Incensed Spain threatens Argentina after YPF seizure

MADRID – An incensed Spain threatened swift economic retaliation against Argentina on Tuesday after it announced plans to seize YPF, the South American nation’s biggest oil company, in a move which pushed down shares in Spanish energy giant Repsol, the controlling shareholder.

Madrid called in the Argentine ambassador in a rapidly escalating row over the nationalization order by Argentina’s populist and increasingly assertive president, Cristina Fernandez, a move which delighted many of her compatriots but alarmed some foreign governments and investors.

Promising action in the coming days, Spanish industry minister Jose Manuel Soria said: “With this attitude, this hostility from the Argentine authorities, there will be consequences that we’ll see over the next few days. They will be in the diplomatic field, the industrial field, and on energy.”

“Argentina has shot itself in the foot,” said Foreign Minister Jose Manual Garcia-Margallo.

Despite the rhetoric, Spain appeared to have little leverage over Buenos Aires – any action to be taken will be determined at a cabinet meeting on Friday – and Argentina has proven impervious to such pressure in the past.

Repsol said YPF was worth $18 billion as a whole and it would be seeking compensation on that basis, but the Spanish oil major’s shares fell by 7.5 percent in Madrid on Tuesday. The company said it could raise money in the bond market and sell some assets to help its cash flow.

Repsol described Argentina’s move as “clearly unlawful and seriously discriminatory” and said it would take legal action.

“This battle is not over,” Repsol Chairman Antonio Brufau said. “The expropriation is nothing more than a way of covering over the social and economic crisis facing Argentina right now.”

But Fernandez dismissed the risk of reprisals. “This president isn’t going to respond to any threats … because I represent the Argentine people. I’m the head of state, not a thug,” she said.

European Commission President Jose Manuel Barroso said he expected Argentina to uphold international agreements on business protection with Spain. “I am seriously disappointed about yesterday’s announcement,” he said in Brussels.

But action against Argentina appeared limited in scope. The EU Trade Commissioner would write to Argentina’s trade minister to “reiterate our serious concerns” while an EU-Argentine meeting this week would be postponed.

“It’s absolutely shameful considering everything that Spain has done for Argentina,” said a woman called Domi, who was filling her tank at a Repsol petrol station in Madrid.

“I hope the government takes measures and does something serious. They’ve pulled our leg long enough!”

Spanish media condemned the Argentine action, believed to be the biggest nationalization in the natural resources field since the seizure of Russia’s Yukos oil giant a decade ago.

La Razon newspaper carried a photograph of Fernandez on its front page in a pool of oil with the headline: “Kirchner’s Dirty War”, referring to her full name. The business newspaper La Gaceta de los Negocios called the takeover “an act of pillage”.

El Periodico spoke of “The New Evita”, pointing out that Fernandez had announced the nationalization in a room decorated with a large portrait of Eva Peron, the actress who was married to a president and revered by many Argentines as a populist mother of the nation and champion of the poor.

Repsol’s Brufau said he suspected nationalization of YPF was imminent when he tried to contact Fernandez last Friday and was told that the president “was angry” and did not want to speak.

YPF has been under pressure from Fernandez’s centre-left government to boost oil production, and its share price has plunged in recent months on speculation about a state takeover.

Spanish investment in Argentina may now be at risk after the move on YPF. In the “reconquista” or reconquest, of the 1990s, newly privatized Spanish businesses bought Latin American banks, telephone companies and utilities, much as their armor-clad ancestors had conquered the region 500 years earlier.

Through its latest nationalization move, Argentina runs the risk of frightening off foreign investors, key to contributing money to help develop one of the world’s largest reserves of shale oil and gas recently discovered in the Vaca Muerta area.

ACE UP ITS SLEEVE?

This led some analysts to question whether Argentina might have an ace up its sleeve in the form of a new partner such as China Petrochemical Corp (Sinopec Group).

Repsol has, however, identified Vaca Muerta as “the cause of the pillage”, or the reason Argentina went after its YPF share.

A Chinese website said Sinopec was in talks with Repsol to buy YPF for more than $15 billion, although other sources said the nationalization move would probably get in the way of such a deal. Sinopec dismissed the report as a rumor.

Fernandez said the government would ask Congress, which she controls, to approve a bill to expropriate a controlling 51 percent stake in YPF by seizing shares held exclusively by Repsol, saying energy was a “vital resource”.

“If this policy continues – draining fields dry, no exploration and practically no investment – the country will end up having no viable future, not because of a lack of resources but because of business policies,” she said.

YPF’s market value is $10.6 billion, although an Argentine tribunal will be responsible for valuing the company as part of the takeover. Central bank reserves or state pension funds could be used for compensation.

Fernandez, who still wears the black of mourning 18 months after the death of her husband and predecessor as president Nestor Kirchner, stunned investors in 2008 when she nationalized private pension funds. She has also renationalized the country’s flagship airline, Aerolineas Argentinas.

Such measures are popular with ordinary Argentines, many of whom blame free-market policies such as the privatizations of the 1990s for the economic crisis and debt default of 2001/02.

Her announcement of the YPF takeover plan, however, drew strong warnings from Spain, Mexico and the European Union, a key market for Argentina’s soymeal exports.

Mexico’s President Felipe Calderon said Fernandez’s plan would damage chances for future foreign investment in Argentina and hurt Repsol, in which Mexico’s state oil monopoly Pemex holds a 10-percent stake.

