It was 2007 when Hugo Chavez seized Exxon oil assets in Venezuela. He simply stole the property of others without compensation and called them his own. When Exxon appealed to international law keepers, Exxon won.
International Chamber of Commerce arbitrators awarded Exxon $908 million for its assets in Venezuela. Playing by the rules and not suffering fools, Exxon appealed to international arbitration for settling its dispute with the dictatorship on its stolen assets. In a dictatorship, the dictator wins. In a world governed by laws between civilized nations, the law abiders win. In this case, that would be Exxon.
Nobody knows what the stolen assets are worth, but the arbiters’ award to Exxon of $908 million seemed low. Furthering the unfairness, Venezuela is expected to pay Exxon only $225 million. Nevertheless, Exxon will go on running the rest of its business like a business. And there’s a lot of it, putting nary a dent in its revenues of $125 billion per quarter.
If Venezuela wanted to hurt the big international oil company, it didn’t. The pain will be borne by Venezuela alone and it has yet to come in a meaningful way. Now operating the seized oil assets is Petroleos de Venezuela, a company wholly owned by the government. It brings in revenues of $90 billion each year, cash flows from which support Chavez’s social programs rather than maintaining the business once run by Exxon.
Such unsupported businesses usually flop in time, this one leaving the vast Venezuelan oil reserves right where they are and dwindling revenues for distribution to the people. If Chavez thought that kicking Exxon out would save Venezuelan oil reserves for Venezuela, he had that right. Its vast resource may remain in the ground for the lack of technological know-how to effectively find and efficiently produce it.
We have also seen dictatorships come and go. Prominent socialist regimes such as the Soviet Union, Poland, Rumania, Bulgaria, Chile, East Germany, and Greece have fallen apart in our lifetimes. Socialism doesn’t work for the people as promised. Such regimes implode upon themselves. Venezuelans face a future with a track record of failure.
Both Chavez and Exxon will each go their ways, each in their own way bringing what they believe is value to the world and its peoples. If you could bet between the two on their respective future success, where would you choose to stack your chips?