Bolivia’s Nationalization Bolivia’s Nationalization of Natural Gasof Natural Gas

By: Andrew Switkay, Ed Wons, Andrew Mong, By: Andrew Switkay, Ed Wons, Andrew Mong, Dillon FarrellDillon Farrell

Energy in South Energy in South AmericaAmerica

Economic growth in recent years is partially Economic growth in recent years is partially driven by rising prices for commodities such driven by rising prices for commodities such as oilas oil

Only significant exporters of gas are Only significant exporters of gas are Venezuela, Bolivia, and EcuadorVenezuela, Bolivia, and Ecuador

State intervention threatens production levelsState intervention threatens production levels

Lack of cooperation could slow economic Lack of cooperation could slow economic growthgrowth

Natural Gas vs. OilNatural Gas vs. Oil

One barrel of crude oil has about 6x the One barrel of crude oil has about 6x the energy content of 1000 mcf of natural gasenergy content of 1000 mcf of natural gas

Natural Gas is cleaner, safer and more usefulNatural Gas is cleaner, safer and more useful

Lower air emissions, very little water used, no Lower air emissions, very little water used, no dirty water discharge, no substantial amount dirty water discharge, no substantial amount of solid wasteof solid waste

Natural Gas in South Natural Gas in South AmericaAmerica

Bolivia has 2Bolivia has 2ndnd largest natural gas reserve largest natural gas reserve

Resource nationalization troubles the ability Resource nationalization troubles the ability to supply gasto supply gas

Argentina is now dependent on gas imports Argentina is now dependent on gas imports from Boliviafrom Bolivia

BoliviaBolivia 2002 – estimated 54.8 trillion cubic feet2002 – estimated 54.8 trillion cubic feet 2007 – estimated 31.5 trillion cubic feet2007 – estimated 31.5 trillion cubic feet

Brazilian Gas Brazilian Gas ConsumptionConsumption

1010thth largest energy consumer in the world largest energy consumer in the world

Imports 40% of its natural gasImports 40% of its natural gas

Motor vehicles beginning to rely on natural Motor vehicles beginning to rely on natural gasgas

Increasingly high demandsIncreasingly high demands

NationalizationNationalization May 1May 1stst, 2006, 2006

Morales ordered military to occupy energy Morales ordered military to occupy energy installationsinstallations

53 energy installations occupied53 energy installations occupied

Brazil’s Petrobras Co.Brazil’s Petrobras Co.

Silas RodeauSilas Rodeau

Bolivian VP Garcia- est revenue jump to $780 Bolivian VP Garcia- est revenue jump to $780 millionmillion

Along with Petrobras; Repsol YPF, BG Group PLc, Along with Petrobras; Repsol YPF, BG Group PLc, & TOTAL are major gas Co’s in Bolivia& TOTAL are major gas Co’s in Bolivia

October 28October 28thth, 2006 agreement, 2006 agreement

AgreementAgreement Bolivian goal was to raise revenue Bolivian goal was to raise revenue

shares from major fields from 60% shares from major fields from 60% to 82%to 82%

Much resistance from Much resistance from Petrobras Co.Petrobras Co.

Copied ChavezCopied Chavez

Geopolitical EffectsGeopolitical Effects• During early 1990’s, Argentina privatized their During early 1990’s, Argentina privatized their

state-owned energy companystate-owned energy company• Becoming energy dependentBecoming energy dependent• Prices will risePrices will rise

• Southern Gasoduct could help lower Argentina Southern Gasoduct could help lower Argentina dependencydependency

Geopolitical EffectsGeopolitical Effects Brazil uneasy about Brazil uneasy about

the role of Chavez in the role of Chavez in BoliviaBolivia Causing Brazil to Causing Brazil to

take the backstage take the backstage to Boliviato Bolivia

Tensions raise Tensions raise between Bolivia and between Bolivia and PetrobasPetrobas

Geopolitical EffectsGeopolitical Effects

Bolivia’s nationalization involves riskBolivia’s nationalization involves risk Loss of foreign investmentsLoss of foreign investments

Petrobas has created complications between Petrobas has created complications between regions rather than collaborationregions rather than collaboration

Strengthened relations between Bolivia, Strengthened relations between Bolivia, Venezuela, and CubaVenezuela, and Cuba

Weakened relations between Brazil and Weakened relations between Brazil and Argentina, Argentina and BoliviaArgentina, Argentina and Bolivia

Implications for Implications for WashingtonWashington

Traditionally concerned with coca productionTraditionally concerned with coca production Relationships with Peru and ColombiaRelationships with Peru and Colombia

Bolivia’s combating illegal drugsBolivia’s combating illegal drugs

Bolivia’s increase in ties with Venezuela and Bolivia’s increase in ties with Venezuela and CubaCuba