Venezuela, where socialist President Hugo Chavez has nationalized almost all the oil industry, applauded her move.

The row over YPF comes as Fernandez heaps pressure on Britain over oil exploration off the Falkland Islands, over which Argentina claims sovereignty.

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Argentina’s shale potential at risk

April 14, 2012 10:27 pm by Jude Webber

Any hostile moves on YPF, the Spanish-controlled oil company, by the pro-nationalisation government in Buenos Aires could have implications that go way beyond the companies and investors at the heart of this bitter tug-of-war.

Why? Because Argentina is sitting on what geologists and energy experts widely agree is one of the world’s most attractive reserves of unconventional gas and oil – known as shale – which are trapped deep in the bedrock below ground.

Shale is potentially a very big deal indeed. It turned the US from energy importer to exporter – something that Argentina, which spent $9bn importing fuel last year, ought to take note of.

Argentina has about a third of the US shale reserves, but they are less deep (which makes them cheaper and easier to access), seams are two to three times thicker than in the US and, for now at least, Argentine shale is concentrated in the Vaca Muerta (Dead Cow) formation, rather than being spread out across the country.

So all other things being equal, shale producers should be brushing up their Spanish and heading south. Several big players – including ExxonMobil, Total and Apache – and smaller companies already have. But it is YPF which has the biggest acreage, and it estimates that as much as $250bn will be needed to develop a viable shale industry over the next decade.

No one’s pockets are that deep, so partnerships are the way to go. Except that regulatory concerns are raising red flags before investors’ eyes now.

YPF has been publicly criticised, stripped of a string of concessions after being accused of underinvestment and now the government is analysing how to give the Argentine state a bigger role in the company – something that, according to some proposals circulating in the government, could translate into the expropriation of as much as 50.01 per cent of the company.YPF is currently controlled by Repsol of Spain, which has 57.43 per cent, and 25.46 per cent is in the hands of the Eskenazi family’s Petersen Group. Just over 17 per cent is traded on stock markets.

So enthusiasm among potential new players in the shale sector – where some were prepared to invest as much as $10,000 to $12,000 per hectare, according to industry sources – is screeching to a halt. “This is damaging shale (prospects), of course,” Alieto Guadagni, a former energy secretary, told beyondbrics.

The government has been berating YPF for what it perceives as a failure to invest enough, yet the concerns its nationalization dream are raising risks reducing investor appetite – which is perverse. And if concerns over contracts were not enough to dampen investors’ spirits, the prospect of partnering with a state that likes fast results and dislikes repatriation of dividends may give pause for thought.

What is worse is that the shale prospects represent energy that Argentina badly needs. Underinvestment in the sector, analysts and industry players say, is the direct result of a regulatory regime that keeps prices in Argentina well below the international market.

As Guadagni put it, Argentina pays domestic gas producers some $2.8 per million British Thermal Units, yet shells out some $11 per million BTU for gas from Bolivia (produced, ironically, by Repsol YPF), and some $17 for liquefied natural gas to plug its huge energy deficit.

Meanwhile, the cost to Argentines for their domestic gas is about 50 US cents per million BTU of gas, and drivers of vehicles that run on compressed natural gas pay around $1.

“The big question is whether these plans for YPF will improve or worsen Argentina’s prospects for recovering its energy self-sufficiency,” Guadagni said.

Argentina had a $3bn energy surplus in 2006. This year, Guadagni reckons the deficit will be $6bn to $7bn, ballooning to $12bn in 2013. Argentina’s policy of cheap domestic energy to stoke demand and economic growth worked well after the country’s default of nearly $100bn in 2001. But it isn’t working now.

Source

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Repsol YPF ups Argentine shale potential

Posted on February 8, 2012 at 6:08 pm by Associated Press

SANTIAGO, Chile — Repsol YPF on Wednesday raised the estimate for potentially recoverable oil and gas in its part of Argentina’s “Vaca Muerta” (Dead Cow) basin to the equivalent of nearly 23 billion barrels, indicating a total shale deposit big enough to enable Argentina to challenge the United States in non-conventional petroleum production.

But it cautioned that exploiting the formation would need a huge expansion in Argentina’s oil and gas industry, requiring thousands of wells, hundreds of drilling rigs and a national push to attract the necessary talent, equipment and investment at a time when other countries are competing to increase energy resources.

The company’s shares traded on the Buenos Aires stock exchange jumped 8 percent after the announcement.

Repsol YPF SA, a majority-Spanish-owned company, issued the statement from Madrid shortly after its president, Antonio Brufau, returned from a series of closed-door meetings in Argentina with government officials who have been pressuring the company to increase exploration and development.

The pro-government newspaper Pagina12 in Buenos Aires said Repsol YPF has been paying out more in dividends than it has made in profits in Argentina, and suggested President Cristina Fernandez might consider nationalizing the company’s Argentine operations so the money could instead be used to increase Argentina’s energy capacity.

Juliette Kerr, a Latin America energy analyst at IHS in London, discounted the possibility of nationalization, saying Argentina can’t afford a buyout. The idea was never openly endorsed by Fernandez or her Cabinet ministers.

