Two weeks ago I noted that Washington was in the process of recasting its hemispheric policy in the context of a new energy security regime. Since then I have received a number of requests to explain this in more detail and what the implications might be for the Caribbean.
For the last few months Brazil and the United States have been discussing the creation of an energy partnership that they hope in part will encourage ethanol production and its use throughout Latin America and the Caribbean. A series of high level meetings have been taking place with the objective that when the US President George Bush visits Brazil on March 8 and his Brazilian counterpart, President Lula da Silva, pays a return visit to Washington on March 31, major announcements will be made about ethanol, energy security and hemispheric development.
What the two nations have been discussing is an agreement on technology transfer that would stimulate production and lead in the medium term to a new global market driven from the Americas for internationally traded ethanol. The agreement is expected to result in the US and Brazil sharing technology that will then be made available to enable others throughout the hemisphere to become both ethanol producers and consumers.
The initiative partly relates to surging demand for ethanol and the inability of the US and Brazil, the world’s two largest producers, to keep up with demand. But there is much more to it than this. What is happening is that both nations for different reasons see a new energy partnership as offering a wide range of policy options that will better integrate those in the hemisphere that are seen as like minded.
Among the gains cited by officials include a reduction in the hemisphere’s strategic dependency on oil from the Middle East and Venezuela; the conservation of foreign exchange in economically vulnerable countries across the hemisphere; the creation of employment in agriculture as it is reoriented towards energy production; and the re-siting of production and distribution facilities within a hemispheric security structure.
For the US, the new approach is seen as offering an opportunity to redefine its hemispheric economic policy in a manner that offsets Venezuela’s growing influence.
Some of the thinking behind this new strategy was spelt out in detail in testimony given last March before the US House of Representatives Committee on International Relations. Then, Karen Harbert, the Assistant Secretary for Policy and International Affairs at the US Department of Energy noted that thirteen countries in the Western Hemisphere provided 49 per cent of the United States’ gross imports of crude oil and petroleum products. Canada, Mexico and Venezuela accounted for three out of the US’s top four suppliers while Ecuador, Colombia, Brazil, Trinidad and Tobago, and Argentina also fell in its list of top 25 suppliers.
In her testimony she went on to note that the prospects for economic growth and development in the region depended increasingly on “unlocking valuable resources to supply reliable, affordable and clean energy.”
“Western Hemisphere energy security is enhanced,” she said by “policies that expand the sources and types of global energy supplies, increase efficiency of energy production and consumption, encourage the use of the most environmentally responsible technologies, enhance the transparency and efficient operation of energy markets, and strengthen the capacity to respond to oil supply disruptions.”
She also told the sub-committee that the production of renewable energy offers the opportunity to revive domestic industry in Central America and the Caribbean when it comes to raising crops and processing ethanol.
Placing her message in a political context, she noted also that “energy security… must include commitments to market-based pricing and open investment.”
For the Caribbean, the new US energy led hemispheric policy comes just as a number of nations are placing their energy security in the hands of Venezuela on very different terms.
Under its PetroCaribe arrangement, Caracas is providing almost all Caribbean nations with a concessionary financing framework for the purchase of Venezuelan oil. The scheme offers deferred payments, a fund for social and economic programmes and more recently support for refining, storage and delivery systems.
Venezuela’s interests in consolidating it energy-led relationship with the Caribbean was evidenced in President Chavez’s recent visit to Dominica and St Vincent.
According to the Venezuelan news agency ABN one consequence is that it is likely that in a year-and-a-half’s time, Venezuela will be the only diesel supplier to St Vincent thus providing fuel for all but 20 per cent of the island’s electrical generating capacity. Other nations such as Guyana are being rather more cautious for both strategic and economic reasons, aware that despite the scheme’s short to medium term benefits it could complicate a number of relationships.
In an important commentary on the implications for regional energy security, the Prime Minister of Trinidad, Patrick Manning, who has lead responsibility for energy in Caricom, noted on February 15 that PetroCaribe shifted the regional dominant energy supplier from Trinidad to Venezuela. “As is traditional in the industry, one of the responsibilities of the dominant supplier is the responsibility to guarantee energy security,” he said.
He further noted that as Trinidad, was losing its position as dominant Caribbean energy supplier, it would seek to divert its attention to other markets and would not be responsible for supplying fellow Caricom countries with energy products in the occasion of any break in supply. Trinidad would, he suggested, now enter into long-term contracts with North America where the republic already has a 70 per cent share of the US’s total imports of liquefied natural gas.
No one would deny that PetroCaribe provides a lifeline at the precise moment at which many Caribbean nations feel there is no longer any interest among traditional partners in supporting them. But paradoxically it is pushing Trinidad into a deeper relationship with the US and may even have the potential to create a regional ideological divide.
Whether you believe that the US or Venezuela hemispheric energy policy is developmental or hegemonic seems to depend on where you sit politically and geographically. This is a development that some in the region have not fully comprehended. Hemispheric energy security is a big league game in which the long-term strategic interests of the US, Brazil and Venezuela cannot be set aside.
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