Andy Webb-Vidal in Caracas wrote a Financial Times article War of words between Chavez and US heats up (subscription required) about the continuing escalation of rhetoric between Venezuela and the United States.
“I will sting those who rattle me, so don’t mess with me, Condoleezza,’’ he said, blowing Ms Rice a kiss during his Sunday television programme.
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“Relations with the US are deteriorating and they are going to get worse,’’ says Adolfo Salguiero, an international relations analyst in Caracas. “At some point this year we could well face a grave diplomatic crisis as Chavez attempts to rally nationalist sentiment ahead of the election.’’
Mr Chavez, who has been in power for seven years, recently reiterated his prediction of an inevitable showdown with the US. He may be right. US officials have in recent weeks determined that the Venezuelan president is not only their top political irritant in the region, but that he is also undermining US interests.
At some point, this situation will come to a head. Venezuela is important to the U.S. because of the amount of crude imported to the country. The U.S. is important to Venezuela because it owns refineries in the U.S. that are specifically designed to process Venezuelan heavy crude. Should Venezuela want to sell its crude elsewhere, it will have to ship its crude further, increasing its costs, and find refineries or build refineries that are capable of processing the crude. The U.S. would, in turn, have to find crude from other sources. It would like import heavy crudes from the Middle East.
I have highlighted the Venezuelan situation before. While I do not believe that there is an imminent threat, I do believe that the situation is becoming worse. I am not sure what a worst case scenario would look like. Because both parties appear to need each other, perhaps a worst case scenario would not be that traumatic. That said, Venezuela is not motivated to keep world oil prices at lower levels. It is one of the more hawkish members of OPEC. In summary, I think the Venezuelan situation is worthwhile monitoring.
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