Bush Nominee Says Chavez Serious About Oil Cutoff

Bush Nominee Says Chavez Serious About Oil Cutoff
Thomas A. Shannon, the choice for top envoy for Latin America, tells senators that Venezuela is determined to find an alternative market.
By Paul Richter
Times Staff Writer

September 22, 2005

WASHINGTON — Venezuelan President Hugo Chavez is not just bluffing when he threatens to cut off the huge volume of oil his country sells the United States, the Bush administration's nominee to be top U.S. diplomat for Latin America said Wednesday.

Although it would be difficult for Venezuela to halt the flow soon, Chavez does want an alternative market so he will not be subject to adverse decisions by the U.S. government, with which he is increasingly at odds, Thomas A. Shannon said at his Senate confirmation hearing.

"In the short term, it's a hollow threat," Shannon, who has been nominated to be assistant secretary of State for Western Hemisphere affairs, told the Senate Foreign Relations Committee. Yet, he added, "we do believe that the Venezuelan government, over the long term, is concerned that this relationship … limits its political flexibility."

Venezuela is the fourth-largest oil supplier to the United States, and a cutoff of the 1.4 million barrels it supplies per day could sharply raise prices and would also be a setback for U.S. efforts to reduce dependence on oil from the Middle East.

Venezuela sells about two-thirds of its crude oil to the United States, shipping it to Venezuelan-owned refineries in the U.S. and then selling it through the Citgo gas station chain, a subsidiary of its state-owned oil company.

Many analysts have portrayed Chavez's threats as bluster, saying that because of the proximity of the two countries and the value of Venezuela's distribution network here, it would be costly and inefficient for Caracas to seek another market.

One private analyst, Daniel P. Erikson of the Inter-American Dialogue think tank in Washington, said the oil relationship, though awkward amid the current friction, actually benefits Chavez by restraining U.S. officials from taking strong action against Venezuela.

The nation's current role as a huge U.S. supplier "acts as a buffer on U.S. action," he said. "If Venezuela had a smaller trade tie, it would give wider latitude to U.S. policymakers."

Erikson said he was skeptical that Venezuela could find another market that would give it the same economic benefits as the United States. Although China has expressed an interest in Venezuelan oil, the Chinese can develop oil ties with African countries, which are much closer geographically and would offer substantially lower transportation costs.

Shannon, a soft-spoken career foreign service officer, is expected to be confirmed for his new job at a time when U.S.-Venezuelan relations figure prominently on the U.S. diplomatic agenda in the region.

Chavez portrays the United States as a bully, whereas U.S. officials contend that he has damaged democratic institutions at home and, through support of radical groups, threatens to destabilize neighboring governments.

Shannon said Chavez's regular rhetorical attacks on the United States reflected his desire to build support at home and in the region.

"This is a discourse that we do not seek out, and it is discourse we would not like to have to deal with," he said.

But he said U.S. officials needed to respond to Chavez's attacks on the formula of free trade and democratic governance that the United States had been prescribing for the region. "It is something we should be prepared to talk about," he said.

Asked by Sen. Bill Nelson (D-Fla.) whether he could repair the relationship with Venezuela, Shannon replied: "Sir, as in so much, this depends on Hugo Chavez."

Shannon acknowledged that the United States faced a growing challenge in the region because the U.S. free-trade formula had failed to deliver higher living standards for many, leading in recent years to an increasing drift toward left-leaning governments.

Shannon, now a senior official for Latin affairs at the National Security Council, would succeed two officials, Roger Noriega and Otto J. Reich, who have been strong opponents of the Castro government and favorites of conservative Cuban Americans in Florida.

Some Cuban Americans have expressed concern that the 21-year foreign service veteran does not have the ideological commitment of his predecessors, but Shannon declared that he would carry out President Bush's policy of "standing up to tyranny" in Cuba.