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Venezuela squandered oil opportunities

Venezuelan President Hugo Chavez takes part in a meeting of the leaders of the Bolivarian Alternative group at the Miraflores presidential palace in Caracas on April 23.

TEXT OF INTERVIEW

KAI RYSSDAL: Oil prices tumbled today, as I mentioned. More than 6 bucks. The biggest dollar drop in 17 years. Part of that was the grim economic forecast from Mr. Bernanke this morning. Another was that Venezuelan President Hugo Chavez didn't make news with any public announcements today. Venezuela's a key crude supplier to this country. So this week as we're trying to get a handle on why oil prices move the way they do, we've called Michael Shifter with the Inter-American Dialogue in Washington.

Mr. Shifter, good to have you with us.

MICHAEL SHIFTER: Thank you. It's nice to be with you.

RYSSDAL: The Venezuelan oil industry today isn't really what it was just a couple of years ago, is it?

SHIFTER: No, it's not. They've had tremendous problems, lack of expertise, lack of investment, a lot of technical difficulties. So, it used to be the jewel of Venezuela. It no longer is.

RYSSDAL: How much of that lies with President Hugo Chavez and his plans to reshape the economy there?

SHIFTER: Well, I think Hugo Chavez has introduced a new form of governance. And there was a strike at the oil company at the end of 2002, early 2003. And, basically, President Chavez put in a lot of people in key positions whose primary qualification was to be loyal to him. but it has had a tremendous cost in terms of the productivity of the state oil enterprise.

RYSSDAL: And has that hurt the Venezuelan economy domestically?

SHIFTER: It has hurt in the sense that there was a tremendous opportunity that Venezuela had really to use the resources well for the purpose of developing the country. That hasn't happened. So, unfortunately, Chavez has managed to stay in power and he has kept some support.

RYSSDAL: Venezuelan oil, obviously, is important to the United States. It's either the number four or number five importer to this country. How important is it for the Venezuelan economy, though? How reliant are they on oil revenues?

SHIFTER: Well, it's tremendously important. And one of the ironies of Chavez's rule is that he really attacked the old political-economic establishment in Venezuela that preceded him for being too dependent on oil. And yet, his economy is even more dependent on oil -- even more dependent on exports to the United States than his predecessors were, despite the political tension with the United States.

RYSSDAL: So when he does things that make geopolitical news around the world, whether it's nationalizing the oil industry or -- as he did a year or two ago -- calling President Bush the devil, is he doing that with one eye on oil prices, helping to bump them up a little bit?

SHIFTER: His main objective is to consolidate his political power, stay in office as long as he possibly can. For him, oil is a political instrument, a political weapon that has enabled him to mobilize support, to provoke enemies from the outside like the United States, with the aim of trying to increase . . . see oil prices go up and to see his power tighten.

RYSSDAL: The Bush administration has been dismissive of President Chavez. The president wouldn't even mention his name when he was down on that South American swing a year, year-and-a-half or so ago. Does the White House ignore Mr. Chavez at its own peril when it comes to oil?

SHIFTER: Well, I think Chavez has to be taken very seriously. It's a mistake to ignore him. But what I think President Bush was trying to do was to not go for his bait. Because the United States has done that and at every turn he's become stronger. The challenge is who to deal with him in a more sophisticated way -- strengthening relationships with other Latin American countries. Really, the United States hasn't been able to really keep him in check and really deal with him in a very effective way.

RYSSDAL: Well, Mr. Shifter, thanks a lot for your time.

SHIFTER: Thank you. My pleasure.

RYSSDAL: Michael Shifter is the vice president for policy at the Inter-American Dialogue in Washington.

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