Tensions Rise in South America

Colombia will ask the International Criminal Court to try the Venezuelan President Hugo Chavez of supporting genocide. (Reuters: Jorge Silva)

The Australian Broadcasting Corporation reports:

Venezuela has moved 10 army battalions to the border with Colombia, as diplomats struggle to defuse the regional crisis triggered by Colombia's cross-border attack in Ecuador last weekend.

The Organisation of American States says Colombia violated Ecuador's sovereignty in the raid and Colombia has said it will ask the International Criminal Court to try the Venezuelan President Hugo Chavez for genocide, claiming he is financing the rebels.

Ecuador has accused Colombia of violating its sovereignty when it raided the FARC's jungle camp - killing the rebel group's second-in-command, Raul Reyes.

Colombian President Alvaro Uribe says the leftist governments of Venezuela and Ecuador provide support to the rebels and has now signalled he will seek to bring charges of supporting genocide against the Venezuelan President Hugo Chavez.

"We are proposing to the International Criminal Court that President Hugo Chavez of Venezuela be denounced for the presumed crime of financing genocide.

"We have suffered 40 years of terrorism, and we can't accept that a country should be in solidarity and in complicity with terrorists."

But Ecuador's President Rafael Correa sees it differently.

"Here is a naked, irrefutable fact" he said.

"International law has been trampled upon; the letter to the Organisation of American States has been trampled upon; the fundamental respect that needs to exist for a sovereign country, a friend and a dear brother, has also been trampled upon"

Organisation of American States secretary Reinaldo Rodriguez Gallad says Correa is now being backed by the organisation, after an emergency meeting in Washington.

"We reaffirm the principle that a state's territory can't be violated and can't be the subject of military occupation, nor any other forceful measure taken by any other state, whatever the motive may be, even temporarily."

The United States was the only nation in the OAS to offer Colombia unqualified support.

Ecuador has since rejected a Colombian apology as insufficient and President Correa has mobilised thousands of Ecuadorian troops towards the border.

And the Colombian raid has also infuriated President Chavez, who has ordered his own tanks and troops to the border area.

President Chavez says he believes conflict with Colombia and its ally, the United States, is inevitable, but his country wants peace.

"Nothing and nobody will take us off the road to true peace," he said.

Dr Yvonne Corcoran-Nantes is a senior lecturer with the School of Political and International Studies at Flinders University and says Colombia has broken all the existing protocol.

"The co-existence and the solidarity that been developed over the last decade within South America has been really, really important and this has really broken all the protocols or many of them that have been sustained and supported over the last decade," she said.

Dr Corcoran-Nantes says there is little basis to Colombia's claims that Chavez is supporting the FARC rebels.

"International political positions, particularly those that support the United States will consistently blame Hugo Chavez for almost everything that goes on in Latin America that it doesn't like," she said.

"I don't think for one minute that Chavez is supporting in any substantive financial or materialistic way, FARC for example.

Dr Corcoran-Nantes says that the crisis will eventually pan out.

"I think that Columbia will come to a point when it will make some grudging apology," she said.

"But at the same time it will justify what it has done and whether that is acceptable or not remains to be seen.

"I don't believe, we are going to break out in all out war, unless pushed.

"The United States wouldn't want that, but I think it will make the relationship between Columbia and Ecuador and Columbia and Venezuela extremely fraught."

Meanwhile, border commerce between Venezuela and Colombia has already been disrupted as the tensions worsen.

What one Venezuelan citizen says perhaps best sums up the mood of the people there.

"Everybody is afraid of what could happen," he said.

"The truth is, as far as I'm concerned, this shouldn't be happening, how can we fight if we are brothers?"

Battling Over The World's Oil Reserves

Alistair Tice looks at the rivalry for access to the world's oil supplies and assesses the likely consequences for the world economy, and the continued dominance of US imperialism.

Alistair Tice reports:
George Bush invaded Iraq for power, prestige and oil. Whilst the catastrophe of the occupation has dealt a huge blow to the prestige of US imperialism around the world and its power in the Middle East has been severely undermined, US and British oil companies are still set to get their hands on Iraq's oil.

Iraq's pro-western cabinet has approved a Hydrocarbon Law that will hand over long-term control of the country's untapped energy fields to foreign multinationals, with profit rates of up to 75 per cent! Iraq has the world's second largest known oil reserves and the Middle East currently supplies two-thirds of the world's oil.
Bush's war for oil was driven by his administration's close links to the major oil companies and by the United States' oil import needs. US oil production peaked in 1970 at ten million barrels per day (bpd); today it is less than five million bpd and the US consumes 20 million bpd. That is 25% of the world's oil consumption, yet the US only has 5% of the world's reserves.

Imports have risen from 36% of its oil needs in 1970 to two-thirds today. A recent submission to the Senate Committee on Energy and Natural Resources stated "there is no economically plausible scenario for a strategically meaningful reduction in the dependence of the Unites States and its allies on imported hydrocarbons during the next quarter century."

The major oil companies, mostly US-owned, are collectively known as 'Big Oil'. Closely connected to the Bush regime, many were originally based in the key oil state of Texas and are an essential element in the 'military-industrial complex'. Their profit-driven objectives have played a decisive role in Bush's aggressive, interventionist policy in the Middle East and Central Asia. Big Oil makes huge profits. In 2005, ExxonMobil became the world's biggest company, overtaking Wal-Mart. Five of the world's top ten corporations are now oil majors.

