Bolivian seizure of oil, gas fields worries foreign governments

The Guardian reports that Mr. Morales announced the seizure at a natural gas field operated by a Brazilian company, saying "The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources."

Speaking [Monday] at the San Alberto gas field in the south-east of the country, he ordered the military, including "battalions of engineers", to take immediate control of energy fields. All companies were told to turn production over to the state's Yacimientos Petroliferos Fiscales Bolivianos company, which used to produce the country's natural gas, but was reduced to an administrative capacity in the mid-1990s after Bolivia's gas exploration and production business was privatised. Those that refused to obey the decree would have to leave the country within six months.

Mr Morales said the state would also recover Bolivian hydrocarbon companies that were privatised in the 1990s. Foreign companies will be reduced to operators.

The Associated Press reports that Mr. Morales moved to allay foreign objections to the announcement in an appearance on Venezulan television Tuesday, saying "We're not expelling any company, but they will not earn much ��� not like before." But while expressing hope that the companies will work with the Bolivian government, he warned that "if they don't respect these laws, we'll make them respect them with political force."

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Agence France-Presse reports that Vice President Alvaro Garcia Linera said, "The (international gas) companies are going to keep making money, but now theirs will be normal profits. Before the decree, operating in Bolivia was like winning a lottery because their profits were abusive."

The Times of London reported that a Bolivian embassy official said, "In the end, the companies will understand these new rules help Bolivia and make it more stable. They should not be scared." However, the official said that, should foreign companies lose their assets to Bolivia, "I don't think they'll be compensated."

The Financial Times reports that one of Morales' main campaign promises was to nationalize natural gas, especially since such nationalization was supported by 95 percent of Bolivians in a 2004 referendum.

"Politically, this is a very astute move," said José Mirtenbaum of Gabriel Rene Moreno university in Santa Cruz. "Evo is trying to correct some of his failures in other policy areas, such as coca, education and health."

However, the Times notes that Morales's move, which mirrors Venezuelan President Hugo Chávez's seizure of foreign-run oil fields in early April, will have ramifications across South America.

...Mr Morales' decision will make regional politics in general more polarised. Mr Chávez and the lure of his resource-based populism seems to cast an ever longer shadow over the string of elections due to take place in the region over the next few months.

In Peru, Mr Chávez is backing a radical nationalist - Ollanta Humala - in a second round run-off due to take place later this month. Last week he even threatened to break off diplomatic relations with Lima if Alan Garcia, the more moderate of the two, triumphs.

In Mexico, which faces presidential elections in July, Mr Chávez's influence is very limited. Even so, Felipe Calder���n, the centre-right candidate, has risen in opinion polls after accusations that the leftwing front-runner, Andrés Manuel Lopéz Obrador, is close to Mr Chávez.

Ecuador, which goes to the polls in November, last month imposed a 50 per cent windfall tax on oil revenues and, although politics is highly fragmented, Mr Chávez has links to one leftwinger who has been prominent in the polls - the former finance minister, Rafael Correa.

Financially, Morales's decision particularly affects Brazilian energy company Petrobras and Spanish-Argentine energy company Repsol, and those financial effects in turn threaten Bolivia's relations with Brazil and Spain. Knight Ridder reports that Brazil, which has been both Bolivia's ally and its biggest gas market, said " it will take the necessary steps to defend the interests of Petrobras." Petrobras, part-owned by the Brazilian government, is the biggest gas producer in Bolivia. The Brazilian press, meanwhile, are portraying the seizure as a betrayal by Morales.

"The Brazilian press is baffled and furious," said one Brazilian official who asked for anonymity because he did not have authorization to speak publicly. "The press is showing images from past statements by Evo that he would protect Brazil's investment to say that he lied. This is becoming an internal issue in Brazil."

Reuters reports that the move personally blindsided Brazil's President Luiz Inacio Lula da Silva, who has been attempting to position his country as a strong regional leader.

Bolivia's action could lead Lula to re-evaluate his foreign policy so as not to dent his standing before the October presidential election, analysts said.

Lula had considered Morales an ally in forging a moderate alliance of leftist-leaning governments to counterbalance the interests of rich countries, such as the United States.

Washington, which has watched the leftward trend warily, had hoped the pragmatic Lula would act as a moderate force to counter the influence of its current bete noir, Venezuelan President Hugo Chavez, and its traditional foe, President Fidel Castro of Cuba.

"It's a serious setback to Brazil's foreign policy, which was based on a false vision of South American integration," said Jose Botafogo Goncalves of the Cebri foreign relations institution in Rio de Janeiro.

"What we know does not augur well," said [Foreign Ministry official Bernadino Leon]. "But we hope that the process will allow companies to stay in Bolivia in a reasonable manner."

He said the delegation would travel to Bolivia in the next few days....

Leon said Spain would "act firmly and prudently" but added the "ball was now in Bolivia's court."

The International Herald Tribune reports that foreign gas companies like Spain's Repsol may have little recourse other than to accept the terms of Bolivia's nationalization.

"For companies to pull out would be precipitous," said Dan O'Brien, an analyst with Economist Intelligence Unit who studies Spain. "Companies have costs invested in the country and they will be cautious to pull up the stakes and lose them."

Citing Repsol as an example, Mr. O'Brien said the companies were likely to turn to their governments for diplomatic assistance. "Repsol has been and will be lobbying the governments to put pressure on Bolivia," he said. Spain's Prime Minister, José Luis Rodr���guez Zapatero of the Socialist Party, has credibility with leftist Latin American leaders like Mr. Morales because of his liberal social policies, but it is far from certain that Mr. Morales will be responsive to the more conservative economic views advocated by the Spanish government, Mr. O'Brien said.

However, the Financial Times reports that Morales' resource nationalization is putting less pressure on foreign oil firms than it is on foreign gas firms. The decree on Bolivian oil is worded more broadly than that on natural gas, which should allow for negotiation with the government. Also, since there has been far less foreign investment in Bolivia's oil infrastructure, oil companies are likely to give up their Bolivian operations should they deem the government's terms unreasonable.

"Bolivia has already a bad reputation among oil companies and some of them are now going to leave the country," said Anouk Honoré, natural gas analyst at the Oxford Institute for Energy Studies. "I see [British oil firms] BG and BP walking out, and [French oil firm] Total is 50 per cent chance they leave."

Both leaders have used such moves to address the discontent of their constituents due to a steady drop in their standard of living, which they blame on the United States' free trade policies and global competition. But re-nationalizing industries and erecting protectionist barriers won't solve their problems. They could exacerbate them.

Newsday warns that Morales and Chavez, who both signed a socialist trade pact with Cuban President Fidel Castro last week, are "bucking global economic trends in ways that could disrupt energy markets and lead their nations down a dead-end road."

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• Feedback appreciated. E-mail Arthur Bright.