Oil industry locks horns with Chavez

By Adam Easton BBC correspondent in Caracas

The power struggle for Venezuela's state oil company between its managers and the country's President, Hugo Chavez, could bring the oil-rich nation to its knees.

Latin America's largest corporation, Petroleos de Venezuela (PDVSA), is undergoing its worst crisis since it was nationalised in 1975.

President Chavez has said that he is prepared to send in armed forces to run the state oil company if protesting workers try to halt production.

It's really like putting a bomb inside the company to implode the whole thing

Luis Giusti
former head of PDVSA

The cause of the crisis is the appointment of the company's new board of directors, which many managers say was politically motivated and an attempt to bring the company under the government's wing.

Some new directors leapt between six and eight levels in the company's hierarchy.

At the top of the pile is new company president Gaston Parra, a 68-year-old leftist academic with no previous management experience who has opposed private investment in the sector.

"It's unacceptable that those who have been enemies of this institution for reasons of political ideology or personal interest should be named in positions of leadership," a statement from 34 of the company's executives, including three former vice-presidents said.

Strike threat

Since then, more than 5,000 executives and managers of the company's 40,000-strong workforce have signed newspaper advertisements opposing the board and administrative staff have held two half-day strikes.

Luis Giusti, a former head of PDVSA who helped shape US President George W Bush's oil policy, told the BBC it was like "putting a bomb inside the company to implode the whole thing".

"PDVSA has quickly gone from being a company people could trust to an agency of the government," he said.

For nothing in the world would I allow a strike

Hugo Chavez
Venezuelan president

Both the country's largest oil workers' union, Fedepetrol, and Venezuela's biggest business association, Fedecamaras, have pledged their support to the managers.

Fedepetrol, which represents more than half the country's oil workers, has said it will start strike proceedings unless the government resolves the crisis within 15 days.

Mr Chavez has, so far, refused to change the board and warned workers they would face "the consequences" if they decided to strike.

"For nothing in the world would I allow a strike," he said.

Bedrock of economy

Mr Chavez has criticised the company for being "a state within a state" and said it is not acceptable that company executives who, he said earn 15 million bolivares a month (US$15,000), live it up in "luxury chalets where they perform orgies drinking whisky."

Mr Chavez wants PDVSA to be at the service of his attempts to redistribute the nation's oil wealth in a country where 80% of the population live in poverty.

Senior executives have so far opposed a strike, recognising the damage it could do to the country.

Venezuela, which has the largest crude oil reserves outside the Middle East, relies on oil for 80% of its export revenues and more than half its tax earnings.

The country pumps 2.5m barrels a day and a full industry stoppage would cost $42m a day in lost export revenues.

It could also cut off 40% of the country's power generation, causing transportation to break down and affecting food deliveries.

PDVSA normally rides out strike action through its contingency plan which sees non-unionised managers filling in for striking workers.

With discontent among white-collar workers at an all-time high, the contingency plan is no longer the safety net it once was.