The U.S. suspended free-trade talks with Ecuador after the Andean country this week seized an oil field from Occidental Petroleum Corp., the fourth-largest U.S. oil company. Ecuador called the U.S. action “blackmail.”
“We will seek an immediate clarification from the government of Ecuador, including whether it intends to fully compensate the company as required under our Bilateral Investment Treaty,” said Neena Moorjani, a spokeswoman for U.S. Trade Representative Rob Portman.
Ecuador’s interior minister, Felipe de la Vega, criticized the U.S. decision in an interview with Canal Uno television, La Hora reported. “This is a sanction, unacceptable blackmail,” he said.
The suspension heightens tensions between Ecuador and the U.S. as President George W. Bush faces deteriorating relations with Venezuelan President Hugo Chavez and Bolivian President Evo Morales.
“This is a two-year-old business dispute that just got politicized,” said Patrick Esteruelas, an analyst at New York- based Eurasia Group. “The suspension of talks isn’t surprising.”
Ecuador on May 15 canceled Occidental’s rights to the Block 15 field in the northeastern part of the country. Los Angeles- based Occidental, which has operated in Ecuador since 1985 and gets 7 percent of its output there, said it still seeks an “amicable” resolution of the dispute.
Exploring Options
“Occidental is exploring all available options,” Esteruelas said. “They would like to see if they could remain an operator while the state retains ownership of the block.”
The U.S. began free-trade negotiations with Colombia, Peru and Ecuador in 2003 partly to help those economies lessen their reliance on the coca trade. The Andean region, which also includes Bolivia, is the world’s main producer of coca, the main ingredient in cocaine.
Goods from Colombia, Peru and Ecuador have duty-free access to the U.S. through the end of this year under an agreement intended to curb the illegal drug trade in the region. A free- trade accord would make that access permanent and open up the Andean countries to more goods from the U.S.
“We are very disappointed at the decision of Ecuador, which appears to constitute a seizure of the assets of a U.S. company,” Moorjani said.
The U.S. had $23.6 billion worth of trade with Columbia, Peru and Ecuador in 2004, led by coffee, fruits, chemicals and machinery.
Ecuador produces about 530,000 barrels of oil a day, with state-run PetroEcuador accounting for 40 percent. The country shipped about 340,000 barrels of oil a day to the U.S. in December, according to the U.S. Energy Department.
To contact the reporter on this story:
Peter Wilson in Caracas at [email protected].
Last Updated: May 17, 2006 12:26 EDT
