The politics of oil and gas…and people’s lives

Jan 11, 2009 Features / Columnists, Ronald Sanders

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By Sir Ronald Sanders

Two Thousand and Nine started with arctic temperatures in Europe. The cold grip in many parts of Europe was worse because of a row between Russia and the Ukraine over natural gas.

Russia cut gas supplies to Ukraine early in January in a dispute over pricing and an allegation that Ukraine was not only not paying its bills but stealing gas as well. The countries of the European Union (EU) depend on Russia for about a quarter of their total gas supplies, some 80% of which is pumped via Ukraine. Tens of thousands of homes were left without heating.

At the time of writing, Russia says that it will resume gas supplies to the EU countries if monitors are sent to the Ukraine, but no date has been set and, as temperatures plunge to minus 10 degrees centigrade, people may die in many countries in Europe, particularly those that were once part of the Soviet Union and who are almost entirely dependent on Russian gas for heating.

This issue is not only about the price of gas. Four years ago, an anti-Russian regime won power in Ukraine and Russia accused it of supplying arms to Georgia last August when Russia and Georgia warred over South Ossetia. Georgia had launched a military strike on the province in an attempt to reclaim it after 16 years of semi-independence – a move the Russians regarded as presumptuous.

Russia pushed Georgian troops back into Georgia but vowed at the time to teach the Ukraine a lesson.
It can’t be discounted that, in cutting off the gas supply to EU countries through Ukraine, the Russian government is underscoring EU dependence on Russian gas, and sending a warning against policies of which it disapproves. Among these would be the expansion of EU membership to include former members of the Soviet Union that share borders with Russia.

In the same week, Venezuela’s President, Hugo Chavez, seemed unable to make up his mind whether to continue donating heating oil to poor families in the US. First, he cut off supply, then he reinstated it after his “god father” image took a beating in the international media.

Chavez introduced the programme four years ago when oil prices were relatively high and he was in full flight in his virulent attacks on the US President George W. Bush and the American government.
According to the Associated Press, Venezuela supplies fuel to 200,000 households in 23 states and 65 Native American tribes – last year alone the value of these supplies was put at $100 million.

Now that the price of oil has dropped almost 70% from its high last July, PDVSA, the state-owned oil company, which Chavez uses to dispense largesse in support of his Bolivarian Socialist Revolution, can not afford these gifts.

Chavez is faced with the possibility of devaluing the Venezuelan currency – a measure he seems to be postponing until a referendum is held in February, the result of which he hopes will allow him to extend the term of his Presidency.

Also at risk is the PetroCaribe programme to which several Caribbean countries are signatories. Chavez has reportedly cut back on oil production as part of an agreement by the Organisation of Petroleum Exporting Countries (OPEC) to force-up the price of oil.

But, projections indicate that, with the demand for oil dropping in several major countries, including China and India, in the face of the international financial crisis, oil prices will not reach their earlier high levels in a hurry if at all.

The Caribbean governments that signed up to PetroCaribe and who have predicated some of their social development projects on the back of promises made by Chavez may find themselves scrambling for financing from elsewhere if they can get it.

Amid all this, an important book on the politics of oil and gas in the Caribbean has been produced by Wendell Mottley, a former Finance Minister of Trinidad and Tobago and now a New York-based investment banker.

The book, modestly entitled “Trinidad and Tobago: Industrial Policy 1959-2008”, is a masterly account of the role that oil and gas has played in the economy of Trinidad and Tobago, and the role it has failed to play in developing the country’s human resources, healing its ethnic divisions and ensuring against potential conflict in the future.

For instance, Mottley makes the point: “In Trinidad, a useful reality check is the ratio of the output of the educational system to employment in the energy sector. Every year, the country graduates 19,000 students from its high schools. Based on the most optimistic expansion of the oil, gas, chemicals and other process industries, only 1,780 of these students will be absorbed by these industries every year. The remaining 17,220 students must be placed elsewhere…in the real Trinidad and Tobago”.

And, the “real Trinidad and Tobago” is one in which of the labour force of 625,900 approximately one-quarter or 159,000 persons “may be poorly equipped to earn a living in (the) twenty-first century”.
Mottley also warns that “the projected large revenue streams (from oil and gas) over the next 20 years could be interrupted by the eruption of destructive social forces caused by the country’s dual development paths”.

He deals too with the petro-diplomacy between Trinidad and Tobago and Venezuela as both countries seek strong influence over neighbouring states in the Caribbean. And, he asks the question: “Is Venezuela, through PetroCaribe, seeking to turn, and can it succeed in turning, the Caribbean into vassal states, tied to one energy source, and sinking daily further into unrepayable debt?”

Mottley’s book, published by Ian Randle in Jamaica, also gives a revealing insight into the maritime dispute between Barbados and Trinidad and Tobago – allegedly over fishing, but really over petroleum as he confirms.

These events so early in 2009 indicate that the politics of oil and gas will continue to play an important part not only in relations between States but in the lives of ordinary people.
(The writer is a business consultant and former Caribbean diplomat)
Responses to: [email protected]

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