Interrelated with control of the production and commercialization of petroleum by the Venezuelan state (see “Petroleum and Venezuela” 10/21/2013), there is the issue of Venezuelan participation in OPEC. Venezuela (along with Saudi Arabia, Iraq, Iran, and Kuwait) had been one of the five founding members of OPEC in 1960. At that time, government income from oil production in the oil producing countries represented no more than 6 or 7% of the final price for a barrel of oil. OPEC was formed with the intention of establishing a just price for the producing countries petroleum and facilitating their economic independence. During the 1960s, OPEC was able to become stronger by incorporating new members. Using a strategy of controlling production in order to protect prices and conserve petroleum reserves, OPEC declared higher prices in 1973, generating the first oil price shock, as oil prices nearly quadrupled during 1973 and 1974 (Pichs 2006:152-54).
However, the OPEC strategy did not break the neocolonial relation. The transnational petroleum companies, which control the refining and commercialization of the final product, passed the higher prices to the consumers. And the governments of OPEC deposited the new funds in the banks of the North. As we will explore in future posts, this generated a surplus of capital in the banks of the North, becoming a source of an expansion of Third World debt, which also would become, through the payment of interest, a mechanism for the flow of capital from the impoverished nations of the Third World to the wealthy nations of the North (Pichs 2006:154-55).
At the same time, the nations of the North were able to rapidly adjust to the higher petroleum prices by adopting energy conservation programs and searching for alternative sources of energy. The underdeveloped nations of the Third World, by virtue of their limited resources, were less in a position to make these kinds of adjustments. As a result, the higher oil prices had a negative impact on the non-oil producing and exporting nations of the Third World (Pichs 2006:154-55).
The Venezuelan government of Hugo Chávez developed new policies in relation to OPEC. During the 1970s, although Venezuela had played a central role in the development of OPEC, PDVSA was functioning as a state within a state (see “Petroleum and Venezuela” 10/21/2013), and it tried to avoid OPEC quotas by investing in production outside of Venezuela. During the neoliberal era, the government of Venezuela had been cooperating with the Washington policy of breaking OPEC by flooding the oil market. Meanwhile, succumbing to the pressure of the Washington consensus toward the “free market,” OPEC had abandoned control of production and prices in 1985, leading to a period of low oil prices from 1986 through 1998. In response to this situation, the Chávez government cut back on production, and Chávez visited OPEC leaders, informing them that Venezuela would respect OPEC quotas and asking them to also reduce production. This produced results, and by the end of 1999, there began a period of higher prices for petroleum (Pichs 2006:157-58, 162; Guevara 2005:24, 36).
But unlike OPEC nations in the 1970s, the Chávez government invested the petroleum income in the development of Venezuela. Other nations of OPEC also are beginning to take steps in this direction, in part as a consequence of the impact of the Islamic Revolution. Moreover, the Chávez government sought to develop mutually beneficial social and economic accords with the nations of the South in accordance with the concept of South-South cooperation. Venezuela sells oil to nations of Latin America and the Caribbean with terms more favorable than those of the international market: ninety-day credit for a payment of 75% of the international market value, with the remaining 25% financed over fifteen years at a fixed rate of 2% annual interest, with payments to begin after two years and with the option of making payments in goods or services, such as rice, corn or maize. And Venezuela has formed Petrocaribe, dedicated to addressing the energy needs of the nations of the Caribbean (Chavez 2006: 149-51).
The story of petroleum in Venezuela and the efforts of the Bolivarian Revolution in Venezuela to control the petroleum industry and to resurrect OPEC illustrate an important dimension of today’s Third World revolutions: they seek to control the natural resources of the nation with the goal of promoting the economic and cultural development of the nation and with the intention of cooperating with other Third World nations in mutually beneficial exchanges. We will be exploring this Third World effort to break the neocolonial relation in future posts.
References
Chávez Frías, Hugo. 2006. La Unidad Latinoamericana. Melbourne: OceanSur.
Guevara, Aleida. 2005. Chávez, Venezuela, and the New Latin America. Melbourne: Ocean Press.
Pichs Madruga, Ramón. 2006. “Petróleo, Energía, and Economía Mundial, 1964-2004” in Libre Comercio y subdesarrollo. La Habana: Editorial de Ciencias Sociales.
