The troubling trend of nationalization

Some analysts believe this approach will only embolden more countries to follow Venezuela’s lead, arguing that the world’s largest private oil companies — with diplomatic support from Western governments — should resist being strong-armed out of existing contracts.

“Either you hang together, or you surely will hang one by one,” said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank.

“I’m not sure Bolivia is the end of this game,” said Goldstein.

Ecuador is arguing with Washington over a new oil royalties law. Last week, the World Bank tentatively resolved a financial dispute with Chad, which had threatened to shut off an oil pipeline.

The rebels threatening Nigeria’s oil infrastructure have gained clout because of high oil prices, and analysts said they would not be surprised to see Angola try to renegotiate some of its contracts with foreign oil companies.

“When you start polling the world for where major oil companies can do business, you have West Africa, Russia, the Middle East and Latin America. What they all share is that they’re becoming more and more difficult operating environments,” said A.G. Edwards oil analyst Bruce Lanni.

The European Commission said Tuesday it would study the impact of Bolivia’s action on foreign investors. Besides Brazil’s Petroleo Brasileiro SA, or Petrobras, most of the biggest natural gas players in Bolivia are European, including Britain’s BG Group PLC and BP PLC; Spanish-Argentine Repsol YPF SA and France’s Total SA.

For its part, the Bush administration said it was worried about U.S. corporate interests being trampled upon abroad, though it stopped short of any direct criticism of the Bolivian government.

“When the issue of privatization does come up, or renegotiating contracts, certainly our concern is that any government meet or fulfill its contractual obligations,” State Department spokesman Sean McCormack said. But McCormack would not say whether any contracts had been violated because “we don’t have a complete picture of the situation.”

What is known is that Bolivian President Evo Morales ordered troops Monday to surround 56 natural gas installations throughout the Andean nation, threatening to evict foreign companies that did not give control over production to Bolivia’s cash-strapped state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, within six months.

Morales was elected late last year on a populist platform, promising to return to the country natural resources that had been “looted” by foreign companies. Bolivia has South America’s second-largest natural gas reserves after Venezuela, and is a critical supplier to Brazil and Argentina.

Daniel Yergin, chairman of Cambridge Energy Research Associates, said Morales’ action might be expedient politically, but warned that it could backfire down the road.

“It will hardly promote the investment Bolivia needs to monetize its gas reserves,” Yergin said. “Whatever the short-term gains, there will be long-term costs.”

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