This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L  CARACAS 000967 
 
SIPDIS 
 
 
NSC FOR TSHANNON AND CBARTON 
ENERGY FOR DPHUMPHREY AND ALOCKWOOD 
 
E.O. 12958: DECL: 03/14/2014 
TAGS: EPET ECON VE
SUBJECT: NEW PDVSA BOARD ANNOUNCED 
 
REF: A. (A) CARACAS 731 
 
     ¶B. (B) CARACAS 851 
 
Classified By: AMB. CHARLES S. SHAPIRO, FOR REASONS 1.4 (b) and (d) 
 
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SUMMARY 
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¶1. (C) A new, expanded Petroleos de Venezuela (PDVSA) board 
was announced on March 12.  The change is not likely to have 
any near term effect upon operations.  The board, the ninth 
named in the five years of the Chavez government, will 
continue to be led by Ali Rodriguez and will have three vice 
presidents with specific corporate responsibilities, two 
internal directors and three external directors.  One of the 
three newly-named board members is Jose Rojas, a 
well-respected former Finance Minister and Venezuelan 
representative to the Inter-American Development Bank.  In 
other PDVSA news, there are reports that the photos of 
company personnel who signed in favor of a referendum on the 
Chavez presidency will be posted as "enemies of the 
revolution."  Some senior employees may be fired while others 
will be denied bonuses or raises unless they repudiate their 
signatures, according to a former senior PDVSA official 
aligned with the opposition.  End Summary. 
 
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YET ANOTHER NEW BOARD 
--------------------- 
 
¶2. (U) On March 12, Minister of Energy and Mines Rafael 
Ramirez announced the appointment of yet another new board 
for Petroleos de Venezuela (PDVSA), Venezuela,s state-owned 
oil company.  The board, the ninth named in the five years of 
the Chavez government, has been expanded to ten members and 
will now include:  Ali Rodriguez, President; Vice Presidents 
Jose Rojas, Felix Rodriguez and Ivan Hernandez; internal 
directors Dester Rodriguez and Nelson Martinez; and external 
directors Luis Vierma, Nelson Nunez, Rafael Rosales and 
Victor Alvarez_. 
 
¶3. (U) Jose Rojas, Ivan Hernandez and Victor Alvarez_ are the 
new members of the Board.  Jose Rojas served as Finance 
Minister from 1999-2001 and then served for two years as the 
Venezuelan representative to the Inter-American Development 
Bank.  Ivan Hernandez is currently General Manager of the 
Paraguana Refining Complex.  Hernandez had previously retired 
from that post and was requested to return during the 
December 2002 strike to lead the effort to re-start 
Venezuela's largest refinery complex.  Victor Alvarez_ 
formerly held positions as Vice Minister of Industry and 
President of the state-owned Foreign Commerce Bank.  He has 
also served as the Venezuelan representative to the FTAA 
negotiations.  We do not yet know if this appointment will 
affect that assignment. 
 
¶4. (U) In what has been announced as yet another 
reorganization of PDVSA ) but is, in fact, virtually a 
return to the corporate structure in place in December 2002 
) the three Vice Presidents will have specific corporate as 
opposed to regional management responsibilities.  Jose Rojas 
will manage finance; Hernandez will manage national and 
international refining; and Felix Rodriguez, originally 
appointed to the board in 2003 as manager of the so-called 
western production area, will now manage national exploration 
and production. 
 
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BUT UNREST CONTINUES IN PDVSA 
------------------------------ 
 
¶5. (C) In other PDVSA news, Jorge Kamkoff, PDVSA's Senior 
Vice President at the time of the December 2002 oil strike, 
informed econoff that 33 percent of current PDVSA staff in 
Caracas, 65 percent in the western operational area, and 48 
percent in the east are reported to have signed petitions in 
support of the referendum on Chavez's presidency.  According 
to Kamkoff, any senior executives who signed may well be 
dismissed from the company but the number of lower ranked 
signatories is too large to warrant dismissal.  Instead, 
PDVSA personnel have been told that they will not receive a 
planned March bonus or a salary increase due to go into 
 
effect in April unless they repudiate their signatures.  In a 
more activist mode, we have been told that members of the 
"Bolivarian circles" are posted outside PDVSA,s Caracas 
headquarters with copies of the signature list.  Kamkoff 
added that there are reports that photos of people who signed 
will also be posted around PDVSA and named as "enemies of the 
revolution."  Kamkoff characterized this as the continuing 
effort by lower lever PDVSA true believers to get rid of 
personnel who have not shown sufficient revolutionary fervor. 
 
 
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COMMENT 
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¶6. (C) There have been rumors of changes in the PDVSA board 
for some time now.  In fact, given that these rumors included 
speculation that representatives of the Ministries of 
Infrastructure and Planning and Development would be put on 
the board, the announced changes are somewhat better than we 
had expected.  While the board retains military and union 
representations, the only non-oil industry additions are 
finance professionals.  Jose Rojas, in particular is well 
thought of and has ample financial experience.  This may lead 
to much needed improvements in the financial controls of the 
company.  On the other hand to the extent that the board has 
oil sector professionals in it, they are men who are invested 
in the political objectives of the Chavez "revolution.  This 
is not a board that is likely to spur expansion of PDVSA's 
own production.  In the end, political control is more 
important than unleashing the industry.  PDVSA is 
increasingly an off-budget cash cow for various GOV "social" 
(read electoral) missions.  Over the next six months, at a 
minimum, we think this is likely to be a top priority for 
Chavez, and that this board will give him what he wants. 
Finding the money may be the task of the finance 
professionals now on the board. 
 
¶7.  (C)  We would also note that PDVSA remains uncomfortably 
placed as Chavez threatens the use of an "oil weapon" in any 
confrontation with the USG.  After first raising it in his 
February 27 speech ref (a), he sounded a milder note in the 
signing ceremony for the award of the Deltana Platform 
natural gas concession to ChevronTexaco (ref b).  However, in 
a March 13 interview with the New York Times, he stressed 
that he would not accept any effort to remove him by force 
and that this would lead to the price of oil rising to $50 
dollars per barrel.  While Chavez may be uncomfortable with 
Venezuela's close oil ties to the U.S., there is no near to 
middle term alternative for Venezuela.  Indeed, according to 
press reports, Ministry of Energy and Mines Vice Minister for 
Hydrocarbons Luis Vierma (an old PDVSA hand) while in 
Wshington spoke of deepening the bilateral energy 
relationship and of increasing Venezuela's refining capacity 
in the U.S.  Amidst these contradictory signals, and with the 
current priority being for PDVSA to produce short-term 
revenue at the expense of new investment either in Venezuela 
or elsewhere, we see the new board as incapable of 
undertaking major new managerial initiatives to put the 
troubled giant back on its feet. 
SHAPIRO 
 
 
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      2004CARACA00967 - CONFIDENTIAL