Key words: Third World, revolution, colonialism, neocolonialism, imperialism, democracy, national liberation, sovereignty, self-determination, socialism, Marxism, Leninism, Cuba, Latin America, world-system, world-economy, development, underdevelopment, colonial, neocolonial, blog Third World perspective, petroleum, oil, Venezuela, OPEC
However, the OPEC strategy did not break the neocolonial relation. The transnational petroleum companies, which control the refining and commercialization of the final product, passed the higher prices to the consumers. And the governments of OPEC deposited the new funds in the banks of the North. As we will explore in future posts, this generated a surplus of capital in the banks of the North, becoming a source of an expansion of Third World debt, which also would become, through the payment of interest, a mechanism for the flow of capital from the impoverished nations of the Third World to the wealthy nations of the North (Pichs 2006:154-55).
At the same time, the nations of the North were able to rapidly adjust to the higher petroleum prices by adopting energy conservation programs and searching for alternative sources of energy. The underdeveloped nations of the Third World, by virtue of their limited resources, were less in a position to make these kinds of adjustments. As a result, the higher oil prices had a negative impact on the non-oil producing and exporting nations of the Third World (Pichs 2006:154-55).
The Venezuelan government of Hugo Chávez developed new policies in relation to OPEC. During the 1970s, although Venezuela had played a central role in the development of OPEC, PDVSA was functioning as a state within a state (see “Petroleum and Venezuela” 10/21/2013), and it tried to avoid OPEC quotas by investing in production outside of Venezuela. During the neoliberal era, the government of Venezuela had been cooperating with the Washington policy of breaking OPEC by flooding the oil market. Meanwhile, succumbing to the pressure of the Washington consensus toward the “free market,” OPEC had abandoned control of production and prices in 1985, leading to a period of low oil prices from 1986 through 1998. In response to this situation, the Chávez government cut back on production, and Chávez visited OPEC leaders, informing them that Venezuela would respect OPEC quotas and asking them to also reduce production. This produced results, and by the end of 1999, there began a period of higher prices for petroleum (Pichs 2006:157-58, 162; Guevara 2005:24, 36).
But unlike OPEC nations in the 1970s, the Chávez government invested the petroleum income in the development of Venezuela. Other nations of OPEC also are beginning to take steps in this direction, in part as a consequence of the impact of the Islamic Revolution. Moreover, the Chávez government sought to develop mutually beneficial social and economic accords with the nations of the South in accordance with the concept of South-South cooperation. Venezuela sells oil to nations of Latin America and the Caribbean with terms more favorable than those of the international market: ninety-day credit for a payment of 75% of the international market value, with the remaining 25% financed over fifteen years at a fixed rate of 2% annual interest, with payments to begin after two years and with the option of making payments in goods or services, such as rice, corn or maize. And Venezuela has formed Petrocaribe, dedicated to addressing the energy needs of the nations of the Caribbean (Chavez 2006: 149-51).
The story of petroleum in Venezuela and the efforts of the Bolivarian Revolution in Venezuela to control the petroleum industry and to resurrect OPEC illustrate an important dimension of today’s Third World revolutions: they seek to control the natural resources of the nation with the goal of promoting the economic and cultural development of the nation and with the intention of cooperating with other Third World nations in mutually beneficial exchanges. We will be exploring this Third World effort to break the neocolonial relation in future posts.
References
Chávez Frías, Hugo. 2006. La Unidad Latinoamericana. Melbourne: OceanSur.
Guevara, Aleida. 2005. Chávez, Venezuela, and the New Latin America. Melbourne: Ocean Press.
Pichs Madruga, Ramón. 2006. “Petróleo, Energía, and Economía Mundial, 1964-2004” in Libre Comercio y subdesarrollo. La Habana: Editorial de Ciencias Sociales.
Key words: Third World, revolution, colonialism, neocolonialism, imperialism, democracy, national liberation, sovereignty, self-determination, socialism, Marxism, Leninism, Cuba, Latin America, world-system, world-economy, development, underdevelopment, colonial, neocolonial, blog Third World perspective, petroleum, oil, Venezuela, OPEC
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