EU warns Bolivia on nationalizing natural gas

updated 12:12 p.m. ET May 2, 2006

SANTA CRUZ DE LA SIERRA, Bolivia - The European Union warned Tuesday that Bolivia’s decision to nationalize its natural gas industry could hurt world energy markets.

Across Bolivia’s border, Brazilian President Luiz Inacio Lula da Silva called an emergency meeting to assess the impact on Brazil — the biggest buyer of Bolivian gas and the owner of Petroleo Brasileiro SA, one of Bolivia’s biggest gas producers.

President Evo Morales ordered troops Monday to surround 56 natural gas installations throughout the Andean nation and threatened to evict foreign companies unless they gave Bolivia control over production within six months.

The decree fulfills Morales’ election promise to increase state control over the country’s natural resources, which he says have been “looted” by foreign companies. It also solidifies his role alongside Venezuela’s Hugo Chavez and Cuba’s Fidel Castro in Latin America’s new axis of leftist leaders opposed to U.S. and corporate influence in the region.

Morales was elected in a landslide in December and took power in January.

On Monday, he said the nationalization of the hydrocarbons sector “was just the beginning, because tomorrow it will be the mines, the forest resources and the land.”

While EU nations import little natural gas from the South American country, bloc spokesman Ferran Tarradellas Espuny said the move “may have a negative impact on markets, because the markets are now subject to considerable pressure as far as prices are concerned.”

Morales’ announcement followed a trend by oil- and gas-rich Latin American nations to exact a larger share of profits from the extraction of fossil fuels.

Ecuador is arguing with Washington over a new oil royalties law. Last month, Chavez ordered the seizure of oil fields from France’s Total and Italy’s Eni SpA when the companies failed to comply with a government demand that operations be turned over to Venezuela’s state oil company, Petroleos de Venezuela SA.

Bolivia has South America’s second-largest natural gas reserves after Venezuela.

Morales ordered all foreign companies to turn over most production control to Bolivia’s cash-strapped state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos, or YPFB. Engineers with the Bolivian company were ordered to installations and fields tapped by the foreign companies, and Morales said the companies have six months to agree to new contracts or leave Bolivia.

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