Trouble Brewing

skunk

macrumors G4
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http://www.nytimes.com/2005/04/26/international/americas/26venezuela.html?hp
U.S. Considers Toughening Stance Toward Venezuela

By JUAN FORERO

Published: April 26, 2005

As President Hugo Chávez of Venezuela veers toward greater confrontation with Washington, the Bush administration is weighing a tougher approach, including funneling more money to foundations and business and political groups opposed to his leftist government, American officials say.

The Bush administration has already begun to urge Venezuela's neighbors to distance themselves from Mr. Chávez and to raise concerns about press freedoms, judicial independence and the Venezuelan government's affinity for leftist groups abroad, including Colombian guerrillas.

But it has found no allies so far in its attempts to isolate the Venezuelan leader, and it has grown more and more frustrated by Mr. Chávez's strident anti-American outbursts and policies that seem intended to fly in the face of Washington. On Sunday, Mr. Chávez ended a 35-year military cooperation agreement and ordered out four American military instructors he accused of fomenting unrest.

The accusation, which American officials denied, was the latest blow to relations that had been bitter since the United States tacitly supported a coup that briefly ousted Mr. Chávez in April 2002. Since then his strength has grown. He won a recall election last August, and record high oil prices have left his government flush with money as it provides 15 percent of American oil imports.

American officials, who had chosen to ignore Mr. Chávez through much of last year, now recognize the need for a longer-term strategy to deal with a leader who is poised to win a second six-year term in elections next year.

A multiagency task force in Washington has been working on shaping a new approach, one that high-ranking American policy makers say would most likely veer toward a harder line. United States support for groups that Chávez supporters say oppose the government has been a source of tension in the past. Under the plans being considered, American officials said, that support may increase.

"The conclusion that is increasingly being drawn in Washington is that a realistic, pragmatic relationship, in which we can agree to disagree on some issues but make progress on others, does not seem to be in the cards," said an American official who helps guide policy in Latin America.

The official added, "We offered them a more pragmatic relationship, but obviously if they do not want it, we can move to a more confrontational approach."

Already counternarcotics programs have suffered, American officials noted, and meetings among high-ranking officials from the two countries are minimal.

"What's happening here is they realize this thing is deteriorating rapidly and it's going to require some more attention," said a high-ranking Republican aide on Capitol Hill who works on Latin America policy. "The current look-the-other-way policy is not working."

The United States, he said, is particularly concerned because Venezuela is one of four top providers of foreign oil to the United States. "You can't write him off," the aide said of Mr. Chávez. "He's sitting on an energy source that's critical to us."

A main problem for the United States is that Washington has little, if any, influence over Caracas. The high price of oil has left Venezuela with no need for the loans or other aid that the United States could use as leverage.

Nor does the Bush administration have much support in Latin America, where left-leaning leaders now govern two-thirds of the continent. Secretary of State Condoleezza Rice is expected to raise concerns about Venezuela in a four-country tour through the region this week. Political analysts say she will have a hard time finding support.

Defense Secretary Donald H. Rumsfeld, on a recent trip to Brazil, publicly raised concerns about Mr. Chávez. Days later, President Luiz Inácio Lula da Silva of Brazil, in a meeting in Venezuela with Mr. Chávez and the leaders of Colombia and Argentina, pointedly said, "We don't accept defamation and insinuations against a compañero," meaning a close friend.

"Venezuela has the right to be a sovereign country, to make its own decisions," he added. (more)​
To paraphrase Von Clausewitz: "(US) Diplomacy is a continuation of War by other means". Venezuela is a sovereign country. The Administration might want to look that up.
 

pseudobrit

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Jul 23, 2002
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skunk said:
To paraphrase Von Clausewitz: "(US) Diplomacy is a continuation of War by other means". Venezuela is a sovereign country. The Administration might want to look that up.
Iraq was a sovereign country too. I hope Chavez chokes back the oil supply.
 

