Venezuelan President Hugo Chavez, one of the hemisphere's harshest critics of the United States, is receiving hundreds of millions of dollars in subsidies from Washington, thanks to an obscure 20-year-old oil pricing formula.Have a nice day.
The formula is part of a supply contract between Venezuela's state-owned Petroleos de Venezuela (PDVSA) and its wholly owned U.S. subsidiary, Citgo Petroleum Corp., which forces Citgo to buy PDVSA's crude for at least $5 a barrel over market prices.
The net effect is to reduce Citgo's taxable earnings in the United States and to boost Venezuela's share of oil profits by as much as $1 million a day.
"At the moment, we have the strange situation where the USA is subsidizing Venezuela to the extent of the tax relief on the excess above-market prices" says Oliver Campbell, a former finance coordinator of PDVSA.
James Williams, an Arkansas-based oil analyst with WTRG Economics, estimates that Citgo has been paying $5 to $8 a barrel over market prices for the past two years, amounting to a de facto U.S. subsidy.
Mr. Williams estimates that Venezuela could be earning as much as an extra $1 million a day that would otherwise belong to the U.S. Treasury.
Sunday, August 20, 2006
Washington Times: Washington subsidizing Chavez?
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