Last week, Venezuelan President Hugo Chávez threatened to cut off oil sales to the United States because the intention of ExxonMobil to freeze assets of state-owned Venezuelan oil company Petróleos de Venezuela (PDVSA), as part of a US government backed “economic war” against his government.

On his weekly TV show ‘Alo Presidente,’ President Chávez described ExxonMobil:

“Más nunca nos robarán, bandidos de la Exxon Mobil, son unos bandidos imperialistas, ladrones de cuello blanco, corruptores de gobiernos, derrocadores de gobiernos, apoyaron la invasión a Irak y el bombardeo y siguen apoyando el genocidio en Irak….”

Literal Translation: They will never rob us again, those bandits of ExxonMobil they are imperialist bandits, white collar criminals, corruptors of governments, over-throwers of governments, who supported the invasion and bombing of Iraq and continue supporting the genocide in Iraq….

Translation: They will never steal from us again, ExxonMobil are thieves, imperialist, white-collar criminals, corrupting and over-throwing governments, supporting the invasion and bombing of Iraq and continue supporting the genocide in Iraq..

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ExxonMobil won a series of temporary court orders in New York, London, the Netherlands, and the Dutch Antilles, freezing up to $12 billion in PDVSA assets around the world. The dispute is over compensation owed after the Venezuelan government required six oil companies to hand over their portion of the Cerro Negro exploration project in the Orinoco oil field to them. ExxonMobil, along with ConocoPhillips, rejected Venezuela’s generous settlement offer for its 41.7% stake in the project.

Venezuela’s Energy Minister and PDVSA president, Rafael Ramírez, said that ExxonMobil’s legal actions violated arbitration proceedings in the International Center for Settlement of Investment Disputes (ICSID) by seeking separate court orders, and that it may sue for damages that caused Venezuela’s dollar-denominated bonds to record their biggest drop in six months.

Over the weekend, President Chávez toned down his earlier message saying that Venezuela will not cut off oil shipments to the United States, but added if Washington were to attack Venezuela or try to harm them, they have no problem cutting off supplies. In a speech before the Venezuelan National Assembly, Ramírez said PDVSA would continue exporting around 79,000 barrels per day to the Louisiana-based Chalmette refinery, which it co-owns with Exxon, but will cut all other exports to Exxon.

According to Ramírez, oil companies from Europe and China have already expressed interest in purchasing the oil that used to be sold to ExxonMobil, which is part of the Chávez administration’s “Sowing the Oil” plan. The purpose of the “plan” is to take advantage of the recent oil price boom that has generated unprecedented revenue for the Venezuelan government. The plan calls for using earnings from PDVSA to fund public initiatives to provide better health, education, and employment programs to those who need it most.

Although the most common reaction to Hugo Chávez is to demonize the Venezuelan President, there are others who feel that Chávez’s impact has been better for the country than that of any other national leader to have governed this long abused country in at least a generation, if not longer.

Upcoming Petro Conflict
In the history of United States, it is well documented that the US have used incidents such as this to deploy its power to gain access to natural resources, stifle dissent and control the nationalism of newly independent states or political movements. More often than not, such events turn out to have either been willfully provoked or fabricated out of whole cloth. History is coming back to haunt us.

It’s no surprise the media the US portrayed Chavez as the aggressor and Exxon as the victim. If anything, the news media these days are cruder in its distortion of fact and its resort to outright lies.

Contemporary warfare traditionally involves underlying conflicts regarding economics and resources. Today this intertwined conflict not only involves oil, it also involves international currencies. Recently, the media focus on the latest crises in the Middle East has been on Iran’s nuclear program. This would explain why the media failed to report on a significant event that just occurred in Iran. We are led to believe the real reason for the current hostilities between the US and Iran has to do with Iran’s nuclear intentions. However, this goes beyond Iran’s nuclear intentions but rather how Iran is about to re-shape the global economical system by changing the way countries purchase oil.

On Sunday, Iran opened its first oil exchange - the Iranian Oil Bourse (IOB) - the stock exchange for oil products and petrochemicals. The idea of the Iranian Oil Bourse has been on Iran’s domestic agenda for quite some time, but has suffered several set backs, until now. The IOB is located on the Persian Gulf Island of Kish, which is designated by Iran as a free trade zone, which means the standard laws of the Islamic Republic of Iran are far more relaxed than on the mainland. Over the years, the island has seen significant increases in international trade.

