Chavez, Mercosur, the pipeline and oil

As Western Hemisphere energy resources become increasingly scarce, competition for access is bound to create geopolitical tension. The latest example of this trend is the overture made by Venezuelan President Hugo Chavez towards Mercosur, the free trade area made up of Brazil, Uruguay, Paraguay and Argentina. Venezuela’s accession to Mercosur would combine nicely with attempts by Venezuela and Argentina to connect their energy markets via a pipeline laid across the South American continent.

President Chavez and Argentinian President Nestor Kirchner met in November to discuss the pipeline. The AP reported that “the cost for a pipeline running south through Brazil to Argentina has been estimated at $10 billion.”   

If the pipeline is completed, Venezuela could help Argentina overcome an expected energy shortage during the coming years as the natural gas reserves of the Southern Cone come under pressure of the growing needs of its population. According to The Economist, “Venezuela could become the hub of a regional energy network.” Venezuela already helped Argentina meet its energy demand last year by shipping diesel, The Economist reported.

The Mercosur move comes after Venezuela invited to foreign firms to quantify the heavy oil of the Orinoco Belt, perhaps the most important untapped energy deposit in the Western Hemisphere.

“The state oil firms of allies such as Iran, Brazil and China (along with Spain's Repsol) have been contracted to quantify the heavy oil in the Orinoco belt, formerly classified as tar but now claimed as some 235 billion barrels,” The Economist reported in November.

In September Deputy Secretary of State Robert Zoellick told reporters that the U.S. would not feel particularly threatened by China’s attempts to get oil from Venezuela because no nation can simply secure energy resources in the face of U.S. military dominance.

“If it is an emergency situation and we had to interrupt the energy flow, would you rather interrupt it in the Caribbean or in Russia?" Zoellick was quoted as saying in the Washington Post.

Also, according to the Financial Times, in June Chavez reached an agreement with 14 Caribbean countries to provide cheap oil.

In October Chavez was quoted by the AP as saying, “We're at the doorway of major energy crisis worldwide," and he added, “Prices will continue to rise but oil is running out.”