Desertrat

macrumors newbie
Jul 4, 2003
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"I hope Chavez chokes back the oil supply."

Duh? If WalMart chokes back sales, who gets hurt? WalMart, or the would-be buyers? You've been coming to this forum for how long? And still haven't learned that all oil is sold into a world market? Who sells to whom is purely a function of relatively short-term contracts and convenience. So Venezuela is looking into future dealings with China. So they discontinue sales into the US by whatever amount China buys. So US buyers then buy elsewhere. The increase in total world demand from China's and India's increases in imports continues the oil price runup. No net change in who gets how much--except for poor countries and poor people, who are already sucking buttermilk.

In the FWIW department, Chavez was a Castroite, anti-US sort since long before he gained political power. The US could be pure as the driven snow, but so long as we're not overtly self-styled as Socialist, we're seen by him as his enemy.

'Rat
 

IJ Reilly

macrumors P6
Jul 16, 2002
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Right, I agree -- oil is a fungible commodity. Which is why oil drilling in ANWR won't make a dime's worth of difference to the price of gasoline in the U.S.
 

mactastic

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Apr 24, 2003
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Desertrat said:
In the FWIW department, Chavez was a Castroite, anti-US sort since long before he gained political power. The US could be pure as the driven snow, but so long as we're not overtly self-styled as Socialist, we're seen by him as his enemy.

'Rat
Please 'Rat... You know damn well it's not because we're not 'self-styled Socialists' just as you know bin Laden isn't after us because he 'hates our freedom'. If that statement were true, Chavez wouldn't be dealing with any countries who wern't 'pure as driven snow'.

Do you think his dislike of us might have something to do with "...the United States tacitly supported a coup that briefly ousted Mr. Chávez in April 2002"

"He trad ta kill mah daddy". ;)

In the FWIW department, can people imagine what the result here would be if we discovered that al Qaeda was funding anti-government groups here in the US with the goal of fomenting a coup? Would we all be as cool with that as we are about discussing supporting the overthrow of a regime WE don't like?
 

skunk

macrumors G4
Original poster
Jun 29, 2002
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mactastic said:
In the FWIW department, can people imagine what the result here would be if we discovered that al Qaeda was funding anti-government groups here in the US with the goal of fomenting a coup? Would we all be as cool with that as we are about discussing supporting the overthrow of a regime WE don't like?
Somehow, calling it a "regime" makes it more acceptable to subvert it. What's wrong with "duly elected constitutional government"?
 

mactastic

macrumors 68040
Apr 24, 2003
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Sheesh, spelling cop, grammar cop, and now terms-of-debate cop too?

But are we talking about the Bush regime, or the Venezualan "duly elected constitutional government"? ;)
 

pseudobrit

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Jul 23, 2002
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Desertrat said:
"I hope Chavez chokes back the oil supply."

Duh? If WalMart chokes back sales, who gets hurt? WalMart, or the would-be buyers? You've been coming to this forum for how long? And still haven't learned that all oil is sold into a world market?
I'm not stupid; I'm talking about them slowing the tap altogether. Why? It'd drive Bush batty, and force our gasoline prices closer to where they've belonged.

The longer they sit on that oil, the more precious it becomes.
 

Desertrat

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Jul 4, 2003
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Somewhere around 1994/1995, Clinton's economic advisors and the OPEC folks agreed that a reasonable target price for oil was around $35/bbl. this would provide ample income for the exporters, and not have negative impacts on importers' economies.

I disremember exactly when Chavez came onto the serious political scene in Venezuela, but one of his earlier actions was to begin lobbying OPEC to raise the price of crude. He publicly commented about a twofold aim: First, to add more money to Venezuela's income in order to spread more money among the poorer elements; and, second, to have a negative impact on the US economy.

Chavez' earliest policy implementations led to a flight of capital from Venezuela, and a shutdown of their oil production. This left Venezuela in a brand-new position: That of an importer of refined products. A putsch of upper echelon oil-production people got production restarted, but at lower levels than originally existed. I don't know if they are now back to pre-Chavez levels.

