Hugo Chavez, the rebellious President of Venezuela, and devotee of Fidel Castro has kept his promise to cut Exxon-Mobil's supply of oil from Venezuela.
Venezuela's state oil company announced Tuesday that it has stopped selling oil to Exxon Mobil Corp. This is in response to the oil company's successful drive to use the courts to seize billions of dollars in Venezuelan assets.
Exxon Mobil is engaged in a dispute over nationalization of oil ventures it funded in Venezuela. The dispute led President Hugo Chavez to threaten to cut off all Venezuelan oil supplies to the United States.
Venezuela is currently the United States' fourth largest oil supplier. Chavez, a very radical leader, has been shown in past months with the President of Iran, at a conference of the two leaders over their declared economic war against the US.
Tuesday's announcement was limited to Exxon Mobil, which PDVSA (state-run Petroleos de Venezuela SA) accused of "judicial-economic harassment" for its efforts in U.S. and European courts.
Venezuela "has paralyzed sales of crude to Exxon Mobil" and suspended commercial relations with Exxon-Mobil.
PDVSA said it will honor existing contracts it has with Exxon Mobil for joint investments abroad. However, it reserved the right to terminate those contracts if permitted by the terms.
It would appear the US is heading for a political show-down with Mr. Chavez, a confrontation of serious magnitude. The economic war he and Mahmoud Ahmadinejad are waging are having striking effects on the US economy. Clearly, without confrontation on this by the Bush Administration, both Venezuela and Iran are winning. Summer will see a sharp increase in oil prices, probably well over $100 a barrel, with an average price per gallon creeping up on, if not surpassing $5 at the pump. The effect of that on the economy, as it is could spell serious disaster.
Was Exxon-Mobil correct to bring legal action? We, and the courts, believed so, and that Chavez acted with aggression in nationalizing assets paid for by Exxon-Mobil.
