Venezuela's National Assembly Tuesday passed a new oil windfall tax in the latest blow by President Hugo Chávez to foreign oil companies operating in this oil-rich Andean nation. The tax is expected to net the government about $760 million a month or more than $9 billion a year, Venezuela's Oil Minister Rafael Ramirez said Tuesday shortly before the congressional vote.
The levy kicks in when the price of benchmark Brent crude sits above $70 a barrel. If oil prices are above that threshold for one month, the state will take 50% of the difference between this average and the final sale price of every barrel. When Brent crude exceeds the $100-a-barrel average, the rate will rise to 60%. Passage of the bill reflects how the continuing rise of high oil prices creates temptation for governments of oil-producing nations to capture more of the windfall profits that private companies reap. Global oil prices hit a record above $113 a barrel Tuesday.
The tax will affect companies ranging from state-oil firm Petróleos de Venezuela, or PDVSA, to its foreign partners like France's Total SA, Norway's StatoilHydro ASA, Britain's BP PLC, and U.S.-based Chevron Corp. The tax is expected to become effective this week, as soon as the approval is published in the country's official gazette. Mr. Chávez's moves against big oil have prompted some firms, like Texas-based Exxon Mobil Corp. to pull out of Venezuela. But other companies that have stuck it out are likely to continue, viewing Mr. Chávez's action as the price of having access to Venezuela's rich deposits.
The windfall tax is also a sign of how eager Mr. Chávez is to get more money ahead of municipal and gubernatorial elections later this year. Venezuelan lawmakers passed the bill just two days after Mr. Chávez told them his government urgently needed the money. Despite rampant spending by his government, Mr. Chávez's popularity has slipped in the past year because many ordinary Venezuelans see little improvement in their lives from all the money. Price controls designed to offset inflation from Mr. Chávez's spending have also led to food shortages that have angered his supporters.
The tax is the latest headache for foreign firms under Mr. Chávez. Since he took power in 1999, the president has changed the rules for the oil sector several times, including forcing foreign companies to accept only a minority stake in all of their local ventures.
Will Chavez be able to buy his cronies wins in the next round of elections with his additional revenues? It will be interesting to watch. Meanwhile, there are interesting developments in Asia as well. In Nepal, the newly elected Maoists, while promising a further move away from the country's monarchic roots, are saying that they now welcome foreign investment and industrial capitalism while promising that nothing will be nationalized or socialized. At this rate, they'll be quoting Ayn Rand at press conferences, maybe. With Raul Castro allowing all sorts of capitalist filth to pollute the dignity of the Cuban people, it sure is hard to find an honest-to-goodness Marxist-Leninist regime in this decadent age. Chairman Mao is surely rolling in his grave given the activities of these capitalist roaders. From the Financial Times:
’s Maoists, poised to win a clear majority in the country’s constituent assembly, will work with other parties to set up a federal democratic republic with a capitalist economy, a party leader told the Financial Times on Wednesday. Nepal
“We are fully committed to building a good coalition with other political forces,” said Baburam Bhattarai, who as a member of the central secretariat of the Communist party of Nepal (Maoist) is seen as the group’s number two leader and a likely candidate to be prime minister. “Our understanding is that the [constituent assembly’s] main function is to draft a new constitution,” he said in an interview. “For that, we would need political consensus [and] we will have to work with other political forces.”
As of Wednesday, reported results gave the CPN (M) 119 of 239 directly elected district seats, with results yet to come in from about 20 more. Voting has been put off in one, following the murder of a candidate. The Maoists were also well positioned for a large share of 335 seats to be awarded on a proportional basis. The assembly will have 26 members appointed by the government. Candidates from the current prime minister’s Nepali Congress party had won in 32 districts and the other large Communist party, the UML, had won in 30. A new regional party representing the restive Terai southern plains was in fourth place.
“Our immediate agenda is not to build socialism, but to build a strong economic foundation . . . to develop industrial capitalism, to abolish all remnants of feudalism,” said Mr Bhattarai, who is an architect by training. He said the next government’s main challenge would be to prevent “reactionary forces” from creating instability, and meeting popular expectations for rapid economic development. Almost 30 per cent of
’s 27m people live in absolute poverty or on less than $1 a day. The Maoist leader said his party would welcome both domestic and foreign investors. Nepal
“There will be full scope for the private sector and nothing will be nationalised or socialised,” he said. “There is no reason to panic.” Mr Bhattarai said his party was convening a meeting on Wednesday with businessmen and industrialists.