Caracas gets a sanctions reprieve while the U.S. vetoes a loan to Guyana, a rare U.S. ally in the region
By Mary Anastasia O’Grady
At the United Nations climate conference in Sharm El Sheikh, Egypt, the U.S. agreed to pay environmental reparations to developing countries. Days later it emerged that the Biden administration would issue a new license to Chevron to resume operations in joint ventures with Venezuela’s oil company, PdVSA.
The U.S. government thinks you’re a fool, dear reader. And not only because it waited until Americans were en route to grandma’s house for Thanksgiving to let news slip of a deal to increase heavy-crude output from joint ventures controlled by a dictatorship allied with Iran. Or that it expects you to believe that Venezuela is considering a return to free elections in exchange.
Presumably you also haven’t noticed Team Biden’s effort to impede the development of huge reserves of light sweet crude from Guyana, a U.S. ally.
Washington policy makers occasionally make miscalculations that help American enemies, undermine development in a poor country, or harm U.S. economic interests. But to nail the trifecta requires a special blend of ideological blindness and incompetence that is mercifully rare. Still, as the administration’s treatment of Guyana demonstrates, it does happen.
In a region that has been trending anti-American in recent years, Guyana, with a population of less than 800,000, has been an uncommon ally. Nestled on the southeast border of Venezuela and north of Brazil, the small English-speaking nation has obvious strategic value to the U.S.
Since 2015, when Exxon Mobil made its first oil discovery in offshore waters, a series of further finds has brought Guyana’s estimated reserves above 11 billion oil-equivalent barrels. On a per capita basis only Kuwait has more oil.
The story gets even better because the crude under Guyanese waters has low sulfur content, the opposite of the tar that comes out of Venezuela. It would be hard to dream up a more exciting narrative for a country mired in poverty.
In a November working paper for the International Monetary Fund, economist Rina Bhattacharya noted that the petroleum discoveries offer the “promise to transform Guyana’s agricultural and mining economy into an oil powerhouse, while hopefully helping to diversify the non-oil economy.” There is “a momentous opportunity to boost inclusive growth and diversify the economy providing resources to address human development needs and infrastructure gaps.” But there are also significant “challenges.”
The most obvious problem facing a poor country that suddenly enjoys a gusher of dollars is the absence of the rule of law. Frail institutions tend to fuel financial recklessness and corruption.
Guyana needs all the U.S. help it can get if it hopes to harness its newfound wealth constructively and avoid turning into another banana republic with oil. But thanks to Mr. Biden’s climate religiosity, it looks as though the Guyanese will have to rely on China.
Consider a project to upgrade the Guyanese infrastructure necessary to export the oil safely. Guyana Shore Base Inc., a private company based in Georgetown, asked IDB Invest (the private-sector financing arm of the Inter-American Development Bank) for help. IDB Invest described the company as serving the needs of transshippers for “supplies, materials, and equipment” and providing “various support personnel and services, including waste management, warehousing, fuel bunkering, pipe storage, water treatment and potable water storage, among other services,” to Exxon in Guyana.
IDB Invest proposed debt financing for the project of $70 million to refinance bridge loans, expand port facilities and a logistics support area, and construct a new heavy-cargo off-loading project and a waste-management facility. The company also planned to use the financing to “install rooftop solar photovoltaic capacity to meet [its] energy needs.” The IDB Invest loan would have anchored the project, which required $130 million in total financing.
It looked like a 21st-century fairy tale: wealth creation, low-impact energy production, environmentally careful investors and solar development all in a democracy aligned with the U.S. In a March interview with Guyana’s Stabroek News, then-IDB President Mauricio Claver-Carone spoke about the auspicious outlook: IDB oversight and transparency was poised to assist in producing real benefits for the nation rather than what has occurred under “Middle Eastern and African models that have actually seen development stalled with the new resources and democracy trampled.”
The U.S. vetoed the loan. Its reasoning was based on August 2021 Treasury “guidance on fossil fuel energy at the multilateral development banks,” which says that the U.S. will “promote ending international financing of carbon-intensive fossil fuel-based energy.” After two years of working with the IDB to ensure proper due diligence, the company had to go back to the drawing board.
Meantime China, with no such restrictions, is aggressively signing contracts to build infrastructure in Guyana and getting in on the oil boom. And the U.S. is turning to renowned polluter Venezuela to boost crude supplies. What could possibly go wrong?
Write to O’Grady@wsj.com.
Mary Anastasia O’Grady is an Opinion Columnist, writes “The Americas,” a weekly column on politics, economics and business in Latin America and Canada that appears every Monday in the Journal. Ms. O’Grady joined the paper in August 1995 and became a senior editorial page writer in December 1999. She was appointed an editorial board member in November 2005. She is also a member of the board of directors of the Indianapolis-based Liberty Fund. Energiesnet.com does not necessarily share these views.
Editor’s Note: This article was originally published by The Wall Street Journal (WSJ), on November 27, 2022. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
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energiesnet.com 11 28 2022