Bolivian’s nationalizationBolivian’s nationalization

Turning down the FTAATurning down the FTAA ALBA alternative (Chavez’s)ALBA alternative (Chavez’s)

Economic ImplicationsEconomic Implications

Rise of UNASURRise of UNASUR•Treaty signed on May 23, 2008Treaty signed on May 23, 2008•Brought together two existing trade blocs Brought together two existing trade blocs (Mercosur & CAN)(Mercosur & CAN)•12 member Union12 member Union•Largest economic, monetary and political alliance Largest economic, monetary and political alliance in the worldin the world•Promotion of South American regional integrationPromotion of South American regional integration

GoalsGoals•Single MarketSingle Market•Development of international infrastructureDevelopment of international infrastructure•Common Defense PolicyCommon Defense Policy

enhancing multilateral military cooperation, enhancing multilateral military cooperation, promoting confidence and security building measures promoting confidence and security building measures fostering defense industry exchangefostering defense industry exchange

•Free movement of visitors & migrant workers among member Free movement of visitors & migrant workers among member nationsnations

Emerging Geopolitical Emerging Geopolitical ForceForce

•One of the Western Hemisphere’s leading One of the Western Hemisphere’s leading multilateral bodiesmultilateral bodies•Combination of countriesCombination of countries‘‘GDPs would reach more GDPs would reach more than $2.3 trillion: 7than $2.3 trillion: 7thth in the world. in the world.•Brazil at the center of UNASUR momentum Brazil at the center of UNASUR momentum •Undermines the Undermines the OAS OAS

•"In a world overpopulated with agencies that generally do not fulfill "In a world overpopulated with agencies that generally do not fulfill the objectives for which they were created, UNASUR became very the objectives for which they were created, UNASUR became very useful and, in addition, laid bare the ineffectiveness of the OAS, an useful and, in addition, laid bare the ineffectiveness of the OAS, an entity that since its creation has operated at the service of US interestentity that since its creation has operated at the service of US interestss””

Late Argentine President Nestor Kirchner Late Argentine President Nestor Kirchner

UNASUR Backs MoralesUNASUR Backs Morales

•2008 Attempted coup of Bolivian President Evo 2008 Attempted coup of Bolivian President Evo MoralesMorales•Emergency meeting in Santiago by Chile president Emergency meeting in Santiago by Chile president Michele BacheletMichele Bachelet•Condemned violence and attacks against Bolivian Condemned violence and attacks against Bolivian democracydemocracy•Created commission of Created commission of ““support and assistancesupport and assistance”” to to Bolivian governmentBolivian government•OAS not involved in peaceful resolutionOAS not involved in peaceful resolution

Brazil’s RoleBrazil’s Role•As one of the major actors of UNASUR, Brazil As one of the major actors of UNASUR, Brazil successfully used it as a regional mechanism that has successfully used it as a regional mechanism that has helped to smooth relations with Boliviahelped to smooth relations with Bolivia•Lula’s close relationship with Evo MoralesLula’s close relationship with Evo Morales

"For the first time in South America's history, "For the first time in South America's history, the countries of our region are deciding how the countries of our region are deciding how to resolve our problems, without the to resolve our problems, without the presence of the United States.” presence of the United States.”

-Evo Morales-Evo Morales

QuestionsQuestions

Do you think the nationalization of Bolivia’s Do you think the nationalization of Bolivia’s natural gas will ultimately lead to economic natural gas will ultimately lead to economic and political stability?and political stability?

Do you think it is possible for the United Do you think it is possible for the United States to regain some of its influence in Latin States to regain some of its influence in Latin American countries prior to UNASUR?American countries prior to UNASUR?

SourcesSources

http://www.cfr.org/energy/energy-bottlenecks-south-america/p16037

http://www.globoscope.ru/eng/content/articles/354/

http://www.thefreelibrary.com/UNASUR+comes+into+its+own,+sets+example+of+Latin+American+diplomacy.-a0246536239

http://www.coha.org/brazil-and-unasur-regional-security-and-the-nation%E2%80%99s-world-sanding-in-the-era-of-rousseff%E2%80%99s-rule/

http://www.boliviainfoforum.org.uk/inside-page.asp?section=3&page=33http://www.boliviainfoforum.org.uk/inside-page.asp?section=3&page=33

https://docs.google.com/viewer?a=v&q=cache:g4ubF6GoqdsJ:www.thedialogue.org/https://docs.google.com/viewer?a=v&q=cache:g4ubF6GoqdsJ:www.thedialogue.org/PublicationFiles/Shifter-CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3-PublicationFiles/Shifter-CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3-zDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFczDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFcMKiKt7LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6SMKiKt7LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6Sy6cAy6cA

http://www.cepr.net/index.php/blogs/cepr-blog/unasur-emerging-geopolitical-force/http://www.cepr.net/index.php/blogs/cepr-blog/unasur-emerging-geopolitical-force/