Exxon Fights Chavez' Venezuela for Compensation in Courts

By Llana, Sara Miller | The Christian Science Monitor, February 11, 2008 | Go to article overview

Exxon Fights Chavez' Venezuela for Compensation in Courts


Llana, Sara Miller, The Christian Science Monitor


In winning court orders to freeze up to $12 billion of Venezuela's global assets, Exxon Mobil Corp. has mounted the boldest response yet against the resource nationalism that has swept Latin America in recent years.

Announced by Exxon Thursday, the injunction represents the latest chapter in a battle between Venezuelan state oil company, Petroleos de Venezuela (PDVSA), and the US oil giant, which began after Venezuela took a majority stake in some of the country's largest oil projects last year. Exxon refused the new terms at that time.

The legal fight on compensation is expected to take years, analysts say. For now Venezuela, which has dismissed the latest move as "judicial terrorism," is expected to appeal. But the political ramifications are immediate.

While analysts say Exxon's victory could bolster sympathies for Venezuelan President Hugo Chavez in the face of what he calls "US imperialism," they say the wider impact will be a strike against efforts by oil and gas-producing countries to renegotiate contracts as commodities prices soar.

"It obviously represents an effort by Exxon not only to address its concerns in Venezuela but to try to deter the increasing tendency of economic nationalism in Latin America and elsewhere," says Miguel Tinker-Salas, a Latin America oil and politics expert at Pomona College in Claremont, Calif. "It may embolden other companies to do the same thing."

Last year, Mr. Chavez declared oil sovereignty by taking a majority stake in projects in the Orinoco River Basin, which may hold the world's largest deposits of heavy crude. Of the six companies operating there, all agreed to new contracts except for Conoco-Phillips and Exxon.

Unable to come to terms over the value of its assets, Exxon demanded arbitration to settle. The effort to freeze Venezuela's foreign assets is meant to guarantee that PDVSA has the money to pay should Exxon Mobil win in arbitration. …

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