Let’s Confiscate Venezuela’s U.S. Refineries

I recall reading this story a while back:

Chavez Considers Sale of U.S. Refineries

The implications just sank in today. Chavez, having confiscated the property of U.S. companies and torn up contracts, has property here in the U.S. Why don’t we just confiscate Venezuela’s Citgo refineries as compensation, or make them sell the refineries for half price? Isn’t turnabout fair play? From the article above:

“Not one Venezuelan works at these refineries,” Chavez said in Buenos Aires yesterday, according to Venezuela’s Communication and Information Ministry. “They don’t give us one cent of profit. They don’t pay taxes in Venezuela. This is economic imperialism.”

Citgo Petroleum Corp., the U.S. fuel-making unit of Petroleos de Venezuela, owns four U.S. oil refineries and two asphalt plants, with a combined daily crude processing capacity of 756,000 barrels. The company also operates a 265,000 barrel-a- day refinery in Houston that’s a joint venture with Lyondell Chemical Co. and has more than 13,500 U.S. retail fuel outlets.

Well, I think I have a solution. The U.S. will just take those refineries off your hands, in the same way that you have confiscated investments that were made by U.S. companies in your country.

On that topic, Jim Mulva was recently interviewed by Financial Times:

Conoco holds out on Venezuela terms

Jim Mulva, chief executive of ConocoPhillips, the third largest US oil company, is holding out against the terms under which Venezuela is expropriating the company’s oil assets and the commercial terms under which they will be managed.

Mr Mulva said the sticking points related to the fact that Conoco invested in the country’s energy projects but is now being left with less than it originally paid for.

As I have pointed out before, it’s not the nationalization I have a problem with. It’s the theft of the infrastructure that the companies built. It is that the nationalization followed companies (and not just U.S. companies) being invited in to invest billions in the development of Venezuela’s heavy oil fields. Venezuela could not afford to do it themselves, as this is very expensive. After the investments starting paying off, Chavez tore up the contracts, demanded a majority position, and doesn’t want to compensate the companies. As I wrote over at The Oil Drum:

It won’t take too long before everything is nationalized, and he has no more coffers to plunder and then must count on the revenue from the industries he has already plundered. Then, to his chagrin he finds that they aren’t producing like they used to, because he hasn’t invested in the infrastructure. But some people have this fairy-tale vision where he is just looking after the poor. That wouldn’t even be possible if not for the investments the oil companies have already made. And with his threat today to nationalize the banks, I think companies are going to be very cautious about investing money in Venezuela.

But, since he has assets in the U.S., maybe that’s a bargaining chip. And it is one I haven’t heard anyone mention in this context.

Disclaimer: I am not a disinterested party here. I own shares in one of the companies whose assets have been seized. (Then again, so do most people with a pension fund, 401K, etc.) So maybe we demand Citgo as compensation. If this goes to arbitration, that would be a position I might take. Or, to prevent it from going to arbitration, maybe Chavez might we willing to trade some U.S. refineries for assets on the ground in Venezuela.