Environmentalists seem to realise that they have some stake in a fight such as the Ecuador-Chevron lawsuit.
That case, which Chevron has recently moved to an international arbitration panel to try to avoid a multibillion-dollar penalty handed down by Ecuadorian courts, is about whether a multinational oil corporation will have to pay damages for pollution, for which it is responsible. Most environmentalists figure that would be a good thing.
But what about fights between multinational oil giants and the governments of oil-producing states, over control of resources? Do people who care about the environment and climate change have a stake in these battles? It appears that they do, but most have not yet noticed it.
In December, Exxon Mobil won a judgment against the government of Venezuela for assets that the government had nationalised in 2007. The award was actually a victory for the government of Venezuela: Exxon had sued for US$12 billion, but won only $908 million.
After subtracting $160 million the court said was owed to Venezuela, Exxon ended up with a $748 million judgment. The ruling was made by an arbitration panel of the International Chamber of Commerce (ICC). On February 15, Venezuela paid Exxon $250 million and announced that the case was settled.
The case has been widely seen as extremely important among oil industry analysts, although it did not get that much attention elsewhere.
The dispute arose out of the Venezuelan government鈥檚 decision to take a majority stake in oil extraction, in accordance with its law. In 2005, it entered into negotiations with foreign oil companies to buy enough of their assets in order to gain a majority stake.
Almost all of the negotiations with dozens of companies were successful, with only Exxon and ConocoPhillips going to arbitration. Conoco is still negotiating.
Exxon adopted a strategy of trying to make an example out of Venezuela, so no government would try to mess with them. They went to European courts to freeze $12 billion of Venezuelan assets, but this was reversed within a matter of weeks.
They also went to arbitration at the ICC and at the World Bank鈥檚 arbitration panel, with the World Bank case still pending.
But the ICC gave them much less than the Venezuelan government had reportedly offered them in negotiations. The decision was noted intensely among oil industry specialists 鈥 and was seen by developing country governments as an important victory for the developing world.
But it didn鈥檛 get much attention in the mass media.
This is a big precedent, and there are other countries that will have disputes with oil companies over control of resources.
Why should environmentalists care?
Those of us who would like to slow the accumulation of greenhouse gases in the atmosphere would like to keep more oil in the ground. That is one reason why most environmentalists would support a carbon tax, which would raise the price of carbon emissions.
The main reason Venezuela insisted on a majority share in these oil projects is that it wants to control production. Venezuela is a member of OPEC, and abides by the organisation鈥檚 quotas.
If you want to reduce climate disruption, then you have a big interest in whether governments that want to reduce oil production are able to do so.
A higher price of oil due to reduced production by oil-producing countries reduces oil consumption. It also encourages the development of non-fossil fuel alternatives, including solar and wind technologies, which become more economically feasible at higher oil prices.
Of course, higher prices do encourage non-OPEC countries to produce more oil and OPEC members to cheat on the cartel 鈥 but this would be an argument for a stronger and more inclusive OPEC.
On the other side, our adversaries have always had the goal of flooding the world with cheap oil, which would of course greatly accelerate global warming.
Before Hugo Chavez was elected president of Venezuela in 1998, the national oil company (PDVSA) shared that goal with Washington. But as soon as he was elected, Chavez successfully pushed OPEC to reduce production, moving oil prices off their deep low point of $11 a barrel in 1998.
The US State Department, in a 2002 report, admitted that the US government 鈥減rovided training, institution building, and other support to individuals and organizations understood to be actively involved鈥 in the military coup that briefly overthrew Venezuela鈥檚 elected government that year.
That same report said one of the main reasons for Washington鈥檚 鈥渄ispleasure鈥 with Chavez was 鈥渉is involvement in the affairs of the Venezuelan oil company and the potential impact of that on oil prices鈥.
Environmentalists should recognise they have a stake in the producing states鈥 struggle with multinational companies over control of fossil fuel and other natural resources.
[Abridged from www.cepr.net. Mark Weisbrot is co-director of the Washington-based Center for Economic and Policy Research.]