Regardless, the last thing on God's green earth that Chavez will do is reduce total output. He can't afford the loss of income.

It is known that a variation of some two million bbl/day will strongly affect the world price of oil on the spot market and later the contracts for oil purchases. (Possibly in the range of 10% to 20%.) It is reported that ANWR production is likely to be as much as one million bbl/day. This would definitely lead to some amount of downward push on world oil prices.

Another fossil-fuel problem is natural gas. California built gas-fired turbine generators to augment the demand for electricity. This is a relatively new large demand which has contributed to a world price of around $7/mcf and thus the idea of building LNG terminals around the US. The environmental restrictions against drilling in certain areas of the US contributes greatly to this present-day situation of high prices, imports from Canada (from a declining pool of known reserves) and to the potential hazards of the LNG facilities.

Note I'm not putting values on these various causes. I'm just commenting that certain causes and situations exist.

'Rat
 

pseudobrit

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Desertrat said:
It is reported that ANWR production is likely to be as much as one million bbl/day.
Likely, no. Possibly, yes. You don't know how much is recoverable until drilling is done. Until then it's just as likey there's only a few weeks' worth of recoverable oil or production would be a few thousand bbl/day.

This would definitely lead to some amount of downward push on world oil prices.
One (optimistic) extra million added to the world demand for 76,000,000 barrels might drop the price per bbl a buck or two. Whoop-de-doo.
 

Desertrat

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Jul 4, 2003
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"One (optimistic) extra million added to the world demand for 76,000,000 barrels might drop the price per bbl a buck or two. Whoop-de-doo."

No. Wrong.

Since around 1974 I've been watching the geopolitics of oil and precious metals. My "meddling around" in those markets gave me enough profit and investment income such that I've been mostly semi-retired since 1979. Not bad for a 45-year-old...

Anyhow, a supply movement up or down of some two million bpd can move the price well over that "buck or two". Always has. Call it the tail wagging the dog, if you will. It's still true.

Look at today's morning news: Just the announcement that the US stocks on hand are more than expected has dropped the price of crude. I just skimmed past, but the drop was some $4/bbl on the spot market.

GDP and Consumer Confidence numbers, if showing a downturn as expected, may well be reflected in less summer driving. This will knock the price down some more. I don't expect it to last, but my point is that it takes very little to affect oil prices, whether up or down.

World demand is some 82 to 88 million bpd, depending on the source of reporting. The demand is increasing, and the rate of use exceeds the rate of new discoveries. So, long term, the price will go up. Short term, there will be all manner of up/down blips. Just the news of approval of drilling in ANWR would cause a downward movement. If terrorists blow up a Saudi pipeline, you'd see a large upward movement. Peace and quiet in Colombia would cause a mild downward movement, were there an end to pipeline sabotage there.

If you keep an eye on all these bits and pieces, it's not all that hard to figure out what's gonna happen during any short-term period.

Similarly, if the oil of Kazakhstan and of the Azerbaijani region can be brought on through the Balkans*, oil prices will drop some or will at least stabilize at levels below today's spot market. Another factor is updating and upgrading of the equipment in the Russian oil fields; their efficiency of production is low. If success is had in development of new fields in Siberia, more oil will be brought to market. Again, however, the totals available will barely meet the increases in world demand.

Regardless, M. King Hubbert was one smart fella. "Hubbert's Pimple" is, I believe, definitely factual, and even his time frame is reasonable...

'Rat

* IMO, the only "national interest" for the US in the Balkans is so that an oil pipeline will pass through a region of greater stability in supplying western Europe.
 

IJ Reilly

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'Rat, it seems to me, oil prices are permanently above $50/barrel. Nothing is likely to make them drop significantly below that mark save a widespread recession, which was the cause of the last collapse in oil prices. IOW, if the economy goes south in a big way, we'll be rewarded by lower oil prices. Gives us something to look forward to, doesn't it?