Company spokesmen and government officials declined to comment on the talks this week.
But Wednesday’s statement, made as a filing to Spain’s securities regulator, provided a stark analysis of Repsol YPF’s commitment to Argentina and how much would have to change for the country to realize its energy dreams.

“If exploration proves successful in the Vaca Muerta formation and immediate intensive development began in the area, in 10 years its capacity could double Argentina’s existing gas and oil production. This would require a vast investing effort that would reach $25 billion per year in order to develop all the existing prospective resources,” it said.

Repsol YPF said in November that it had discovered 927 million barrels of recoverable oil and natural gas in the shale deposit. But even 23 billion barrels ranks below Brazil’s recent deep-sea oil discoveries, which experts estimated at up to 55 billion barrels, or the 296 billion barrels of proven crude reserves that Venezuela claims.

Argentina currently has only 80 drilling rigs and would need at least 100 more, along with upgrades in all sectors of its oil and gas industry, to capitalize on the potential of the deposit in western Neuquen province, the company said.

Repsol YPF currently is the leader in exploring in this area, having invested $300 million in exploration, mapping and initial development, but has claims on less than half of the formation, which stretches over 7.4 million acres. Many other companies would need to make substantial investments for the area to achieve its potential, it said.

So far, only a tiny fraction of the Vaca Muerta foundation has been developed, producing 700,000 barrels as of December, and the statement suggested that Brufau didn’t give in to the pressure for huge new investments right away.

“The company aims to drill 20 wells in 2012, solely and jointly with several partners, to continue investigating prospective resources,” it said.

The statement suggested international investors may be holding back until they have confidence that Argentina will guarantee government policies and labor unrest won’t get in the way of eventual profits. Instead, Argentina has been withdrawing energy exploration subsidies, dealing with a punishing oil workers strike and making it more difficult for multinational companies to move their gains out of the country.

Source

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Latin America : Business climate is king again

By Brian Winter
SAO PAULO | Thu Jan 12, 2012 9:20am EST

(Reuters) – Here’s an economic riddle of sorts: Which economy grew faster over the last seven years? A) President Hugo Chavez‘s Venezuela, famous for its forced nationalizations and “21st century socialism,” or B) Chile, long renowned as a capitalist paradise for investors.

It might surprise some outsiders to learn that the answer is actually A. In recent years, commodities prices have dictated growth in Latin America more than any other factor, meaning that countries could trample on businesses but still grow briskly as long as they exported plenty of raw materials such as oil and iron ore to China and elsewhere.

Venezuela, the region’s No. 1 oil exporter, has averaged about 4.6 percent economic growth since 2005, compared to 4 percent in Chile, the world’s leader in copper. An even clearer example of commodities’ almighty reign was Argentina, which averaged 7 percent growth during the same period as record soy and other farm exports helped offset the government’s hostile stance toward energy companies and some other investors.

Now, it looks as if the trend is shifting. In Latin America, 2012 seems set to be the year in which business climate clearly reestablishes its supremacy as the main driver of growth.

The countries expected to grow the fastest in 2012 are also generally the ones that are perceived by the World Bank and others as treating investors the best. That means Chile, Peru and Colombia should lead the pack, while Venezuela and even Brazil will lag a step behind – just as they did last year.

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Graphic on region’s economies: r.reuters.com/bed95s

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What has changed? The global economy.

Demand for many commodities is expected to slacken in 2012 due to economic problems in buyer markets such as China and Europe. That means it will be up to Latin American countries to generate more of their own growth – and the ones that fare best will be those who have made their labor laws more flexible, cut red tape, and taken other steps to stimulate business.

“There’s no question we’re seeing a change,” said David Rees, Latin America economist for Capital Economics in London. “The external drivers of growth are drying up and these countries will have to look to other sources like investment in order to keep up the pace.”

A DOGFIGHT FOR FIRST PLACE AMONG INVESTORS

One way to measure the trend is by looking at the World Bank’s annual “Doing Business” study, which ranks the business climate in 183 countries around the world based on how well they protect investors; the ease of starting a business; the simplicity of paying taxes; and other factors.

The cluster of Latin American countries that rank a clear step above their other regional peers in the survey are Chile (39), Peru (41) and Colombia (42).

All three of those economies are forecast to grow 4.5 percent or more this year, according to the International Monetary Fund‘s latest forecasts, made in October. Countries that rank lower in the Doing Business survey, such as Guatemala (97), Brazil (126) and Venezuela (177) are all forecast to grow in the 3.5 percent range or lower.

The divergent trend is even more pronounced in more recent 2012 forecasts by Wall Street firms such as Morgan Stanley.

The region’s other two big economies also appear to be headed in opposite directions.

Growth in Argentina (113) is expected by the IMF to be around 4.5 percent this year – but that’s just about half of last year’s pace. Meanwhile, Mexico’s (53) relatively open, low-tax economy should show resilience, with growth of 3.6 percent – well above its roughly 2 percent trend level since 2005.

Most of the countries at the top of the economic league table have vigorously implemented pro-business reforms in recent years, often with the explicit goal of improving their standing in the Doing Business rankings.

Peru, Chile and Colombia have been battling each other for supremacy within Latin America for years, said Luis Plata, a former Colombian trade minister. “We fought hard to be first,” he said in an interview. “It became a competition.”

“The rankings improve your standing with investors, but … the real reason to do it is to help you identify deep changes in the system, things that will help your economy grow better,” Plata said.

