Pulpit Denied?

If Hugo Chavez had made his case calmly and rationally at the opening of the UN General Assembly in New York a few weeks ago, the outcome of yesterday's vote to fill a Latin American vacancy on the Security Council might have been different. Despite a transparent effort to buy UN member countries' votes with aid and trade deals, Venezuela couldn't garner as many votes as Guatemala, which had no petro-dollars to lavish on its supporters. After 10 rounds of voting, Guatemala was leading, but not by enough to win the seat. UN watchers expect a compromise candidate to be put forward today. While the outcome is already being portrayed as the result of a strong-arm campaign by the US, Sr. Chavez has only his poor impulse control to blame. And if yesterday's full-page ad in the Washington Post--and presumably many other US papers--is any indication, the UN isn't the only place where Chavez has damaged his country's reputation.

The management of Citgo Petroleum has found it necessary to "set the record straight" concerning the expiration of its marketing agreement with 7-Eleven and their relationship with the Venezuelan government. I doubt the clarification of ownership and "alignment with the global energy policy" of PDVSA, as they put it, will provide much comfort to Citgo's retailers or concerned customers. Although the ad, which is based on an earlier press release, didn't mention by how much sales were off, its publication suggests that the various boycotts of Citgo are having more effect than the "buy-cott" that one of my readers highlighted in a comment.

My sympathies are with the Citgo retailers, here. While retail boycotts are one of the few channels by which consumers can express displeasure with an oil company's policies, they harm retailers more than the parent company, which can sell any resulting surplus product on the spot market. When most of these small, independent businesses signed their contracts with Citgo, its government-owned parent company was precisely the reliable supplier of long standing that the Citgo ad characterizes them as being.

Going forward, Citgo retailers must assess whether the benefits of the Citgo brand and supply contract will outweigh the inherent risks of economic and social hardship that could follow future comments or actions by Sr. Chavez. Unlike the publicly-traded, multinational companies that have frequently been portrayed as insufficiently loyal to their national homes, a state oil company must ultimately hew to the policies of the government that owns it, thus sharing the global reputation of that state, for good or ill. As long as Hugo is at the helm, there's more downside than up. If I were a Citgo retailer, I'd be looking seriously at other options.