Also, it seems to me, you continue to tout a direct link between oil prices and gasoline prices. A very large part of the increase in prices at the pump is due to substantially higher refiner's and retailer's profit margins. As we know here in California (where we've got a refining oligopoly), pump prices can soar even as oil prices drop. The link between the two is tenuous at best.
 

mischief

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Aug 1, 2001
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Desertrat said:
M. King Hubbert was one smart fella. "Hubbert's Pimple" is, I believe, definitely factual, and even his time frame is reasonable...


IMO, the only "national interest" for the US in the Balkans is so that an oil pipeline will pass through a region of greater stability in supplying western Europe.
Pardon the edit...

Hubbert was worth looking up.

It looks more and more like we're close to a significant shift in energy technology. Let's not forget that petroleum was considered a hazardous nuisance until it became clear that wood and coal were becoming scarce, polution was killing people and there was machining available that could make using gas practical.

One of my favourite demonstrations of how leaps in technology happen was James Burke's "Connections" series. It made the multifaceted and often serindipitous nature of technological catharsis quite plain. I think there are enough things in place now for there to be a significant shift... there just needs to be an impetus. Unfortunately we're a stubborn species that waits on tech shift until we need it to survive and the market begins to stumble without it.

There's a lot to be said about technologies as yet in the wings... there's some very cool stuff out there that nobody's taken seriously and may soon eclipse the current norms for energy.

Have faith... We may be a stubborn, conservative bunch of apes but when we decide to globally CYA we do so in an astonishingly short time and with remarkably thorough ingenuity.
 

Desertrat

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Jul 4, 2003
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I'm among many, apparently, who believe the true rate of inflation is closer to 5% or so, rather than the feel-good official numbers. Time will tell. But, if interest rates do continue to go up, I'd bet that the decay in the housing market will be recessionary. Too many sub-prime borrowers with floating-rate mortgages and interest-only mortgages. Bank rules are that if the value of a collateral is less than the outstanding balance of a note, the note can be called. FDIC rules are that if a bank's non-performing loans--defined as collaterals less than outstanding balances--exceed a certain percentage of all loans, the FDIC takes over that bank. We went through all that, twenty years ago.

Serious recession. Little to no savings, nationwide, and few can meet calls on notes. Fannie Mae, already in trouble for fraudulent accounting practices, could go kerflop, which would ripple throughout the lending industry.

I dunno. From reading newspapers and watching some TV, I'm reminded of what I've read of lifestyle behaviors in Paris and Vienna in the early 1930s. The unknown is about what comes next; hope it's better than the last go-round. The last thing we need is a national cry of, "Save us! Save us!" to some guy on the proverbial White Horse...

Let's just hope I'm suffering from old-age pessimism...

:), 'Rat
 

mischief

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Nope, Rat I'd say you're quite accurate. I'm just under thirty and my projections into the next ten years are not rosy in the short term. There are too many systems building entropy and wavering away from homeostasis.

There will, of course come a breakpoint beyond which new memes take presidence but it's always a phoenician change involving simultanious worldwide upheaval, massive destruction, social chaos, tearing down of both sociopolitical and physical infrastructure. The good thing is that we're getting better at rapid reconstruction and every time the result is a better world with more tellecom and resultingly enlightened and freethinking populaces.

All of this is a very large part of why I'm moving into the civillian Emergeny Response field. It's where I can do the most good while preserving my income. Only time will tell where (geographically) I come to dig in and prep for the nasty ride ahead.
 

Desertrat

macrumors newbie
Jul 4, 2003
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Careful, IJ. :D

http://www.newratings.com/analyst_news/article_801391.html

I grant that $49.80 doesn't leave a lot of change from a $50 bill...