For this year’s “champion,” the dividends are clear. Chile saw foreign investment of $13.79 billion in 2011, a historic high that contributed to the country’s fastest economic growth in years. A top Chilean official told Reuters last month that the government expects a new record in foreign investment this year.

STALLED REFORMS IN BRAZIL

In countries closer to the bottom of the table, attitudes are notably different.

Argentine President Cristina Fernandez has shown few signs of softening an antagonistic stance toward some investors that in recent years has seen her government nationalize private pension funds and face widespread suspicions of manipulating basic economic data such as inflation.

Venezuela’s economy remained buoyant for years thanks largely to its status as South America’s biggest oil exporter, but Chavez’s frequent confrontations with business have hollowed out much of the private sector and left the economy dependent on state spending.

In Brazil, Latin America’s largest economy, the picture is slightly more complex. While successive governments have catered to private enterprise to a much greater extent than Argentina and Venezuela, Brazil has also failed to push any major pro-business reforms through Congress in a decade.

As a result, investors have become frustrated with the country’s high costs and red tape. Brazil dropped six spots in the latest Doing Business survey – more than any other big economy in Latin America – and ranks in the world’s bottom third in categories such as trading across borders, dealing with construction permits, and ease of paying taxes.

Partly as a result of the business climate, some economists believe that Brazil may be downshifting into a new era of 3 percent to 4 percent economic growth, which would be a letdown after the faster pace of previous years.

“Brazil hasn’t kept pace with some other (Latin American) countries on some of the really important long-term questions, and they may pay the price for that,” said Gray Newman, chief Latin America economist for Morgan Stanley.

“People focus on things like inflation, and that’s good, but what about – How long does it take to open a business? How easy is it to hire and fire?” Newman said. “The economies that are moving forward are the ones that have looked at those metrics, and have put them at the heart of government policy.”

(Editing by Todd Benson and Kieran Murray)

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Soros-Rockefeller-Rhodes protégé – tried to allay a default by engineering a new sovereign debt bond mega-swap.

Argentina, Buenos Aires : A woman passes in front of the window of an exchange in downtown Buenos Aires on October 28, 2011. (AFP Photo / Danniel Garcia)

Exactly ten years ago Argentina suffered a full-scale financial and governmental collapse. That was the end-result of over a decade of doing exactly what the IMF, international bankers, rating agencies and global “experts” told us to do.

Then President Fernando de la Rúa kept applying all IMF recipes to the very last minute, making us swallow their poisonous “remedies”.

It all began getting really ugly in early 2001 when De la Rúa could no longer service Argentina’s “sovereign debt” even after driving the country into full “deficit zero” mode, slashing public spending, jobs, health, education and key public services.

By March 2011, he had brought back Domingo Cavallo as finance minister, a post Cavallo had already held for six years in the nineties under then-President Carlos Menem, imposing outrageous IMF deregulation and privatization policies that weakened the state and led straight to the 2001 collapse.

Well, it wasn’t really De la Rúa who brought back Cavallo but rather David Rockefeller (JPMorgan Chase) and William Rhodes (CitiCorp), who personally came to Buenos Aires to tell/order President De la Rúa to name Cavallo… or else!

So, by June 2001, Cavallo – a Trilateral Commission member and Soros-Rockefeller-Rhodes protégé – tried to allay a default by engineering a new sovereign debt bond mega-swap which increased public debt by $51 billion, but did not avert total collapse that December.

What then? De la Rúa and Cavallo protected the bankers, avoiding a massive run on all banks by freezing all bank deposits. “Corralito” they called it – “the crib” – whereby account holders could only withdraw 250 pesos per week (at the time, equivalent to $250; after the 2002 devaluation, equal to $75).

Argentina’s economy all but collapsed; people took to the streets banging pots and pans, screaming and yelling, calling all bankers ‘thieves, criminals, crooks, swindlers and robbers’ but… the big mega-bank bronze gates all remained tightly shut. No one got their money back.

Half of bank deposits were in dollars. Again, no one got their dollars back, but just as pesos at a fraudulent rate of exchange after devaluation had been imposed and Argentina’s so-called “convertibility” Currency Board that Cavallo had imposed a decade earlier pegging the peso to the dollar at an unrealisticone-to-one parity, was dropped.

Clearly,this was a massive banker-orchestrated, government-backed robbery of the assets and savings of 40 million Argentinians.Half our population quickly fell below the poverty line, GDP contracted by almost 40% in 2002, millions lost their jobs, their savings, their homes to foreclosures, their livelihoods and yet… not one single bank folded or collapsed!

Amid rioting in Buenos Aires and major cities and brutal police repression that left 30 dead on the streets, De la Rúa boarded his helicopter on the rooftop of the “Casa Rosada” presidential palace and abandoned ship. That last week of December 2001, four presidents successively went by until finally the bankers, the media, and the US State and Treasury Departments accepted Eduardo Duhalde as provisional president. He finally named finance minister Roberto Lavagna, a founding member of the local CARI, the Argentine Council on Foreign Relations, which is the local New York CFR branch.

Argentina was used as a testing ground by the global power elite to learn how a full-scale financial, monetary, banking and economic collapse can be controlled and its social consequences suitably engineered to ensure that, with time: (a) the bankers came out unharmed, (b) “democratic order” is re-instated and the new government imposes another sovereign debt mega-swap, balance their numbers, and calm the people down (or else!), and (c) put big smiles back on bankster faces…Business as usual!

