Journalist | Writer | Analyst
17 December 2004
Inside Venezuela IV
Venezuela-India ties to centre around oil
By Siddharth Varadarajan
Caracas: With the Venezuelan President, Hugo Chavez, due to visit New Delhi in February, the stage is set for the establishment of a fruitful bilateral relationship between the two countries, centred around oil, of course, but not necessarily limited to it.
Four years ago, ONGC Videsh Ltd. and the Venezuelan oil company, PDVSA, nearly clinched a deal involving the Indian public sector unit operating at least six promising or proven oil blocks. When the memorandum of understanding was signed in 2000, it marked the first time Venezuela had offered oil concessions to a foreign company outside the international tendering procedure. For ONGC, which has been looking at diverse oil extraction opportunities around the world, the $50 million Venezuelan deal made good sense. Despite the distance involved, ONGC could have either sold the crude in a swap deal or even shipped the oil to India at a reasonable cost since many West Asia-based tankers return empty after discharging their cargo at ports on the Atlantic seaboard. Indeed, Reliance today finds it worthwhile to source crude for its Jamnagar refinery from both Venezuela and Brazil, say Indian officials.
Negotiations with PDVSA reached the stage where ONGC was sent a confidentiality agreement — usually the penultimate stage before the facilities are actually handed over — but the Venezuelans suddenly changed their mind. Ali Rodriguez, who was then head of PDVSA, told the Indian side that new OPEC restrictions on output meant Venezuela was not in a position to boost production.
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Though the scrapping of the deal was a setback, the failure of India and Venezuela to agree to a set of dates for the visit of Mr. Chavez has been another source of irritation since 2001.
On the basis of bilateral consultations, the Venezuelan President was due to visit New Delhi in the summer of 2001. However, due to some misunderstanding, Mr. Chavez was informed only about a week before his departure that the trip could not take place. The Vajpayee Government subsequently sent the late Murasoli Maran, then Commerce Minister, all the way to Caracas to mollify Mr. Chavez and invite him to be chief guest at the January 2002 Republic Day function. But even this was not to be. Barely a week before January 26, the Venezuelans sent word that their leader would be unable to come, sending New Delhi scrambling to find a replacement.
After much confabulation, the two foreign offices have finally settled on February 2005 but the dates still have to be cleared by the PMO. In the run-up to the visit, New Delhi has reminded Caracas of its old commitment to ONGC. According to Venezuelan officials, the President has asked Mr. Rodriguez, who is now the Foreign Minister, and Rafael Ramirez, Oil Minister and PDVSA head, to examine the prospects of a fresh deal. Of course, if the dates for Mr. Chavez’s trip are not cleared, or if the trip is cancelled again, India and Venezuela can pretty much forget about doing business with each other for the time being. Which would be a great pity considering both countries have an interest in South-South cooperation and the creation of a world order that is not unipolar.
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For India, a strong economic partnership with Venezuela would complement its other proposals in South America. Apart from the Indian-Brazil-South Africa (IBSA) initiative, New Delhi has been pursuing framework agreements for free trade with the Mercosur countries (Brazil, Argentina, Uruguay and Paraguay), as well as Chile.
But progress has been painfully slow. Though India’s trade with the Latin American region has increased by 87 per cent during the last five years and stands at $2.6 billion, its share in the region’s total trade is a mere 0.48 per cent. India exported $1.5 billion to Latin America in 2003-04 — a mere drop in the ocean considering that the region’s import bill for the same period was $330 billion. In contrast, China’s trade with the region stands at $29 billion.
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