This just in this evening from StratFor:

"China has begun to tip its hand as to how it plans to unravel a Gordian knot of social, financial and political problems -- any one of which could be life-threatening to the communist government in Beijing. The revelation came April 27, when a China Banking Regulatory Commission (CBRC) official said leaders are examining ways to protect the country's banking sector against foreign competition, while -- at least for now -- still honoring its commitments under the World Trade Organization (WTO).

Though Shi Jiliang, the vice chairman of the CBRC, was careful to emphasize that China's WTO commitments are not in doubt, his discussion of achieving "an appropriate level of protection for Chinese banks" and taking efforts to "reduce excessive competition between foreign and Chinese banks" could hardly be lost on Beijing-watchers waiting for the government -- which faces a crisis of legitimacy on multiple levels -- to signal its next move.

As the situation stands now, any credibility the government gleaned from Marxism, Maoism or Communism has long since faded, and the Communist Party remains in power only by dint of its ability to deliver economic well-being to the masses. Its chosen delivery mechanisms are state-owned enterprises (SOEs) -- government-run companies that directly employ more than half the nation's urban dwellers. These vastly bloated and unprofitable companies are kept "viable" through subsidies and cheap loans, regularly injected by China's state-owned banks.

And therein lies the rub -- for China, its banks and the WTO as well.

By any unbiased definition -- and as recently as two years ago, even in the opinion of the government -- the state banks are all moribund. Their total portfolio of (intentionally given) bad loans amount to somewhere between one- and two-thirds of China's gross domestic product, the highest ratio of any major economy in human history. Should that flow of loans be interrupted, the banks would crumble, the SOEs would crash and China would burn in flames of economic catastrophe and social unrest.

The end of China's five year phase-in to full WTO membership -- scheduled to arrive in December 2006 -- is the very thing that could interrupt that life-giving flow of deadly loans.

At that point, all restrictions on foreign participation in the Chinese banking sector will fall away. And if Beijing allows this to occur as envisioned by the WTO, foreign banks would quickly attract the bulk of China's private savings, which now are forcibly funneled into the state banks and thence to the SOEs.

Currently, foreign access to China's financial world is thin, restricted as it is to local currency transactions in 18 cities. But even this limited access has led to the formation of some 220 foreign bank offices in China and totaled business worth 108.3 billion yuan ($13 billion) at the end of 2004. These foreign banks already hold 12 percent of all lending business in Shanghai, a rate of increase that Shi calls "unexpectedly [read: disturbingly] fast." Full competition would send Chinese money to the foreign banks in droves, and once foreign currency [read: U.S. dollar] operations are allowed, capital flight will reach mountainous proportions.

Hence, Shi has signaled that China will abrogate its commitments to permit banking competition, in order to assure the continued existence of the government. A choice between China's WTO commitments and the continued survival of the government is no choice at all.

There is certainly something to be said for preparation. Foreign bankers -- who have been singing China's praises for years -- have a vested interest in maintaining the Chinese hype, since they turn profits as money moves into or out of China. But for these bankers, access to China's hundreds of millions of savers is the Holy Grail. A sudden split between Beijing and those who thus far have been singing in the choir would signal not the beginning of the end, but the end itself -- for once the choir realizes it has been had, it is only a matter of moments before the entire congregation of investors speeds for the door.

You have been sent this weekly brief as you elected to receive periodic updates from Stratfor. If you do not wish to receive the Intelligence Brief every week, please reply to: sfib-unsubscribe@yorktown.stratfor.com


© Copyright 2005 - Strategic Forecasting, Inc."

And you think we have troubles?

If China implodes to any notable amount, this reduces the demand on imported commodities. Steel, copper, cement--and oil.

Complex lil ol' world out there, ain't it?

'Rat
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
"We may be a stubborn, conservative bunch of apes but when we decide to globally CYA we do so in an astonishingly short time and with remarkably thorough ingenuity."

Consder the period of late 1973 to around 1982/84: We went from the Arab oil embargo and an era of 10mpg cars and then oil at $30 in 1973-sized dollars. Within a half-dozen years we'd upped the CAFE via the marketplace to around 20+mpg. Another three or four years and we had a CAFE of 28.5 mpg and oil had fallen to the $10/$12 range.

