Oil negotiation between Honduras and Venezuela rankles Washington


HONDURAS: Cheaper energy is sought all around the world, but the very mention of it in Honduras is proving costly, as Fiona Forde reports from Tegucigalpa

When Manuel "Mel" Zelaya was sworn in as president on January 27th, he promised to turn the impoverished country into a better place for Hondurans. The 56-year-old leader of the Liberal party, more social democrat than leftist, vowed to combat crime, create 100,000 jobs, construct 200,000 homes for the poor and cut the price of fuel amid fears of an energy crisis.

According to the Central Bank, Honduras last year spent $928 million (€728 million) on imported oil, a figure expected to rise to $1.1 billion in 2006 to meet the country's daily consumption of 42,000 barrels. For a country as destitute as Honduras, where unemployment is 40 per cent and poverty marks the lives of two-thirds of the seven million population, the new president was acutely aware that such an energy bill would not be sustainable. Earlier this month, the wealthy landowner and former bank director introduced measures to curb these costs.

The clocks were put forward by one hour for three months - to capitalise on the extra 58 minutes of summer daylight. And under the new energy austerity, the drivers of the country's 60,000 state cars were ordered to fill their tanks with gasolina regular only, the cheapest form of petrol. The same cars were also issued with identification stickers to curtail their presence on the roads to certain days of the week. This was to save the country $6.3 million dollars a month and cut consumption by about 7 per cent. But President Zelaya did not stop there and, last week, while world leaders gathered in Vienna and expressed their concerns over President Evo Morales's plans to nationalise Bolivia's gas supplies, he met President Hugo Chavez to discuss the possibility of buying cheap oil from Venezuela, which is extending its net across Latin America with a well-defined oil deal.

PetroCaribe is a pact that allows Caribbean states to purchase oil from Venezuela under preferential terms: you pay 60 per cent up front and the remainder over a two-decade period at a 2 per cent interest rate. Alternatively, the debt can be serviced by supplying Venezuela with services or products, such as bananas or sugar, as would apply to Honduras.

But cheap oil is proving very costly here. Within 24 hours of the presidential aircraft touching down in Tegucigalpa on Monday, the US ambassador to Honduras called on President Zelaya to tell him Washington was not happy with the arrangement and that the proposed deal "was changing the rules of the game". "We hope this is commercial, and not political," Charles Ford said.

The ambassador also reminded the president of the $215 million the US has donated to his country in the Millennium Challenge Account, which can be drawn down in the coming weeks, a fund set up to strengthen the ties between the two countries.

But President Zelaya staunchly defended his decision. "If Venezuela can sell oil to the United States, where it has eight refineries and 19,000 service stations, why can't it sell oil to Honduras?" he asked.

Factions of the country's elite were also quick to voice their concerns about the trade links with their most important partner, which last year imported $623 million worth of goods from Honduras. In the view of Julio Flores, a prominent businessman: "Mel should know that to ask Venezuela to sell us oil is only challenging the United States, which has long been one of our allies." But Mr Zelaya was unrelenting. "The sovereignty of this country is not for sale," he retorted. "Neither for energy supplies or for funds."

However, that may change on June 5th when President Zelaya meets President George Bush in Washington "to discuss the issue of energy in depth", according to Mr Ford.

Meanwhile, Hugo Chavez says he would be happy to do business with President Zelaya, with no political strings attached.

"Unlike the International Monetary Fund, Venezuela doesn't apply conditions," he said, adding that the deal "means less debt for our neighbouring friends and brothers".