactics (the Berlin Wall hadn't tumbled yet), disinformation was one of the recommended instruments, aimed principally at sowing doubts and suspicions inside OPEC itself regarding such things as compliance with quotas set by the organization.

The fourth element agreed to was the “Community’s prior interest to promote and support efforts that would lead to the privatization of the oil industry in OPEC countries.” The reasons are understandable, when among the arguments, is that “as long as the oil industry belongs to the states, they will have the possibility of brandishing the weapon of geopolitical bargaining.” The report established that “to achieve the goal of privatization, the ensuing competition among the partners would guarantee greater volumes of production and lower prices, in view of the fact that they all have a common interest in increasing profit and cash flow in the short term.”

The Fifth ...? Why continue?

I admit the above is pure fiction and that, as far as I know, it doesn’t exist except in my imagination. There’s no Kohlenweiss or Grüngelde. I have no knowledge of any such meeting and I definitely don’t believe that the European Union fixed a period of only twenty years to make documents of this kind public.

However, since reality is stronger than fiction, I trust the reader will pardon my cheek. Let’s see:

Since 1980 all taxes on oil and derivative have been hiked. For example, in the United Kingdom they went from 85% added value in 1980 to a confiscatory 456% in 1998. Obviously, during the same period oil products price index on the consumer level increased in the UK in constant terms from 100% to 247%, while, as if it were planned, the crude oil price index fell from 100% to a miserable 18%.

A barrel of oil contains around 160 liters of oil products broken down into gasoline (84), jet fuel (12), gas oil (36), lubricants (16) and heavy residuals (12). Today, when oil in Europe sells at a minimum $1.20 per liter, we see that this component represents more than $100—adding the other derivatives we come to a market value, that is, the price the consumer is prepared to pay, of more than $150 per barrel. If we start from the fact that refining, transport, and distribution costs aren’t high, let’s say around $20 per barrel, we can conclude that the European Treasury retains a minimum of $100 per barrel, while the producer, who actually sells an asset and sacrifices a nonrenewable resource, has to be satisfied with $30—scarcely 20% of its European value.

As for cooperation with environmental movements, there’s no doubt it’s been a complete success, since oil has been punished with all kinds of possible taxes, thus diminishing its consumption, while coal hasn't been touched even with a feather, arriving at the absurd situation where it’s even being subsidized in some countries by taxes on oil. The consequence of such disparity in treatment can be seen in International Energy Agency statistics, which indicate that in 1973 oil accounted for 44.9% of world fuel consumption compared to 35.3% in 1996. Coal consumption in 1973 represented 24.8% and had maintained the same percentage in 1996.

Despite the fact that the figures mentioned above show clearly that only through geopolitical instruments like OPEC can existing injustice be reversed or at least cushioned, in Venezuela privatization has not only been preached until the beginning of 1999 but it has also been partially achieved through Apertura Petrolera (Oil Opening).

Another trick was to egg us on to believe that the solution lay in increasing the volume of production, even though the price was $8 per barrel, 5 cents for each liter (less than bottled water), a price that hardly covers the costs of extraction. Pressures to increase production were so intense that they continue even today, when we see important representatives of our local academe propose a weird thesis, according to which if Venezuela produces 3 million barrels of oil per day and sells it at $30 a barrel, we will find ourselves in the immoral grip of living on rents whereas, if, on the contrary, we produce 7 million barrels a day and sell it for just $7 a barrel, it would reflect an immense and praiseworthy productive effort.

Finally, with respect to OPEC, we can only say it has just saved itself from extinction—for the time being.

With this on record, who can doubt that, in fact, I have produced enough material to inspire a thriller script? If anyone out of curiosity wants to know what the imaginary Kohlenweiss fifth pillar was in the hope that (as my daughters say) recounting a nightmare makes sure it will never happen, I confess that recently I have been waking up each morning bathed in nervous sweat, fresh from the nightmare that the EU has plotted to plant an environmental extremist in the White House.

From El Universal, Caracas, August 3, 2000

And published in OGEL too