Mexico said to be considering a PetroCaribe alternative

Mexico’s government is reportedly studying the development of a mechanism that could provide an alternative supply of crude oil and oil products to PetroCaribe members in the Caribbean and Central America. If pursued, the initiative would diminish Venezuelan influence and enhance Mexico’s role in the Caribbean basin though the provision of a similar programme providing low-cost oil, possibly related to some form of development support.

In an exclusive Reuters report, two unnamed Mexican officials said that the concept was being jointly developed by the country’s finance ministry, foreign ministry and energy ministry as a way of increasing Mexican influence in the Americas. The idea is also believed to relate to Mexico’s desire to enhance its negotiating position with the US, in the recently begun renegotiation of the North American Free Trade Agreement (NAFTA).

Although Reuters also reported that the Mexican foreign ministry had denied any such plan existed, it quoted one of its sources as saying that it was too soon to say how much oil Mexico might offer the nations of the Caribbean and Central America. At present Venezuela ships about 28,100 bpd of crude and refined products under the PetroCaribe arrangement, a figure down from a peak of 121,000 bpd in 2012.

It is not clear how any such development might relate to Cuba which has a more preferential oil, services and investment arrangement with Venezuela under PetroCaribe, compared to other member states. However, media reports in Mexico suggest that the issue was raised when the Mexican Foreign Minister, Luis Videgaray, visited Havana on August 17 for talks with the Cuban government on bilateral issues, the situation in Venezuela, and possible responses.

Meanwhile, the resolution of hemispheric concerns about the situation in Venezuela have been complicated by President Trump’s August 11 remarks that he did not rule out a military option in Venezuela. Mindful of previous US invasions and interventions in the Americas, a number of regional governments have expressed concern. The Dominican Foreign Minister, Miguel Vargas, said: “Obviously (a military intervention) would be a contradiction if what is sought is to solve an internal political crisis in a country in the region where, in addition, there is a democratically elected government”.

In further developments on August 25, the US Administration introduced the first of a number of calibrated sanctions, restricting Venezuelan access to the US financial system. The measures aim to bring financial pressure on the Venezuelan government and its political leadership, with the intention that its approach will encourage or force the Maduro Government to change course.

The effect of the executive order signed by President Trump, has been to halt all trading in new bonds, equities or lending by US entities to the Venezuelan government and PDVSA, the state oil company. Although the decision is expected to end new financing deals, some observers believe that it may encourage ROSNEFT, the Russian state linked oil company, which has been in discussions with PDVSA, to become directly involved in the production, refining and sales of Venezuelan crude and oil
products, increasing Russian strategic influence.

Responding to new US sanctions, President Maduro said that he was initiating a dialogue with existing investors and companies to find alternate solutions, and indicated that he would travel to Moscow soon to advance the two countries’ commercial relationship. In a sign that the regime is digging in and responding to sanctions by further consolidating authoritarian rule, the pro-government Constituent Assembly, unanimously voted to put opposition leaders on trial for treason, and pursue those it accuses of supporting US economic sanctions. Meanwhile, the US National Security Adviser, H R McMaster, has said that the US has developed contingency plans that anticipate the possibility of a further deterioration of the situation in Venezuela, indicating that President Trump had requested a range of options that the US might “take in concert with our partners in the region”.

This is an extract from the Caribbean Council’s leading weekly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.

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