For the first time since it became public that ExxonMobil had obtained Court orders to freeze PDVSA’s assets, President Hugo Chavez referred to the matter and he did it in his characteristic bully style, threatening to cut off oil supplies to the US and explicitly saying that he has given out orders to do so if any of PDVSA’s property is seized.
While Chavez can do anything, nobody really knows how he may react to anything, and I am sure markets will be rattled tomorrow when they open, the truth is that if this were truly what he intended to do, he would have ordered it already, because the order of attachment by a New York Court has already frozen US$ 325 million that PDVSA held in an account in New York. Thus, saying that “if you truly freeze something…we will stop sending oil to the US” is just playing for the gallery, it already happened. So, why wait?
The truth is that not only did Chavez illegally take over ExxonMobil’s investment in Venezuela, but has yet to compensate that company. Moreover, the whole thing has been badly handled in the belief that ExxonMobil will simply accept whatever PDVSA offered, like the state controlled oil companies of Norway and France did with their own project.
In fact, Chavez should have known that these injunctions were requested by ExxonMobil as far back as December, a fact that was hidden from the Venezuelan people. At least in the case of the US Court, ExxonMobil introduced the injunction in the Souhern District of New York on December 27th. and that same day Judge Batts ruled on the case, filed under number 07-CV-11590 and ordered PDVSA’s property attached. Moreover, the Judge ratified the measures on January 2nd and again on Jan. 8th. after talking to PDVSA’s lawyers. It was not until January 24th. that PDVSA’s lawyers actually replied to the injunction in the US.
Thus, while Minister Ramirez accuses the media of not informing or lying, it turns out that it is the Chavez administration that has been lying or hiding the information from the “people” that they claim to love so much and want to take into account in their decisions. Thus, if the letters of attachment had not reached the banks, we probably would not yet know of the injunctions, proving once again that Chavez is running Venezuela as if it was his private property and with total disregard for the law and the right of information given by his 2000 Constitution.
Thus, we will still have to find out if this is just another Chavez bully moment or if he means it. In fact, the injunctions by themselves create many problems for PDVSA that may actually make it more difficult for PDVSA to export oil not only to the US, but to many other places and actually get paid for it.
The question is whether Chavez could benefit from such a move. I doubt it. If Venezuela were to stop exporting oil to the US, it will find it difficult to export the same oil elsewhere because of its characteristics (high sulfur). This will create more financial problems in Venezuela than anywhere else, where shortages are already present and the population is tired of promises and inefficiencies. Thus, if Chavez dared to do it, it will likely become a defining moment in his demise, as people have put up with his rants and ideology because there were unrealized promises attached to them. But somehow it seems this is the wrong time to ask the people to sacrifice in the name of his revolution.
The ExxonMobil injunctions would only become significant if Chavez were to take the “nutty” road, as I suggested the first day I heard about them, such a road will only be bad for us Venezuelans but I still believe there is a very low probability that Chavez will take it.
P.S. Just out of curiosity, the firm representing Venezuela Curtis, Mallet-Prevost, Colt & Mostle is the descendant of the one that represented Venezuela in its case against Great Britain over the British Guayana, not a promising precedent…
The Devil's Excrement 
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