VZCZCXYZ0019
RR RUEHWEB

DE RUEHMU #0640/01 0682311
ZNR UUUUU ZZH
R 092311Z MAR 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 9411
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1002
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS MANAGUA 000640 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EEB/ESC 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EAID MCC NU VE
SUBJECT: NICARAGUA - VENEZUELA AGREEMENT ON ENERGY 
COOPERATION AND PETROCARIBE 
 
¶1. (SBU) Summary. As part of a series of Bolivarian 
Alternative agreements between Nicaraguan and Venezuela 
signed on January 11, 2007, Nicaraguan and Venezuelan 
Ministers of Foreign Relations also signed an Agreement on 
Energy Cooperation and Petrocaribe.  The agreement sets forth 
a schematic for the supply of Venezuelan fuel to Nicaragua 
that includes how much of a purchase may be financed, for how 
long, and at what rate of interest.  End Summary. 
 
¶2. (SBU) The Agreement on Energy Cooperation and Petrocaribe 
was one of a series of thirteen commitments with Venezuela 
negotiated by the Ortega government before it came to power 
on January 10, 2007.  Nicaraguan Minister of Foreign 
Relations Samuel Santos and Venezuelan Minister of Foreign 
Relations Nicolas Maduro Moros signed the agreement on 
January 11, 2007.  The substance of the agreement, along with 
the other commitments made that day, was kept from the public 
for weeks.  This cable reports on an unsigned copy of the 
agreement. 
 
Preambular Language 
------------------- 
¶3. (SBU) Preambular language mentions the creation of 
PetroCaribe on June 29, 2005 as an enabling organization for 
energy policies and plans.  The parties reaffirm close ties 
of friendship and cooperation and take into account that 
"cooperative solidarity" is indispensable to attain mutual 
objectives of social and economic progress in an environment 
of peace and social justice.  The parties recognize the need 
to adapt to changing conditions in petroleum markets. 
 
Article 1: Supply of Petroleum Products 
--------------------------------------- 
¶4. (SBU) The Government of Venezuela will supply crude oil, 
refined products, and liquefied natural propane gas (GLP) or 
equivalent energy projects to Nicaragua in a quantity up to 
10,000 barrels per day, based on a monthly average.  This 
supply will be the object of evaluation and adjustment 
according to the purchasing needs of the Government of 
Nicaragua, the availability of supply from Venezuela, and 
decisions adopted by the Organization of Oil Exporting 
Countries or whatever circumstance that obligates Venezuela 
to change the quota assigned according to the specification 
of this agreement. 
 
Article 2: PDVSA Policies Prevail 
--------------------------------- 
¶5. (SBU) Supply will be effected between the Government of 
Venezuela and the Government of Nicaragua, or Nicaraguan 
entities chosen by mutual agreement between both governments, 
in accordance with the commercial policies and practices of 
Petroleos de Venezuela (PDVSA), which will administer 
deliveries under this agreement according to the quota 
ratified by the Government of Venezuela. 
 
Article 3: Financing Terms 
-------------------------- 
¶6. (SBU) The Government of Venezuela will provide financing 
under the following scheme: a grace period of 2 years on the 
payment of principal and an annual interest rate of 2%.  The 
percentage to be financed varies with the international 
reference price per barrel for crude oil according to the 
following scale: 
 
--  $15/b, then 5%. 
--  $20/b, then 10% 
--  $22/b, then 15% 
--  $24/b, then 20% 
--  $30/b, then 25% 
--  $40/b, then 30% 
--  $50/b, then 40% 
-- $100/b, then 50% 
 
¶7. (SBU) In addition, 15-year financing at 2% per annum 
(including a two-year grace period) will apply if the 
international reference price per barrel of crude oil is less 
than $40; 25-year financing at 1% per annum (including a 
two-year grace period) will apply if the international 
reference price per barrel of crude oil is greater than $40. 
(Note: the international reference price was not designated.) 
If mutually agreed, payment may be made in-kind (i.e., goods 
or services) at preferential prices, including &those 
products whose price has been affected by the policies of 
rich countries.8 
 
¶8. (SBU) Payment must be received within 90 days of having 
 
received notice of shipment.  No interest will be charged 
during the first 30 days.  An annual rate of 2% interest will 
apply to the remaining 60 days.  The Government of Venezuela 
reserves the right to deliver to the port of its choice (cost 
plus freight).  Financing will only cover the cost of the 
product (FOB Venezuela); the cost of shipping will be paid no 
later than 30 days from the notice of shipment. 
 
Article 4: Debt Payment Mechanisms 
---------------------------------- 
¶9. (SBU) Interest and principal payments for debt contracted 
by the Government of Nicaragua or Nicaraguan entities, as the 
case may be, may be made through commercial compensation, 
when requested by the Government of Venezuela. 
 
Article 5: Use 
-------------- 
¶10. (SBU) Financed sales will be used for internal 
consumption by the Government of Nicaragua.  On each 
occasion, quantities will be decided by the Government of 
Venezuela. 
 
Article 6: Imports Not To Exceed Consumption 
-------------------------------------------- 
¶11. (SBU) As in the case under the Energy Cooperation Program 
with Central American and Caribbean countries (San Jose 
Agreement), imports under this agreement may not exceed the 
level of internal consumption of the Government of Nicaragua. 
 
Article 7: San Jose Agreement 
----------------------------- 
¶12. (SBU) This quantities purchased under this agreement will 
have no affect on financing mechanisms in place under the San 
Jose Agreement for Central America and the Caribbean.  For 
this reason, the Government of Nicaragua will notify 
Venezuela of the quantities of purchases to be made within 
the context of this agreement. 
 
Article 8: Executing Authorities 
-------------------------------- 
¶13. (SBU) The Ministry of Energy and Petroleum and Venezuelan 
Oil Company (PDVSA) will execute this agreement on behalf of 
the Government of Venezuela.  They will establish the 
procedures and mechanisms for implementation. 
 
Article 9: Duration, Renewal, Termination 
----------------------------------------- 
¶14. (SBU) This agreement will be in effect for a period of 
one year, to be automatically renewed for equal and 
successive terms.  This agreement may be modified or 
withdrawn when it is in the interest of the Government of 
Venezuela and it so demands, in which case Venezuela will 
notify the Government of Nicaragua in writing at least 30 
days in advance. 
 
Article 10: 2000 Agreement on Energy Cooperation 
--------------------------------------------- --- 
¶15. (SBU) This agreement is an extension of the Agreement on 
Energy Cooperation signed in Caracas on October 19, 2000. 
TRIVELLI