The lessons learned in Argentina in 2001/3 are today being used in Greece, Ireland, Spain, Italy, Iceland, the UK and the US.

So, “Occupy Wall Street” demonstrators, lend me your ears! You haven’t got a chance! The global money masters already made their financial war game exercise in Argentina.

At one point it got so bad that New York Times journalist Larry Rohter (later alleged by the Brazilian government to have ties with the CIA) had the gall to suggest the territorial break-up of Argentina to “solve” our debt crisis. The title of his perverse article, published on 27 August 2002, said it all: “Some in Argentina see secession as the answer to economic peril”, specifically targeting our natural resources-rich Patagonian region…

Then, the global power elite finally got their man when Néstor Kirchner became president in May 2003. Kirchner retained the finance minister, Lavagna, engineered yet another sovereign debt mega-swap running 42 years into the future (!); he paid the IMF the full amount they claimed of $10 billion (in cash, in dollars and with no deductions; i.e. absolutely most-favored creditor status!) getting nothing in return; he further weakened Argentina’s military, dumbed-down education, media and culture, and ended up imposing his wife Cristina as successor.

Clearly, lots of lessons were learned from the “Argentine experience,” which come in so handy when dealing with those rowdy, poorer Europeans today.

So, one decade on…. anyone for a tango? Adrian  Salbuchi

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On Energy Production, U.S. Isn’t Keeping up with the Joneses

America has an abundance of natural resources, yet our policies keep them locked up. We can’t drill in the Gulf. ANWAR is off limits. Mining is nearly impossible due to regulations. “Endangered species” threaten existing supplies.

Meanwhile resource discoveries are being made and developed the world over.

Last week, Repsol announced a new discovery in Argentina—estimated to be more than 900 million barrels of oil. The oil shale find is reported to be Repsol’s largest ever. Argentina’s potential has attracted investment from both majors and independents. Argentina’s rising energy consumption and higher prices make Repsol’s success especially welcome, representing a potential windfall for the country. Argentina is not crying.

On October 20, a “giant” gas discovery was announced off the coast of Mozambique. It is reported that the results of the exploration well “exceed pre-drill expectations and confirm the Rovuma Basin as a world-class natural gas province.” Then, one week later, word came out that the find was 50% greater than originally estimated with up to 22.5 trillion cubic feet of gas. Estimates are expected to increase. Infrastructure, including LNG facilities, will have to be built to support the recent exploration successes with the natural gas expected to be brought to the market in 2018.

The day before the original Mozambique “giant” discovery announcement, it was reported that companies such as ExxonMobil would invest $100 billion to develop and upgrade oil fields in Iraq. The investment is expected to up Iraq’s oil production to at least 6.8 million barrels of oil a day by 2017—making Iraq one of the world’s largest producers of crude oil.

Also, on October 19, reports came out saying that the North Sea Statoil discovery is bigger than originally estimated with a potential of 2.6 billion barrels of oil equivalent—which would make it the third-largest find ever made on the Norwegian shelf. Production is expected to begin by 2018.

One day earlier, October 18, service provider Odebrecht announced plans to triple its revenues over the next three years. In support of Brazil’s vast deepwater oilfields, the company is spending $5 billion in equipment, from drilling ships and floating oil platforms to pipeline-laying vessels. Odebrecht says: “This year we should [have] revenues of about $500 million and we are going to double that next year, and be at $1.5 billion by 2013.”

This, all in the past couple of weeks.

In late-December 2010, 16 trillion cubic feet of gas was found off the cost of Israel in what is being called the Leviathan Field. The Julia Field was discovered in 2008 in the Gulf of Mexico and is called one of the greatest discoveries of the Gulf with an estimated 1 billion barrels of oil—but the Interior Department is now fighting ExxonMobil over its control.

Clearly there is no energy shortage.

While Europe is not rich in energy resources, they do understand their importance. They know they need energy.

Last week, on November 8, the Nord Stream Pipeline opened and began delivering Russian gas to Germany. With proposed plans to close their nuclear power plants by 2022, Germany needs the resource from Russia—though it does raise the specter of dependence on Russia/Russian energy control. Work is underway to build pipelines from other sources, which will minimize Russian domination.

Two days later, on November 10, President Obama announced a delay of more than a year to the true-shovel-ready XL Pipeline that would have created thousands of industry-funded jobs and reduced America’s dependence on Middle Eastern oil. The pipeline would have brought both Canadian and northern US oil to refineries in the southern United States. Instead of diversifying our energy supplies and suppliers, we remain reliant on unfriendly countries.

Some might point to the November 8 announcement of a “modest expansion” in offshore leasing to indicate a change in the Obama administration’s attitude—though, in light of his ideological opposition to oil, gas, and coal, the proposed plan is more likely the result of public and industry pressure and the upcoming presidential election. Much like the apparent reverse on the ozone regulations left plenty of onerous, price-elevating regulations in place, this modest expansion still keeps many of America’s most promising energy resources—some the most promising in the world—off limits.

Worldwide, more and more energy resources are being discovered, developed, and delivered. In the United States, not so much. Like public and industry pressure pushed for an increase in offshore leasing and a decrease in the EPA’s economically destructive regulations, we need to keep the pressure on and engage friends, family, and neighbors to do the same. Congress needs to hear from you. We need to be exploring and discovering here.

