Eduardo Rodriguez (ER): We thank our coworkers here in the studio. As we have been announcing, this Friday we will interview the People’s Minister for Energy and Petroleum and president of Petroleos de Venezuela, Rafael Ramirez, from PDVSA’s headquarters in La Campina.

The entire nation has heard and read about the orders issued by courts in New York and London to freeze 300 million dollars in PDVSA’s bank accounts in U.S. territory, and 12 billion dollars in assets in the United Kingdom.

People talk about an arbitration history and about the migration process of Orinoco Oil Belt projects into Joint Venture Companies.

Oil is the “cash cow”. We are fully dependent on this economic element. Any Venezuelan with some common sense has many questions and is very worried. Minister Ramirez, how can we interpret what is currently happening? What is going on and how does it affect us?

Rafael Ramirez (RR): Thanks Eduardo, good evening.

Precisely today we worked extensively and with efficacy to counter a scheme created to alarm the population about a situation that started a few months ago. That situation is the arbitration process between Venezuela and the multinational corporations that did not accept the terms of the Orinoco Oil Belt Nationalization last February 27, 2007.

In this particular case we are referring to the arbitration process with the American company ExxonMobil, probably the largest corporation in the oil sector, which has decided to go beyond arbitration in its quest against the Republic to harass our company Petroleos de Venezuela.

As you mentioned, this is a national topic that pertains to all Venezuelans. It is a topic that creates national concern. For that reason it is important we explain and reinforce what the issue and the real situation are. By doing so, no unnecessary uncertainty or distress will be created based on what is not happening.

I must say that our country has made a series of sovereign decisions to reestablish control over our main industry, the oil industry. It is no secret that our main economic activity is oil income. In this sense, our Government, the Government of President Hugo Chavez, has set forth a strategy to reestablish what we call Full Oil Sovereignty.

In this sense, we have made a series of decisions to reestablish oil income after the failed sabotage against our oil industry. I believe you remember those topics where we reestablished our royalty. It was 1% and we brought it up to 33.3%. Our oil taxes were 34% and we pumped them up to 50%. Then we moved onto reestablishing operational control in the areas that had been privatized during the oil opening process.

Following this framework we have negotiated and taken action over several very important companies. Following the framework of the operating agreements, we made possible the migration of 33 operating agreements to Joint Venture Companies. We can now say that those 500 thousand PDVSA oil barrels that had been privatized were reestablished. Now our company has majority shareholding.

Last February 2007 we made the last decision to finish the Nationalization of our oil activities. This decision involved the Orinoco Oil Belt and those projects mistakenly called “strategic associations”, where Petroleos de Venezuela only had a 42% interest and multinational companies had total control. This situation led to discussions and negotiations with multinational companies such as ConocoPhillips; Total, from France; Statoil, from Norway; ENI, from Italy; British Petroleum; CNCP; from China, among others. Eight of the ten companies finished their shareholding interest and business in the country. Only two companies established arbitration processes against Venezuela: ConocoPhillips and ExxonMobil.

With regards to ConocoPhillips, despite the fact that there is a current arbitration process against the Republic, we continue to hold conversations and believe we will reach an agreement. On the other side, with regards to ExxonMobil, we have had to face an aggressive attitude from this company which is one of the most powerful ones worldwide.

ER: Minister Ramirez, you have clarified this is a prevention measure or injunction, a temporary situation, a legal process where Venezuela will make its plea and that has support from international and domestic legal counsel. How much time do you reckon will be necessary to solve this arbitration? Is there any precedent in this regard, and how does this situation place Venezuela in the world scene, taking into account this is a global topic, even regarding our status as an OPEC member?

RR: yes, but you have to put things in context in order to understand them. Our people must be wondering what happened to ExxonMobil, why did this company carry out this action. Well, simply put, this is a multinational oil company that accepted neither our legislation nor our decisions. They could also wonder why this discrepancy is being solved in New York. Well, simply because during the oil opening era the political leaders of the Fourth Republic and the Old PDVSA accepted that oil-related issues, strategic issues, got solved overseas and not in our country. This decision led us to give up our jurisdictional sovereignty, which we then denounced to be detrimental to the interests of the Nation. But we now see how, as a consequence of the signed contracts, those companies can take us to international courts.

Are there any precedents? This happens all the time. Oil producing countries have had to face, inside and outside of OPEC, repeated legal actions, embargos, physical aggressions and invasions by large multinational companies to try to counter the sovereign decisions made by our nations. Right now CITGO faces lawsuits in American courts, as well as Saudi Aramco from Saudi Arabia...

This is not an odd situation. A similar situation took place in our own country when in 1958 the Government of Edgar Sanabria modified oil taxes and the Creole Petroleum Corporation sent a letter explaining that it did not accept the decisions made by our Government. The then current Administration expelled Creole’s president from the country. There are many precedents like this; for that reason we uphold they are trying to create an alarm scheme for people to feel that they have taken away our oil industry.

ER: how will PDVSA supply, operations, assets, investments, etc. be compromised if ExxonMobil’s intents in international courts crystallize? Is PDVSA’s financial soundness in risk in this arbitration process? What are the worst consequences we can expect?

