Colombia-Venezuela

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Overview of Relations

Colombia and Venezuela have experienced a period of tension in bilateral relations over the past decade, however they remain important trading partners. The Economist reported that for both countries, the other is the second-largest trading partner (after the US in both cases) and that bilateral trade in 2008 totalled $7.2 billion. Colombian exports made up $6 billion of this, mainly food, live animals, clothing and cars.

According to the report, trade considerations have tended to ease the personal rift between former Colombian President Uribe and left-wing Venezuelan President Chavez.[1]

Between 2008-2010 relations between the two countries significantly deteriorated.[2] In July 2009 Chavez declared a "freeze" on diplomatic ties with Colombia, promising to find alternatives to Colombian goods, in response to Colombia's agreement to allow the US to use seven of their military bases for their anti-drug operations.[1]

In July of 2010 Venezuela definitively broken ties with neighbouring Colombia when Colombian President Uribe accused Venezuela of harbouring rebel forces. However a month later following the election of Juan Manuel Santos in Colombia the two leaders agreed to restore bilateral relations at a meeting in Santa Marta. President Santos has stressed that he seeks comprise, not confrontation, with Venezuela, seen as a departure from the confrontational policies of his predecessor Uribe.

According the BBC, the troubled relations between the two countries between 2008-201 cut bilateral trade by around 70%, with particularly negative effects on border cities.[2] Commenting on the closening of relations between Chavez and Santos, Alvaro Uribe was reported to have asked "President Santos, we are confused, how do you give more weight to 800 million pesos ($410,400) or 400 ($205,200) than to democratic values? Democratic values have no price."[2]

Transnational pipelines

Antonio Ricaurte gas pipeline

The Antonio Ricaurte pipeline (also known as the Trans-Caribbean Gas Pipeline) carries natural gas from Chevron's Ballena field to Western Venezuela. Venezuela's state oil company needs the imported gas in order to maintain oil output in the Maracaibo region and for use in the production of petrochemicals.[3]

The project was announced in 2003 as the first step in a major regional integration project and was inaugurated in October 2007.[4] The pipeline carries an estimated 200 million cubic feet of gas per day,[5] runs approximately 225km and started transporting gas in 2008.[6]

Originally Chavez had intended to extend the Antonio Ricaurte pipeline as far as Nicarague by 2012, but the project was delayed by delays in bringing Venezuela's offshore discoveries on stream. However in November 2011 the Venezuelan President signed an agreement with President Santos to extend the pipeline across Colombian territory to Panama and Ecuador. As of 2011 it was not clear whether the extension to Panama would run onshore or underwater along the coast. Interfax reported in 2011 that the disparity between heavily subsidized Venezuelan prices and global gas prices had in the past deterred such advances on infrastructure deals.[7]

In April 2011 there was an explosion along the pipeline, affecting a 25-metre stretch and producing a 7-metre deep crater in the Maicao area of La Guajira. Gas supply was disrupted for several days.[5]

Many press reports accused rebel group the Fuerzas Armadas Revolucionarias de Colombia (FARC) for the explosion, however energy reporter Steven Southam suggested that anti-Venezuela right-wing paramilitaries may have involved or that the explosion could have been a result of poor maintenance of the pipeline itself.[3]

Proposed pipelines

In November 2011 Presidents Chavez and Santos announced that they plan to boost trade between Venezuela and Colombia and were looking to build a transnational pipeline to carry Venezuelan oil to Colombia's Pacific coast. The pipeline project was described by President Santos as of "transcendent importance."[8]

Illegal Fuel Exports

According to reports in 2005, around 100,000 barrels of oil were illegally exported out of Venezuela every day. Much of this was destined for Colombia, where smugglers could sell the crude for ten times the price it commanded in Venezuela, due to heavy oil subsidies in the country. The border communities of Colombia were said to dependent to a significant extent on cheap, illegally imported Venezuelan fuel.[9]

A Colombian driver in the border regions interviewed by Reuters in 2011 commented that "in this region, we have illegal oil, drugs and some legitimate business. But the profit is made in illegal oil,"

In late 2010 the Venezuelan authorities implemented a system to automate gas sales, using chips in vehicles to track the number of times tanks were filled up, in an attempt to tackle the fuel smuggling. However the system was later suspended following the discovery of fraudulent chips on the market selling for around $20.[10]

Migration of PDVSA Workers 2002

In 2002, Venezuelan President Hugo Chavez fired nearly 20,000 oil workers from state-owned PDVSA after they mounted protests against him. Production in Venezuela subsequently fell dramatically. However many of the specialists who were banished from the Venezuelan industry, from geologists to managers, migrated to work in neighbouring Colombia, where they have helped to ramp up production at Colombian fields.

According to Humberto Calderon, a former Venezuelan mining minister who now runs Vetra Energy in southern Colombia, "Chávez has been a huge help for the petroleum industry in Colombia".[11] While Venezuela went from being the world's fifth-largest exporter to the 11th largest in 2011, Colombia raised its production output from just over 500,000 barrels per day (bpd) in 2005 to nearly 1 million bpd in 2011. One of the sacked oilmen, Ronald Pantin, went on to become CEO of Pacific Rubiales.[12]

References

  1. 1.0 1.1 Politics versus trade”. Economist, 10 September 2009.
  2. 2.0 2.1 2.2 Politics versus trade”. BBC, 11 August 2010.
  3. 3.0 3.1 Colombia-Venezuela gas pipeline blows up, stupid speculation flows freely”. Setty's Notebook, 28 March 2011.
  4. FARC attacks Trans-Caribbean gas pipeline”. CorpWatch, 5 June 2008.
  5. 5.0 5.1 Crossing the Wayúu: Pipeline Divides Indigenous Lands in South America”. Intelligence Quarterly, 5 June 2008.
  6. South America snapshot”. Pipelines International, September 2009.
  7. Proposed pipeline extension is boon for Venezuela’s regional ambitions”. Interfax, 29 November 2011.
  8. Venezuela, Colombia Leaders Discuss Oil Pipeline”. Energy Tribune, 29 November 2011.
  9. Ministry to regulate fuel exports, prevent smuggling ”. Business News Americas, 15 March 2005.
  10. World's lowest gas prices fuel Andean smuggling”. Reuters, 10 June 2011.
  11. Venezuelan oilmen behind Colombia's boom”. Seattle Times, 1 October 2011.
  12. Venezuelan Know-How Fuels Rise Of Colombian Oil”. NPR, 16 September 2011.