Marita Noon is the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy. Marita’s twentieth book, Energy Freedom, has just been released.

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The Mottled Relationship: Iran and Latin America

by admin
September 27, 2011

• Iranian President Mahmoud Ahmadinejad was invited to visit President Hugo Chávez on September 24, but the trip was postponed as the Venezuelan head of state recovers from cancer.
• Ahmadinejad partially empties UN Hall with some of his harshest statements.
• Iranian influence in Latin America is sometimes more fiction than fact.
• Befriending Iran’s repressive regime is somewhat contradictory for Latin American governments that openly crow their respect for democracy and human rights. Does Brazil really mean to have a creditable relationship with one of the most disreputable players and human rights violators?
• In an ironic twist, Chávez is credited for mediating with the Iranian government to free two American hikers.
• The attacks against Israeli centers in Argentina in 1992 and 1994 continue to be a source of tension, but in Buenos Aires, business comes first.

The Islamic Republic of Iran and Latin America have been fostering closer relationships for more than a decade, working towards building cohesive diplomatic relations and strengthening economic agreements. These ties began with Cuba’s championing of the 1979 Iranian revolution, and today those connections also extend to Argentina, Brazil, Bolivia, Ecuador, Nicaragua, Paraguay, Peru, Uruguay, and the ever-controversial Venezuela, with these amplified ties being sedulously cultivated by Tehran. Due to Iran’s internal politics, such as its controversial nuclear program, its contemptible human rights record, and its often tense, if not minatory, relations with the U.S., initiatives between Tehran and the Western Hemispheric states have come under heavy critique. As a result, there is speculation and differing interpretations over the existing level of influence that Iran currently enjoys in several nations of Latin America.

A Brief Overview

Ironically, as relations with the U.S. and European countries have deteriorated, Iran’s relations with the Global South have, if anything, noticeably progressed. Perhaps as a direct result of the U.S. placing Iran within the ‘axis of evil’, the Persian state began pursuing relationships with African governments and, within the last decade, an increasing number of Latin American countries, as a strategy to counteract U.S.-backed ostracism and efforts to diplomatically isolate Tehran. The apparent reasons for these alliances are:

(a) to gain economic advantage as well as much-needed relief and collegiality to cope with the consequences of U.S.- imposed sanctions;
(b) to counterbalance the geopolitical effect of U.S. policy in both the Muslim World and Latin America;
(c) to garner a sympathetic attitude and support for its nuclear program;
(d) to gain recognition in an increasingly prominent part of the Western Hemisphere, and in Washington’s sphere of influence, in order to achieve political prestige in the international community. This also helps, in part, divert the attention among the Iranian people, particularly in the aftermath of the 2009 Iranian election fraud that prompted massive repression of the dissenting democratic opposition.

The most pertinent questions, however, remain to be answered: Has the long term impact of these increasingly intimate relationships, such as the one between Caracas and Tehran, been fully analyzed? Are the initiatives and maneuverings carried out by some Latin American governments solely due to their impetuousness and lack of long-term goals? Notwithstanding the immediate economic advantage of gaining new markets, the long-term political ramifications and disadvantages of doing business with what the free world considers a horrendously corrupt regime places the Latin American region into a precarious situation. Latin America’s good will initiatives and human resources could be more wisely expended in dealing with nations that do not carry out egregious abuses towards its own citizens.

Case Study: Argentina

In March 1992, the Israeli Embassy in Buenos Aires was the subject of a bomb attack. It has been established that a pickup truck loaded with explosives, and driven by a suicide bomber, smashed into the front of the embassy, killing thirty-three and wounding as many as 242 persons. In July 1994, the Asociación Mutual Israelita Argentina (AMIA; Argentine Israelite Mutual Association) building in Buenos Aires was the target of an attack that killed eighty-five people, while scores more were injured.

The violent Islamist militant organization Hezbollah has been regarded as the culprit behind these attacks, but there have been rumors that the Iranian government, including some members of the current administration in Tehran, may have been more directly involved. The Persian state has repeatedly declared its innocence regarding its involvement in both attacks. In July 2011, Iran’s Foreign Ministry stated that “the Islamic Republic of Iran, as one of the major victims of terrorism, condemns all acts of terror, including the 1994 AMIA bombing, and offers sympathy with the families of the victims of the explosion […] Iran’s Foreign Ministry expresses regret that 17 years on from the occurrence of this crime, the truth behind it has not been revealed yet and the identities of its real perpetrators are still shrouded in mystery.” Furthermore, an article published by Press TV (a semi-official Iranian news agency) in July argues that, “under intense political pressure from the United States and the Israeli regime, Argentina formally accused Iran of carrying out the attack on the Jewish community.” Most independent observers, however, dismiss this rhetoric merely as tactical method to confuse the subject.

Tensions between Iran and Argentina took a new twist in early June 2011, when Iranian Defense Minister Ahmad Vahidi visited Bolivia. General Vahidi is wanted by Argentina for allegedly masterminding the 1994 bombing. Buenos Aires asked La Paz to apprehend the Iranian official, but he returned to Tehran before any decision by the Bolivian government could be made. As Iran continues to promote its influence in Latin America, the controversy over the Argentine bombings will continue to be a sore point for the foreseeable future. The Argentine-Persian relationship, or lack thereof, presents a fascinating case study of a state trying to improve relations with another while at the same time attempting to overcome a violent recent past that includes state-sponsored terrorism.

