Nicaragua and ExxonMobil clash over oil

February 22, 2008

While the Venezuelan government of socialist President Hugo Chavez has made headlines for its battle with ExxonMobil, Venezuela is not the only country under attack by the world's largest oil corporation for refusing to submit to its dictates.

The Nicaraguan government of left-wing President Daniel Ortega has been drawn into the battle, which boils down to a struggle over whether or not underdeveloped countries have the right to control their resources or not.

Nicaragua is one of Latin America's poorest countries — with its economy largely destroyed by US-pushed neoliberal policies — and suffers regular electricity blackouts, making the question of energy supplies a major issue.

Ortega, the leader of the Sandinista National Liberation Front (FSLN), Ortega was reelected president in a context of growing rebellion against pro-corporate neoliberal polices led by revolutionary Venezuela across Latin America, that has seen a number of left-leaning governments elected.

The election result was highly symbolic, as the FSLN first came to power in a popular uprising in 1979 that toppled a brutal US-backed dictatorship. The Ortega-led FSLN initiated a revolutionary process aimed at politically and economically empowering the poor majority. However, a US-funded and organised terrorist campaign badly undermined the revolution, and in 1990, right-wing forces, with massive funding by the US, won the elections and began dismantling the revolution's gains.

With Ortega's reelection, Nicaragua has accepted an offer from Venezuela to supply Nicaragua with crude oil at subsidised prices, amounting to 10 million barrels of oil annually, to assist in the rebuilding of Nicaragua's economy.

However, the only refinery in Nicaragua is owned by Esso, a subsidiary of ExxonMobil, and it has refused to refine Venezuelan oil. ExxonMobil is in a dispute with Venezuela over the Chavez government's nationalisation of ExxonMobil investments in its Orinico oil belt in May last year.

The case was taken to Nicaraguan courts and in August last year a judge ordered the confiscation of the refinery. The judgement was partly in response to a debt of $3 million owed by ExxonMobil for evasion of taxes. Ortega declared that the Esso refinery would become public property so that the government would have control over oil distribution and prices.

However, in the face of threats from International Monetary Fund and the US government for alleged violations of the Central American Free Trade Agreement (CAFTA) — a US-pushed neoliberal agreement Nicaragua is a signatory to — Ortega backed down.

Chavez has promised to invest $2.5 million to build a new refinery, however this could take up to two years to construct. In the short term, Ortega has been forced to buy a fuel tank facility from ExxonMobil, without disclosing the terms of sale, in January in order to store Venezuelan crude oil.

Esso will continue operating Nicaragua's only oil refinery at Puerto Corinto, leaving unresolved the issue of refining the 600,000 barels of oil arriving from Venezuela monthly.

Ironically, it was the CIA that was responsible for the blowing up of Nicaragua's only fuel tank storage facility during the 1980s as part of the terrorist campaign to destabilise the Ortega FSLN government.

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