Venezuela nationalizes oil industry, leaves IMF, World Bank (Roundup)

May 1, 2007, 17:19 GMT

Caracas - Thousands of Venezuelan workers stormed foreign- operated oil fields in the country Tuesday to celebrate the nationalization of the world's fifth-largest oil industry, timed to coincide with the traditional workers' holiday May Day.

The nationalization, decreed by leftist President Hugo Chavez in February, comes as Venezuela on Monday evening said it would pull out of the World Bank and International Monetary Fund (IMF). Chavez called the development agencies 'instruments of US imperialism.'

The Venezuelan military was sent to occupy oil fields across the eastern Orinoco Basin, while workers clad in red T-shirts emblazoned with 'Yes to Nationalization' overtook the fields shortly after midnight Tuesday.

The Orinoco Basin, 600 kilometres long and 70 kilometres wide, stretches along the Orinoco River in eastern Venezuela and is believed to hold the world's largest crude oil reserves. Venezuela says it could hold as much as 370 billion barrels, compared with the country's current oil reserves of about 80 billion barrels.

Foreign companies operating in the region have been forced to hand over control of the oil fields to state-owned Petroleos de Venezuela (PDVSA) and accept a minority stake in so-called joint ventures. US firms Exxon Mobil and Chevron, France's Total, British Petroleum and Norway's Statoil have agreed, while a deal is still being worked out with US company Conoco Phillips.

The international oil firms have been part of four strategic associations that have carried out substantial investments since the 1990s to set up technology able to convert heavy oil in the Orinoco Basin into a lighter, better-quality variant.

The associations currently produce some 600,000 barrels of oil per day, and already pay 33.33-per-cent royalties and 50-per-cent income tax on each barrel.

About 20 foreign firms have accepted the government's joint- venture offer and none will hold a majority stake. More than half of Venezuela's exports go to Chavez's declared political enemy, the United States.

Beginning his second term in office this year, Chavez quickly moved to nationalize the country's oil, gas and telecommunications industries. He was granted unprecedented rights to govern by decree, building on a strong electoral mandate to push through his self- styled 21st Century Socialism.

Venezuela has had little contact with the World Bank and IMF since Chavez first took office in 1999 and the IMF had already closed its office in Caracas last year. Venezuela announced at the beginning of April that it had paid back its debts to both agencies.

The IMF has a spotty history in Venezuela. Budget cuts pushed by the IMF on the Venezuelan government in 1989 led to protests and violence that was aggressively put down by police and armed forces, claiming 300 lives.

Chavez also on Monday threatened to pull out of the Organization of American States, as the pan-American bloc was considering sanctioning Venezuela for not extending the license of an independent television network that favours the opposition.

Venezuela's oil nationalization plan parallels Bolivia's steps last year to commandeer tighter control of its natural gas resources.

Last year on May 1, Bolivian President Evo Morales - a close ally and friend of Chavez - made a surprise move, decreeing a nationalization of the small Andean country's natural gas reserves, the second largest in South America after Venezuela's.

The Bolivian government renegotiated contracts with foreign companies, boosting state revenues for Morales' own social programmes.

Another Chavez ally, Ecuador President Rafael Correa, has warned that his oil-rich country plans to review all contracts for oil exploration on its territory and may cancel some deals.

In May 2006, before Correa became president, the government in Quito cancelled a deal with US oil giant Occidental over alleged contract violations. The move prompted a suspension of negotiations toward a free trade agreement with the United States.