However, they face long term problems. Last year, the private oil corporations only replaced 75% of their reserves and now they only control 10% of world oil reserves.

State ownership
Despite two decades of neo-liberalism, national oil companies (wholly or partly state owned) control 90% of world oil reserves. And that share is rising.

On 1 May 2006, Evo Morales, the recently elected leftist president, announced the nationalisation of Bolivia's gas industry. Whilst it ended up as only partial state ownership, it was hugely significant after two decades of privatisation and was referred to as "the first nationalisation of the 21st century." Hugo Chávez, the radical president of Venezuela, has announced that by 1 May 2007, PDVSA (the Venezuelan state oil company) will take a 60% majority stake in the extra-heavy oil fields in the Orinoco Basin.

Vladimir Putin, the Russian president, has taken state-capitalist measures against the oil multinationals to increase his government's revenues and standing internationally.

Shell was forced to accept reduced shares in joint ventures in the giant Sakhalin oilfield. And now BP is under pressure from Gazprom, the Russian state gas company, over a new gas field project in Eastern Siberia.

The oil companies are having to accept lesser shares in future profits or risk expropriation and miss out altogether.

Even in the central African country Chad, last year the government created a new national oil company and threatened to expel Chevron for not paying taxes. In less than three years of exploitation of Chad's recently discovered oil resources, in a deal brokered by the World Bank, the foreign consortium had earned $5 billion for a $3 billion investment and Chad only got $588 million!

Globalisation
This retrenchment from globalisation is likely to increase with more governments nationalising or at least taking majority state holdings in their energy resources. Russia is now the world's biggest oil exporter (it overtook Saudi Arabia last year) and Gazprom is now the highest valued company outside the US.

But the Big Oil companies, and through them US imperialism, still control the international oil market: trading, transportation (tankers and pipelines) and refining. So Russia and China are trying to challenge their domination, and their state-owned energy companies could even make hostile takeover bids for Big Oil companies.

These would not be successful for political reasons. Last year for example, the US Congress blocked an attempted take-over of US energy company Unocal by the Chinese state oil company.

However, Russia and China have made a number of bilateral energy agreements and are planning to open their own oil and gas market exchanges to rival the US.

The world oil price peaked at around $80 per barrel last year but has now fallen back to $50-$60, still way above the $20 per barrel before the Iraq war started four years ago.

In the coming world economic slowdown or recession, the oil price is likely to fall further as energy demand falls, although probably not back to $20. However, any significant fall in the oil price below $50 a barrel will cause big economic and social problems for producer countries. It would also lead to another slump (as in the 1990s) in oil exploration and production (the economic viability of reserves is very much conditioned by the oil price) - paving the way for further shortages of supply and refining capacity later.

Would the leftist governments in Bolivia and Venezuela cut back on their social programmes for the poor or would they be forced into more radical policies of expropriation of capitalist interests?

Similarly, would Putin threaten to cut off western energy supplies if the west did not pay more for its gas and oil?

70% of Iran's state revenues comes from its oil exports so any fall in price would undermine President Ahmadinejad's already failing social promises and popular support. Saudi Arabia and the Gulf states too would face big social upheavals.

Whilst these would be the likely consequences of a fall in oil prices in the short term, in the longer run the price is likely to increase and could jump dramatically in response to internal crises.

The four biggest oilfields in the world (which account for 14% of world supplies) are all over 30 years old and in decline.

Saudi Arabia's Ghawar field, the world's largest, is over 50 years old and over half depleted (some observers say 90% depleted but the Saudi oil industry is shrouded in secrecy).

Daqing is the largest oil field in China and its major source of domestic oil; its decline will only make China even more desperate for imports. China is now the world's second biggest oil importer after the US, hence its deals with Iran, Sudan and Venezuela.

Last year, two senior US senators initiated a computerised simulation exercise called ShockWave to study the effects on the US economy if the oil price rose to $100 a barrel. Their inescapable conclusion was that it would lead to recession.

Many analysts believe that due to 'Peak Oil', prices could rise as high as $125-$150 a barrel. The Peak Oil theory is that a time will come when half the discovered and produced oil in the world has been consumed and after then the oil supply will decline. Some oil experts believe that time has already come, others that it may not be for another 30 years.

Either way, the reaction against neo-liberalism already evident in Latin America will spread to other continents as workers and poor people demand action against the super-profits of Big Oil.

There will be pressure from the masses for more windfall taxes and outright nationalisation.

The intensified rivalry between the declining and desperate US empire and energy-rich Russia and energy-hungry China will intensify, most immediately over Iran, and in Central Asia and Africa, leading to trade wars and further military conflicts.

As a consequence oil prices will become increasingly volatile, with falls and big rises, each with the potential to cause economic crises and social upheaval.

Just before the invasion of Iraq, media magnate Rupert Murdoch expressed his support for war to maintain oil prices at $20 a barrel and help sustain world economic growth (and his profits!). Like most things in his media, Murdoch got that one wrong and Iraq and oil will prove to be sources of world economic and political instability for years to come.