Chavez pushes through oil for Cuba

Castro and Chavez have strong personal ties

By Adam Easton BBC Caracas correspondent

Venezuelan President Hugo Chavez has said his government is restarting supplies of subsidised oil to Cuba five months after they were suspended during a failed coup against him.

The decision to resume the shipments of 53,000 barrels a day has been particularly controversial in the oil-rich South American nation which is going through an economic crisis.

If they want to indict me, then I'm waiting here for them to put on the handcuffs

Hugo Chavez

Mr Chavez's opponents have accused him of giving away oil because of his friendship with Cuban leader Fidel Castro.

Opposition parties have begun legal action against Mr Chavez at the country's Supreme Court, saying the deal was never approved by Venezuela's parliament.

Venezuela's charismatic leader was characteristically bullish when he announced the resumption of the country's oil supplies to Cuba.

He insisted the agreement was commercially sound and did not represent a gift to his friend, Mr Castro.

Shrugging off his opponents' legal challenge, he said:

"If they want to indict me, then I'm waiting here for them to put on the handcuffs."

'Fill her up'

The two-year-old deal is vitally important to Cuba and its troubled economy but it has become a sticky political issue for Mr Chavez.

With rising unemployment, inflation and a shrinking economy, Mr Chavez's opponents say Venezuela cannot afford to give away subsidised oil.

The first tanker is being readied

In fact, Cuba does pay market prices for the Venezuelan crude but it can pay for part of the supplies over 17 years at an extremely low interest rate of 2%.

Some managers at the country's state oil company, Petroleos de Venezuela, who vowed to end the supplies during the failed coup against Mr Chavez in April, say the government is not giving away crude - it is giving away money.

They point out the government has to borrow money on the international markets at rates of up to 16%.

They also say Cuba has run up a debt of 142 million dollars and will likely do so again.

Once an agreement on re-financing that debt was reached, Mr Chavez ordered oil workers to start loading up a tanker which is due to sail on Monday.

What is unclear at the moment is whether the Supreme Court will agree with his decision.