RR: it is important to determine the exact nature of the actions covered by the headlines today. First, we have to state that no Petroleos de Venezuela asset or bank account with the figures made public of 12 billion dollars has been seized. This is not true. The only effective action ExxonMobil has been able to take is to freeze 300 million dollars in a bank account in New York, United States. This freeze will last until we file our complaints this week to demonstrate that supply has not been halted, and to demonstrate there is constant economic activity that could cover any decision made regarding the arbitration.

With regards to the complaints filed before the London court to freeze assets for 12 billion dollars, we would like to ratify that we do not have any assets worth 12 billion dollars in London. It is important to mention that PDVSA’s oil office in England was closed for cost reduction purposes.

Similarly, ExxonMobil attempted to seize and freeze 12 billion dollar assets in The Netherlands, aiming at harmful effects on the Isla refinery in the Netherlands Antilles. But this refinery is not owned by PDVSA, it is leased.

ExxonMobil’s actions do not have direct effects on our oil industry. They rather attempt to create fear in a country, blackmail a government, and harass its national industry to see if we back up from our actions. That is where ExxonMobil has gone completely wrong. We will not back up any sovereign decision made by our State.

This is a national topic and I should say here that we are astonished and ashamed to see how some national actors, due to political differences, have pledged to support ExxonMobil’s abusive actions. Gentlemen, this is a topic we have to repudiate. All Venezuelans are interested in this topic. All Venezuelans are interested in defending oil income, which is one of the essential reasons for the economic bonanza our country is currently enjoying and for our economy’s sustained growth ever since we recovered the industry and the domestic oil income.

We would like to emphasize that the operating conditions of our oil industry are not affected by ExxonMobil’s actions. PDVSA is operating at 100% capacity, and we are selling all barrels we are producing. It is also important to highlight that we have continuous credit with a pool of European and American banks headed by Paribas Bank (France). Furthermore, last week we requested a credit of 1,250 million dollars, and despite the fact that ExxonMobil sent these banks a note with the court order, the banks disregarded it and granted us the credit line.

Today, a risk ranking agency indicated that this had no effect on PDVSA risk indexes. There is no way it would affect them, oil is here in Venezuela, reserves are here, we are producing them.

During our last trip to the OPEC meeting we sign the enlargement of projects we have with the companies Total from France, Statoil from Norway, and ENI from Italy. For this reason, we want to reaffirm to our people that they should not let themselves be intimidated by this situation since there will be no financial consequences.

What are the effects of this? It is a strategy adopted by a company. We have to review ExxonMobil’s record and its actions for example when the Exxon Valdez tanker ran aground, and it ended up suing the State of Alaska.

ER: Minister Ramirez, with regards to this topic, are we facing a purely technical-legal path or do you believe there is something else behind ExxonMobil’s action?

RR: we believe the company clearly has a political position. Why do I say this? Because we have been able to reach agreements with all other companies. ExxonMobil assets that were subject to nationalization have an extremely low value compared to the assets of the rest of the companies that were also nationalized.

We have reached agreements with almost all companies, even with partners such as Petrocanada and British Petroleum, which no one can deem as Chavez supporters. And even with ConocoPhillips, which is undergoing arbitration and with whom we are currently holding talks.

With regards to the ExxonMobil case, there is a political position assumed by multinational companies against oil producing countries. ExxonMobil just lost an important case in Kazakhstan where they also tried to disregard the sovereign terms of a country that wants to control its oil resources.

The important thing here is to understand that no one can undermine the sovereign decision of a State to handle its strategic resources, much less its oil. Based on this we condemn the attitude of the old PDVSA during the oil opening era which allowed solving these issues in foreign courts. We are not currently considering that option.

How long can this situation last? The specific actions now in court will be resolved in a matter of days. ExxonMobil’s legal action is ineffective. PDVSA is a company with more than 100 billion dollars in assets. The only way to not have these 12 billion dollars would be to sell the national oil industry, and this is completely out of the picture. These are strategies that seek to take a different path in negotiating the arbitration and we will not do it.

It is important for our country to understand what arbitration is. In an arbitration procedure the arbitrators designated by the parties, together with a third arbitrator called a jury, form a team that will try to find a solution between the parties in order to reach an agreement. Decisions are never taken based on a unilateral position. ExxonMobil may have aspirations, so does PDVSA, and we will find a balance point. But ExxonMobil cannot expect us to be judged beforehand.

ER: what would be that balance point ideal to Venezuela’s interests?

RR: now there is a complex process that could last five years. Something important is for our country to know that we have been preparing for this arbitration. We have a very prestigious international legal team that has defended oil producing countries since the 70’s. Similarly, we have our own domestic legal team, the Office of the Attorney General, which is defending the interests of the country and of the Venezuelan population.

We restate that no multinational company, whatever its name is, can try to make our country and our people kneel down, much less regarding oil matters which are such a complex and valuable topic for the future of our Nation.

In this sense, we ratify to all Venezuelans that you can be at ease because we are handling this issue with all due importance and with our full oil tradition of defending the interests of the Nation.

ER: Minister Ramirez, just to clarify a point that I had some doubts on: you recently mentioned this issue could be solved in a few days and now you just changed that period to five years.

RR: Well, the alleged freeze is a preventive measure that will be solved in years, but the general arbitration to decide if ExxonMobil has the right to compensation or not and how much it would be is a topic that could last five years.

ER: Minister Ramirez, thank you for this pedagogic approach when explaining such a complex topic. It has been a great opportunity for the prime broadcast of Noticiero Venevision and for all our followers in the nation.