Trade and Investments

During recent years, Iran has expanded its economic cooperation with many Latin American states, entering into substantial trade agreements with Venezuela, Bolivia, Peru, Brazil and, somewhat surprisingly, Argentina. The International Monetary Fund (IMF) stated in a report issued in December 2009 that Brazil is Iran’s largest trade partner in Latin America. Last year, Iran’s state radio announced that bilateral trade with Brazil had increased to more than USD 2 billion in 2009-10, an increase from USD 500 million in 2005, and was forecast to reach USD 10 billion in the next 5 years.

Argentina is Iran’s second largest trading partner in the region, despite the fact that Buenos Aires has accused Tehran of the 1992 and 1994 bombings. Trade relations remained at marginal rates throughout the 1990s, but commercial activity never ceased entirely, and by 2008 bilateral trade had soared to USD 1.2 billion, dramatically overshadowing the 2007 figure of USD 30 million.

In addition, relations between Iran and Venezuela are a mixed bag of actual achievement and diplomatic rhetoric. According to the IMF report, and in spite of highly cordial political and diplomatic relations, bilateral trade between Venezuela and Iran did not advance in the same way as it did for other Latin American countries. For example, while Brazilian and Argentine trade with Iran has increased by 88 percent and 96 percent since 2007 respectively, Venezuela’s trade increased by only 31 percent in the same period. Following the increase in trade with Brazil and Argentina, Venezuela became Iran’s fifth largest trade partner in the region.

Moreover, Iran has pursued deeper trade and diplomatic relationships with Bolivia as well. Trade and energy agreements between La Paz and Tehran, signed in September 2007, confirmed the increasingly friendly nature of ties between the two countries. Iran’s involvement in the Bolivian economy extends to investment in and technological support for industrial projects such as dairy factories, agriculture, mining, and hydroelectric dam construction. Additionally, in July 2009, Tehran agreed to provide USD 280 million in low-interest loans to La Paz. Finally, Peru is also a growing importer of Iranian products, as is Ecuador. The expansion of trade ties follows an overall regional trade ‘offensive’ by Iran in recent years. IMF data analyzed by the Latin Business Chronicle indicates that Iran-Latin American trade skyrocketed by 209 percent in 2008, totaling a robust USD 2.9 billion. What this data tells us is that there is certainly a potential for trade to grow between Iran and several Western Hemisphere states, however Iran’s trade numbers are dwarfed by the region’s other trade partners, like the U.S., China and Europe.

Geopolitical Interests

To Washington’s increasing concern, the Brazilian Deputy Foreign Minister Maria Louisa met with her Iranian counterpart, Ali Ahani, in Brazil in early August 2011. The Brazilian official described Iran as one of “the important partners of Brazil” and an “influential” country. Louisa noted that Tehran and Brasilia would attempt to increase the level of mutual ties “considering the developments of the two countries in different fields.” The Iranian Deputy Foreign Minister, for his part, hailed “the friendly and good relations” between both states and said that the governments of Iran and Brazil are eager to expand ties. Given the grim status quo between Washington and Tehran, at some point in the near future, the White House is bound press the issue, and Brazilian President Dilma Rousseff may have to choose whether her government will pursue closer relations with Washington, or with Tehran.

According to the Iranian International Newspaper Ettelaat, Iran has nearly doubled the number of embassies and cultural centers it maintains in Latin America. The number of embassies increased from six in 2005 to ten in 2010, and Tehran is building cultural centers in seventeen Latin American countries. Additionally, Iran has successfully negotiated no-visa agreements with Nicaragua, Venezuela, and Bolivia. It can also be argued that although relations have been strained with Argentina since the terrorist bombings, the continued trade between the two countries is a signal that geopolitical interests have gradually taken precedence over efforts to apprehend the perpetrators of the attacks. Argentina’s reaction to the visit of Defense Minister Vahidi to Bolivia does point out that Buenos Aires has not forgotten Iran’s alleged role, but that ultimately other initiatives have taken priority.

Nevertheless, if we consider Iran’s repressive regime, its brutal crackdown on dissenting voters, and the continued suppression of what most nations, particularly in the West, consider a wholly organic and legitimate uprising, it is difficult to comprehend the continued warming of relations with its Latin American partners. Nations are certainly free to pursue close relations with any states they wish, but it is baffling, considering the Iranian government’s repressive record when it comes to its own population, that Latin American governments, many of which repeatedly publicly proclaim their respect for human rights, want to befriend a thoroughly toxic nation like Iran. So what could be the reasons why Latin American countries continue to welcome the Iranian government’s overtures? Simply put, Latin American nations want an alternative to what some regional players see, at times, as U.S. imperialism. This is exemplified by the Chávez and Ahmadinejad pact signed in 2007 to formulate an “Axis of Unity”, particularly against the U. S.