What makes the IOB the subject of such interest by the Bush Administration? According to rumors, some fear in the economic circles that the opening of this bourse could lead to a further decline of the US dollar. The dollar has long been the dominant currency in purchasing oil from oil-producing countries. In addition, the dollar is the currency that used on how oil is to be priced. In other words, oil-consuming countries have no choice but to use the US dollar to purchase their oil. Because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars to continue imports. This causes demand for US dollar to remain high, regardless of economic conditions in the United States.

Since the US dollar is the dominant currency in purchasing oil, naturally, the Iranian Oil Bourse would compete against two American owned corporations, New York Mercantile Exchange (NYMEX) and London’s ICE Futures (formerly known as International Petroleum Exchange). Both of these oil exchanges transact oil trades in US currency. The fact that these countries are pressured to purchase and keep large stockpiles of dollars in their Central Banks as their Reserve Fund, is a major reason our economy has not tanked. However, if Iran were to de-link the dollar from oil, such choice would reduce trade volumes at NYMEX and ICE because it would provide an incentive for other industrialized countries to stop exchanging their own currencies for petrodollars. The dollar will no longer serve as the de-facto international currency and the US will be forced to reduce its massive trade deficits and rebuild its manufacturing capacity.

The effectiveness of the IOB will depend on whether the big international oil trading companies decide to accept deals in euros or not. How concern is the Bush administration? Recent articles reveal attempts have been made to halt the opening of the IOB. Prior IOB’s opening, 5 undersea Internet cables were mysteriously cut causing the entire Gulf region to be cut off from the Internet.

Political observers feel the Iran government’s plan to inaugurate its Oil Bourse this month had a connection with the sudden inexplicable cutting of several undersea internet cables. All internet access in Iran was cut and total internet blackout was experienced for a few days. Indian BPOs and focus of media attention for the slowdowns that nearly crippled the industry for almost a week, were probably unintentional targets of what appears to be a far deeper conspiracy.

The lines provided 90% of the region’s Internet service and the countries that were affected are Egypt, Bahrain, Qatar, United Arab Emirates, Kuwait, Saudi Arabia, Pakistan, Iran, India and Southeast Asia. The lines originated from southern Europe making its way to the Middle East through the Suez Canal then onto India. These lines are the communication, commerce and technology lifelines for these nations.

In the eyes of the Bush Administration, Iran actions is a far greater “offense” than Saddam Hussein’s conversion to the euro for Iraq’s oil exports in the fall of 2000. In essence, according to William Clark, author of “Petrodollar Warfare,” petrodollar hegemony is eroding. The US will have to make significant changes to its “current tax, debt, trade, and energy policies, all of which are severely unbalanced.”

What does this have to do with Venezuela? When Saddam Hussein stopped trading his oil for dollars before Iraq was invaded, it was reported that Hugo Chávez was mulling over whether to follow suit. Prior to the opening of the IOB, Venezuela and a few of the larger oil consuming countries, such as China and India, had announced their support for the IOB. Isn’t it a coincidence that Venezuela suddenly decided not to go through with their threat with Exxon or that it was announced the same day IOB opened?

Now imagine if oil producing nations agree to accept other currencies? Even worse, what if they refuse to accept dollars? Washington’s erratic and aggressive foreign policies have contributed to the rise in oil prices. Currently, the US dollar is sliding against most major currencies, according to a recent Reuters’ article and price of oil has now reached $100 a barrel.

New York’s main contract, light sweet crude for delivery in March, soared to an all-time intraday high of 100.10 dollars a barrel before closing up 4.51 dollars at a record 100.01 dollars.

In the event of a military strike on Iran or attempts to interfere in the internal affairs of Venezuela, oil could easily go up $200 dollar mark with severe repercussions on the US and other first world economies.

As the primaries are coming to a close, it is important we choose a president who will fix our fractured international relations. Voters on the progressive wing of the Democratic Party are rightly disappointed by the similarity of the foreign policy positions of the two remaining Democratic Party presidential candidates, Senator Hillary Clinton and Senator Barack Obama. Given the power the US has in the world, even minimal differences in policies can have a major difference in the lives of millions of people.

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