It was a classic set-up for Third World confrontation: a feisty populist government faces off against a multinational oil company that owns the only refinery in the country. Last century, it would have been resolved with a military coup as happened in Iran (1953), Guatemala (1954), and Chile (1973). But in Nicaragua in the 21st Century, negotiations and the signing of a business deal were the order of the day.
Last year, a company called Albanisa, made up by the State-owned oil companies of Nicaragua and Venezuela (Petronic and Petróleos de Venezuela, respectively), wanted to use some tank farm storage facilities at the Port of Corinto in Nicaragua, owned by Esso Standard Oil, for importing Venezuelan crude. Talks dragged on with little progress. National customs authorities got involved and embargoed the tank farm, alleging certain failures to pay some taxes.
A showdown would have had major repercussions for the country since Esso also owns the only refinery in the country. Instead, negotiations intensified and a deal was finally brokered. Petronic will rent out the facilities till end-2008 and will then proceed to purchase them outright. No details were released about prices.
Each year, Esso imports about seven million barrels of crude that are then processed into gasoline, diesel, and other petroleum products at its refinery in Managua. According to Nicaraguan energy authorities, this represents about 70% of local fuel demand. Imports have been coming from several countries: Mexico, the USA, Ecuador, Canada, Trinidad and Tobago, and others. The plan now is to import 10 million barrels just from Venezuela, which is offering a sweet deal that allows Nicaragua to pay half the bill within 90 days and the rest over 25 years at 1% annual interest.
The arrangement is criticized by the opposition, claiming that President Ortega is simply saddling the next generation with a massive debt tomorrow in exchange for energy today. Ortega, on the other hand, speaks wholeheartedly in favor of this cooperation relation with Venezuela within the framework of the recently-formed Bolivarian Alliance or ALBA, an initiative started by Venezuela’s Hugo Chávez in order to promote regional independence in Latin America and the Caribbean.
Apparently, part of the bill is to be paid off in kind, with Nicaragua shipping beef, beans, and corn to Venezuela, as well as providing technical advice in the field of geothermal energy to that country.