In order for Iran to gain the geopolitical strength that its revolutionary leaders so fervently aspire to obtain, the country continues to play its U.S- as-an-imperial power card as aggressively as possible. It also plays a powerful role in pushing its Latin American partners into recognizing Palestine as a counterbalancing force against U.S. and Israeli influence. When it comes to assessing geopolitical gains, the common denominator between Latin America and Iran is economic advancement, rather than the counterbalancing of geopolitical power. Venezuela’s President Chávez is the exception to this rule, as, even though Venezuelan-Iranian economic relations are fairly robust, a major factor for this close rapprochement is that Chavez and the Iranian government are fairly ideologically aligned (at least regarding their views on Washington).

Support for Iran’s Nuclear Program

Venezuela, Cuba, and Syria were the only three countries that supported Iran’s nuclear energy program when the UN voted on it in 2006. However, there is little doubt that support has been increasing throughout Latin America due to Iran’s diligent pursuit of such backing. Now Bolivia and Brazil are also offering their measured support for Tehran’s civilian nuclear program. In addition, the ever-vociferous Venezuelan leader has officially stated that Iran has a legitimate right to its nuclear program and that Venezuela supports Tehran’s quest for peaceful nuclear technology.

The Future of the Iran-Latin America Alliance

Chávez’s present personal medical issues, and the recent U.S.-imposed sanctions on Venezuelan oil company PDVSA (Petróleos de Venezuela S.A. – Venezuelan Petroleum S.A) for dealings with Iran, could serve to weaken the Venezuelan-Iranian nexus. This is because Venezuela’s current ideological views – particularly its foreign policy – ultimately derive from Chávez, and it is unclear what a post-Chávez Venezuela would look like. Would his political party maintain its unity and continue Chávez’s ideology, or would another course be taken? In addition, the Venezuelan military has declared its support for Chávez to the point that some organizations are concerned as to what would happen if another political party were to win the upcoming presidential election. What this means for Tehran is that its closest ally in Latin America is not Venezuela but rather its leader, and it is difficult to foresee how diplomatic ties would be affected by a transition of leadership.

Late September 2011 saw an interesting development, as the Iranian government recognized mediation initiatives by Chávez to free two American hikers held in an Iranian prison since 2009. According to statements by the Venezuelan Vice Minister of Foreign Affairs, Temir Porras, the Venezuelan government agreed to help Shane Bauer and Josh Fattal after receiving a request for help from the hiker’s friends. It has also been reported that Noam Chomsky signed a letter asking for Chávez’s help.

Although various news sources have reported an increase in the establishment of Iranian embassies in Latin America, a Latin daily source indicates that, at least in the case of Nicaragua, such plans have failed to come to fruition. This is particularly interesting as there had been rumors circulating that Iran’s embassy in Managua is, or was supposed to be, some kind of massive intelligence hub involving an unusually large number of staff, which, by default, would put U.S. interests in the region at risk. In reality, the Iranian Embassy in the Central American country may be nothing more than somewhat large.

In mid-June, an Iranian analyst published a piece in the Iranian newspaper Jaam-e Jam entitled “Failure of the United States to break relations between Iran and Brazil.” The analyst explains that Iran’s initiatives in Latin America “change the quiet backyard of the United States to a dangerous backyard for that country, because the expansion of Iran’s economic and political relations with the countries of that region is indicative of the failure of U.S. efforts to impose sanctions and threats on Iran.” The analyst also discusses how relations between Tehran and Latin America affect Israel:

Changing the United States’ quiet backyard to a dangerous backyard has also created major concerns for Tel Aviv, in addition to Washington. Such worries have intensified to the point that Shimon Peres, the head of the Zionist regime, left for a visit to Latin America, which is considered the first official visit of this sort to Latin America in the course of several decades, only a few days before the visit of Mahmoud Ahmadinejad.

The bottom line seems to be that Latin America sees Iran’s involvement in the region in terms of economic interests. Additionally, it may allow the region to gain a foothold in the Muslim world, with the secondary benefit (at least possibly in Venezuela’s case) of reducing U.S. influence in the region. Meanwhile, as interpreted by the aforementioned Jaam-e Jam analysis, Tehran sees its rapprochement with Latin America mostly in terms of its impact on Washington and Tel Aviv.

Finally, it is interesting to observe that Brazil, Latin America’s powerhouse and a nation that is currently attempting to obtain a permanent seat on the United Nation Security Council, has also increased the pace of diplomatic ties with Iran. Brasilia has gone on record to declare its support for Tehran’s civilian – albeit controversial – nuclear program. It may soon become apparent to Itamaraty diplomats that they will have to choose between Washington and Tehran as their primary overseas partner.

Conclusion

In the interest of creating a just and prosperous hemispheric community, it is important for regional nations to continuously evaluate the scope and breadth of the burgeoning economic aid pacts and political gains being devised between Latin American countries and Iran. This survey must also include a gauging of the inherent merits of these gains and an evaluation of whether they are more fictive than real. A closer examination of the Islamic Republic of Iran depicts an undemocratic governing body heavily burdened by religious dogma, underdeveloped financial standards, institutional corruption and self-imposed non-transparency, a legal system hardly worthy of the name, the absence of any civil liberties, and atrocious human rights violations.

Iran’s current leadership can hardly be described as providing a suitable alternative to traditional U.S. domination and a sphere of influence. Even if counterbalancing U.S. power in Latin America can become more than a fantasy, and grow into a viable plan to amplify the resonance of democracy in the region, the advantages derived from an arrangement with Iran must be weighed against the costs of introducing another form of despotic influence into the democratically fledgling Latin American region.

Original Article

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