Japanese cars went from low-quality junkers--as were Audis--to being high-quality, heavily roboticized Good Things. We survived the Carter-era inflation brought about by the Vietnam war and exacerbated by Nixon and began the Reagan boom years. We discovered that the Club of Rome's prediction of Gloom & Doom was BS. Paul Erlich turned out to be a waste of audiences' time with his predictions of widespread starvation.

We made a helluva start on cleaning up our air and water. The Cuyahoga River no longer can catch fire; Lake Erie isn't dead, and you can see downtown Houston from out in the suburbs.

And today's arguments about Social Security involve monthly monies that would be the envy of working people in multitudes of countries around the world. All around the world people wish they could have the multifold increase in incomes that would raise them to the levels we define as poverty.

If ya gotta have a national health problem, obesity is probably better than starvation.

Women in the US worry about the Glass Ceiling. Women elsewhere worry about circumcision. Teenie-boppers here worry about what brand of tenny-runners and sports jackets or jeans. Elsewhere, many are given an AK 47 and pointed at somebody to go and shoot.

We worry about the Religious Right; in the Sudan, being in the religious wrong can mean salvery.

We argue the relative merits of Gap vs. WalMart; billions of others would like any non-ragged pair of pants or a decent pair of shoes.

If we'd quit spending more than we earn, "needing" a lot of fancy frou-frou, we'd probably not have enough to worry about to matter, when you get down to the nitty-gritty.

Have a nice day,

:), 'Rat
 

mischief

macrumors 68030
Aug 1, 2001
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Santa Cruz Ca
Ah... Life in Babylon..

Look out... Soap Box:

It really is sobering to travel a bit. Even a roadtrip through northern Baja. Most of the rest of the world operates on such a low tech level and income that it really does make our social issues look pretty trivial.

Moreover: I occasionally hear someone rail against an industry like silk or textiles for their use of child labor or third world sweat shops. These are horrifying to us pampered, soft, white Americans. What we often fail to recognize is what the alternatives are for these workers. Often the sweat shops making Nike shoes or J-Lo fashions are FAR better alternatives than the brothel, or the open-pit diamond mines of western Africa, or even the subsistance farms of most of the tropical world who are seeing global climate change's negative effects every year as crops dwindle.

We need to get the public educated as to a little international perspective.

Whether you have to sell your SUV, pay more for gas and perhaps turn off your TV now and again is a very small price to pay for relative economic stability, damn stable political infrastructure and a regime that even at it's most facist moments is in the top ten least likely to shoot you in the street.

So far as I'm concerned we, as a leading society need to get our heads out of our asses long enough to realize that there's a lot of work to be done both at home and abroad that only serious international invenstment, global compassion and the unlocking of currently (irrationally) taboo or unfashionable technologies can adress.

We can, and most likely will actively combat climactic shift.

We can and should fully explore tissue cloning, genetic science, stem cell research, bio-mass energy, solar and other out-of-favor methods.

We can and should redefine our millitary role in the world. The world needs infrastructure, not policing. If we want to stabilize things we should be increasing transparency, not secretly trading in international captured criminals and increasing the Gestapo-like powers of the US Executive.

We can and should take a hard look at pandemics like HIV and localized third world epidemics of polio and other diseases not seen in the US in decades. There are solutions out there that are better, cheaper and easier to distribute.

We can and should rescind legislation perpetuating Patents and Copyrights. The point of these mechanisms was to give a temporary boost to the initial entity but also assure rapid dissemination of generic products after a short period.

We can and should let our national and personal egos go. We are no longer a child nation. We have a commitment as the leading world economy to be compassionate and responsible. We have the ethical and moral obligation to finally break from a very isolationist past and show the rest of the world that we are not the devils some sell us as but compassionate, moral and intelligent people just like everyone else.