BOLIVIA: Neighbours Recognise Bolivia's 'Sovereign' Right to Nationalise Gas

The presidents of Argentina, Bolivia, Brazil and Venezuela confirmed their interest in moving together towards regional energy integration, in a summit held Thursday in the northeastern Argentine province of Misiones to discuss the impact of the Bolivian government's decision to reassert state control over the country's energy resources.

After a three-hour meeting, the four presidents held a joint press conference in the Casino Hotel in the town of Puerto Iguazú. Argentine leader Néstor Kirchner said it was "one of the best meetings" he has taken part in as president.

Despite the tension and mutual mistrust that marked statements made prior to the meeting, especially between Bolivia and Brazil, the leaders met in a climate of frank, calm dialogue, they said afterwards.

According to the brief statement that they signed, Kirchner and presidents Evo Morales of Bolivia, Luiz Inácio Lula da Silva of Brazil and Hugo Chávez of Venezuela underlined that "energy integration is an essential aspect of regional integration."

The leaders "agree on the need to preserve and guarantee the supply of natural gas while promoting balanced development among producer and consumer nations," and "stressed that discussions over the price of gas must take place in a rational and equitable framework," says the statement.

The presidents opted for bilateral talks to address the impacts of Bolivia's decision to nationalise the country's natural gas reserves - the second-biggest in South America, after Venezuela's - and set new prices for gas, while ratifying their decision to continue moving ahead towards the construction of a mega-pipeline in South America.

In Puerto Iguazú, Chávez, Lula and Kirchner formally invited Morales to take part in the energy integration project that is to pipe natural gas 8,000 kilometres, from Venezuela's Caribbean coast to Argentina and Uruguay.

In addition, Argentina, Brazil and Venezuela committed themselves to "fomenting joint investments in Bolivia," South America's poorest country, with the aim of "favouring the country's integral development." The presidents thus made it clear that they continued to put a high priority on unity in the face of crisis.

The gathering was called by Lula, who was concerned about the Morales administration's decision to renationalise Bolivia's natural gas.

The decree announced by Morales on Monday states that foreign oil companies operating in Bolivia have six months to renegotiate their contracts with the state oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), which will now have majority control over the entire chain of production in the energy industry.

The measure especially affects Brazilian state-owned oil giant Petrobras - the largest foreign investor in Bolivia's natural gas industry - Spain's Repsol-YPF, British Gas and British Petroleum.

Brazil is the biggest importer of Bolivian gas. A full 67 percent of the gas consumed by industry in Sao Paulo, Brazil's industrial and financial centre, comes from Bolivia, where until Monday Petrobras had control of the country's two refineries, its biggest gas fields, a chain of petrol stations, and a pipeline running from Bolivia to Brazil.

Brazil imports 25 to 30 million cubic metres of gas a day from Bolivia at below-market price. But Petrobras will now have to negotiate a new contract, at a higher price. Although the presidents did not discuss prices, they acknowledged that they had agreed that gas supplies would be guaranteed.

The climate at the summit contrasted sharply with the tone of the announcement made late Wednesday by Petrobras President José Sergio Gabrielli, who warned that the firm would refrain from making new investments in Bolivia, reject any price hikes, and turn to international tribunals to fight the nationalisation measure.

Before the meeting, Morales said Gabrielli's declaration amounted to "blackmail."

Kirchner took part in the meeting because Argentina also imports natural gas from Bolivia, although it is much less dependent on Bolivian gas than Brazil. Argentina imports five million cubic metres a day of gas - four percent of the country's total consumption - at a subsidised price, which Morales plans on increasing.

In the news briefing, Kirchner said Argentina "respects the sovereign decision adopted by Bolivia," while Chávez stated that Morales had "fulfilled the mandate of the Bolivian people" by nationalising the country's oil and gas reserves.

The Bolivian leader expressed gratitude for the solidarity of his neighbours and said the meeting would help "strengthen the most neglected sectors" in his country. He also celebrated the "sincere, honest and serious" talks between the four presidents and said he was confident that the meeting had smoothed over tensions.

Lula recognised Bolivia's sovereign right to make decisions involving its natural resources, and said he was confident that the pending issues would be resolved in bilateral talks.

"I will always be willing to work together with Bolivia to contribute to its development," he said, while inviting Morales to present priority projects in which the neighbouring countries could invest "to improve the quality of life of the Bolivian people.."

Lula also clarified that Petrobras "is an independent company" that "has the autonomy to invest in other countries, and it will do so where opportunities present themselves, and where the conditions are suitable and convenient. That is true of any company.."

Despite the crisis shaking the Mercosur (Southern Common Market) trade bloc, made up of Argentina, Brazil, Paraguay and Uruguay - with Venezuela in the process of joining - Lula underscored the importance of standing as a united regional bloc in international forums.

Mercosur's smaller members, Uruguay and Paraguay, have recently complained that the bloc is not useful to them in its current shape and form, and that their larger partners resolve their own energy problems without even consulting them.

But "Often, what looks like a disagreement is the consolidation of a democratic process," said the Brazilian leader.

Finally, Chávez reaffirmed that the project to build the gas pipeline that will cut across most of South America from north to south will be forging ahead, and said Thursday's presidential summit was "a blow to the chin for those who try to create disunity" in the region. "There is no other way to pull our people out of underdevelopment than to stand together, united," he declared.

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