London-Venezuela Oil Deal: Just The Ticket

Tuesday, Feb 20, 2007

Probably no international agreement has been quite so unusual as the deal being signed today between Ken Livingstone, London’s mayor, and the European branch of Venezuela’s state oil company. In exchange for up to $32m-worth of diesel oil, intended to subsidise bus travel in London for the poor (defined as those on income support), the Greater London Authority will provide its expertise to the Venezuelan government on a wide range of projects, from transport to housing, and from cleaning up rivers to the promotion of tourism.

This agreement is a novel way of doing business between two entities that are not usually considered together in the same breath: a great international city like London and a Third World oil-producing country like Venezuela. Yet in practice, they are not so different. Both have populations that are divided into the very rich and the very poor, and both have popular and charismatic left-wing rulers with revolutionary ambitions.

The origins of the deal go back to last June when Hugo Chávez, the president of Venezuela, visited London and offered to extend to London the cheap oil provision already offered to poor neighbourhoods in the United States, including those of Boston and New York.

At the time it seemed a wonderful gesture, but no one was quite sure how it would work. Since London was hardly in need of Venezuelan charity, there would have to be some reciprocity. What could London offer Venezuela in exchange for cheap oil? Assistance to Venezuela was way outside the guidelines of Britain’s ministry of overseas development, which refuses to have dealings with countries that are considered to be too rich.

So Ken Livingstone’s team at the GLA and at Transport for London came up with the idea of providing Venezuela with London’s acquired expertise on such issues as transport and housing, policing and tourism, cultural activities and rubbish disposal. Instead of Venezuela asking for expensive advice from McKinsey or some other vendor of teenage consultants, it could come to London, the city with such honed marketing skills that it had won the bid for the Olympics. It looked like a good match.

The intervening months have not been easy. Venezuela is going through a revolutionary upheaval, and solid backing from the president does not necessarily translate into useful work at a lower level. There have been hiccups along the way. Livingstone’s visit to Caracas in November, when the details of the agreement were still being discussed, had to be postponed at the last minute, on the grounds that it would not have been opportune during Venezuela’s presidential election campaign, which concluded with a sizeable win for Chávez in December.

So now finally there is an agreement, duly signed at City Hall with Nicolas Maduro, Venezuela’s foreign minister. Peter Hendy, London’s transport commissioner, will soon be off to Caracas to provide a helping hand, while London’s poor will be getting a subsidised Oyster card.

Is this practical socialism or enlightened capitalism? Perhaps a bit of both. American oil companies have traditionally provided cheap oil for the poor on occasion, so Chávez’s gesture in the United States was not in any way outlandish.

For London, traditionally involved with the countries of the British Empire, the agreement with Venezuela enables horizons to be broadened just at the moment when Latin America is waking up from a long sleep. The election of radical governments in half a dozen countries, and the effervescence created by new social movements throughout the region, is changing the continent out of all recognition.

London will now have a chance not just to watch but to participate in the changes ahead.

Source: The Guardian

This is the Energy Funding Contribution and Co-operation Agreement between (Petróleos de Venezuela) PDV Europa B.V. and Greater London Authority and Transport for London.

The document is availabe in PDF and RTF format in both English and Spanish.

Energy Funding Contribution and Co-operation Agreement PDF (English)
Energy Funding Contribution and Co-operation Agreement RTF (English)

Energy Funding Contribution and Co-operation Agreement PDF (Spanish)
Energy Funding Contribution and Co-operation Agreement RTF (Spanish)

Related press release:

Quarter of a million Londoners on income support to get half price bus and tram travel