[Guest post by DRJ]
In January 2007, Venezuela’s Hugo Chavez announced plans to nationalize the majority interests owned by Chevron, ExxonMobil, ConocoPhillips, Statoil and BP in Venezuela’s lucrative eastern Orinoco Belt unless the companies agreed to substantial reductions in their ownership interests. Nationalization of the interests of ExxonMobil and ConocoPhillips was completed last summer.
In September 2007, ExxonMobil filed an arbitration claim with the International Centre for Settlement of Investment Disputes (ICSID) for compensation for the expropriation of its Venezuelan heavy-oil projects.
During the past two months, ExxonMobil has obtained court orders in the UK, the Netherlands, the Netherlands Antilles and the US that freezes up to $12 Billion in Venezuelan assets to satisfy ExxonMobil’s claim should it win its arbitration claim.
ExxonMobil has a reputation for being hard-nosed:
“If you look at Exxon’s decision, it is really driven by their belief that over the long run, the regulatory environment and fiscal terms in Venezuela can only get worse, not better,” said Alex Gorbansky, managing director of the Frontier Strategy Group. “So, arbitration gives them essentially the best possible expected outcome on their investment.”
“Exxon has historically taken a more hard-nosed approach,” he said.”
Freezing this amount of assets may be a problem for Chavez and Venezuela.
By the way, ExxonMobil is not only hard-nosed in its business dealings but it also pays record taxes. Here’s an analysis from University of Michigan economics Professor Mark J. Perry:
“Conclusion: In other words, just one corporation (Exxon Mobil) pays as much in taxes ($27 billion) annually as the entire bottom 50% of individual taxpayers, which is 65,000,000 people! Further, the tax rate for the bottom 50% is only 3% of adjusted gross income ($27.4 billion / $922 billion), and the tax rate for Exxon was 41% in 2006 ($67.4 billion in taxable income, $27.9 billion in taxes).”
Does all this make ExxonMobil a good citizen? It does in my book.
UPDATE: Hugo Chavez is mad at ExxonMobil and “Mr. Danger.”