Bolivian Gas War
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The Bolivian Gas War, also called the First Bolivian Gas War (after the 2005 Bolivia protests began to be referred to as the Second Bolivian Gas War) was a social conflict in Bolivia centering around the exploitation of the country's vast natural gas reserves. The expression can be extended to design the general conflict in Bolivia about the exploitation of gas ressources, thus including the 2005 protests and the election of Evo Morales as president.
The conflict, which was intensified by long-simmering grievances over the government's economic coca eradication policies and corruption as well as violent military responses against strikes, came to a head in October 2003. Strikes and road blocks mounted by indigenous - - mainly Aymara and Quechua - and labor groups brought the country to a standstill, eliciting violent suppression from the Bolivian armed forces that left some 70 people dead, most inhabitants of El Alto, located on the Altiplano above of the capital city La Paz.
The governing coalition disintegrated, forcing the president, Gonzalo Sánchez de Lozada, to resign and leave the country on October 18 2003. He was succeeded by the vice president, Carlos Mesa, who put the gas issue to a referendum on July 18, 2004. In May 2005, under duress from protesters, the Bolivian congress enacted a new hydrocarbons law, increasing the state's royalties from natural gas exploitation. However, protesters, among whom Evo Morales and Felipe Quispe, demanded full nationalization of hydrocarbon resources. On June 6, 2005, Mesa was forced to offer his resignation, as tens of thousands of protesters blockaded La Paz from the rest of the country daily.
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[edit] Background
The gas reserves, which are the second-largest in South America, were discovered in the mid-1990s and are mainly located in the south-eastern Tarija Department, which detains 80% of the Bolivian gas and petrol. 10% is also detained by the Santa Cruz Department, according to Le Monde. Between 1996 and 2002, the estimated gas reserves were multiplied by 12.5, passing from 4.24 TCF (Trillion Cubic Feet) to 52.3 TCF. While the importance of the tin mines declined, those reserves accounted for the majority of foreign investment in Bolivia. Brazilians and Argentine pay to Bolivians US$2 each thousand cubic meter of gas, which costs between $12 to 15 in California.
In 1994, a contract with Brazil was passed, before 1996's privatization of the state-owned Yacimientos Petroliferos Fiscales de Bolivia (YPFB), created in the 1930s. The construction of the Bolivia-Brazil gas pipeline costed US$ 2.2 billions. Three companies dominate the gas sector in Bolivia: Petrobras, Repsol and Total. Template:Ref label.
To exploit the newly discovered reserves, a consortium called Pacific LNG was formed by the British companies BG Group and BP, and Spain's Repsol YPF. A plan costing some USD $6 billion was drawn up to build a pipeline to the Pacific coast, where the gas would be processed and shipped to Mexico and the United States. California, in particular, is a potentially big market for the gas, as it is planning to bring gas-fired power plants on-line in coming years to reduce emissions.
Government ministers point out the revenue from the gas will bolster the sagging Bolivian economy, and pretend that it will be invested exclusively in health and education. Opponents to the exportation of the gas as a raw material said that the agreement with the consortium would have given Bolivia only 18% of the future profits from the exportation of the gas and would have only generated somewhere from $40 to $70 million per year. They further argued that exporting the gas would simply be the latest case of many centuries of exploitation of Bolivia's natural resources by foreigners, starting with silver and gold from the 17th century onward and tin in the 20th century. Hence, they demand that a plant be built to process the gas in Bolivia and that 250,000 homes be supplied with gas before any of it is exported. As Le Monde puts it, "two reasons plead for an industrial exploitation of the gas, which the multinationals are today in measure of doing. The first one is related to the necessity of satisfying the Bolivians energetic needs. The second one demonstrates the interest of exporting a more profitable product, rather than selling raw material". According to the French newspaper, only La Paz, El Alto, Sucre, Potosi, Camiri and Santa Cruz are now connected to the gas network; making an interior network which would aprovisions all Bolivians would count $1.5 billion, withstanding the main gas pipeline to link the various regions together. According to Carlos Miranda, an independent expert quoted by Le Monde, the best industrialisation project is the petrochemical complex proposed by the Brazilian Braskem firm, which would create 40 000 direct or indirect employs and needs a $1.4 billion investment, which is equivalent to the sums invested by all three large firms Repsol, Total and Petrobras to this day. Template:Ref label.
[edit] Via Chile or Peru
The dispute arose in early 2002, when the administration of President Jorge Quiroga proposed building the pipeline through neighboring Chile to the port of Mejillones, the most direct route to the Pacific ocean. However, antagonism towards Chile runs deep in Bolivia because of the loss of Bolivia's Pacific coastline to Chile in the War of the Pacific (1879-1884).
Bolivians began vociferously campaigning against the Chilean option, arguing instead that the pipeline should be routed north through the Peruvian port of Ilo, 260 km further from the gas fields than Mejillones, or, better yet, first industrialised in Bolivia, as not to sell raw material but transformed material. According to Chilean estimates, the Mejillones option would be $600 million cheaper. Peru, however, claimed the difference in cost would be no more than $300 million. Bolivian proponents of the Peruvian option say it would also benefit the economy of the northern region of Bolivia through which the pipeline would pass.
Those in favor of the Chile option argue for accepting the deal as a best option, as Bolivia has no processing industries in place. US financiers, they say, are highly unlikely to put up more up-front costs to develop processing facilities within Bolivia.
Meanwhile, the Peruvian government, eager to promote "territorial and economic integration", has offered Bolivia a special economic zone for 99 years for exporting the gas at Ilo, the right of free passage, and the concession of a 10 km² area, including a port, that would be exclusively under Bolivian administration.
Shortly before leaving office, in July 2002, President Jorge Quiroga postponed the decision in this highly contentious issue, leaving it for his successor; he was thought to have not wanted to jeopardize his chances of being elected president in the 2007 elections.
Gonzalo Sánchez de Lozada, who won the 2002 presidential election, expressed his preference for the Mejillones option but made no "official" decision. However, the Gas War led to his resignation in October 2003. His successor, Carlos Mesa, also resigned following the 2005 Hydrocarbons Law.
Evo Morales, elected president in 2005, is strongly opposed to having a foreign consortium export Bolivia's natural gas. He argued it should be used domestically to help Bolivia, the poorest country in South America.
[edit] Escalation
The social conflict escalated in September 2003 with protests and road blockages paralyzing large parts of the country, leading to increasingly violent confrontations with the Bolivian armed forces. The unrest was spearheaded by Bolivia's indigenous majority, who accuse Sánchez de Lozada of pandering to the US government's war on drugs and blame him for failing to improve living standards in Bolivia. On September 8, 650 Aymaras started a hunger strike to protest against the detention of a villager, accused of having condemned during a "community justice" trial two young men to the death penalty for having stolen two lamas. On September 19, the National Coordination for the Defense of Gas mobilized 30,000 people in Cochabamba and 50,000 in La Paz to demonstrate against the pipeline. The following day, six Aymara villagers, including an eight year-old girl, were killed in a confrontation in the town of Warisata after government forces used planes and helicopters to circumvent the strikers to evacuate several hundred tourists stranded for five days in Sorata by road blockades.
In response to the shootings, Bolivia's Labor Union (COB) called a general strike on September 29 that paralyzed the country with road blockades. Union leaders insisted they would continue until the government backs down on its decision. Poorly armed Aymara community militias drove the army and police out of Warisata and the towns of Sorata and Achacachi. Eugenio Rojas, leader of the regional strike committee, declared that if the government refused to negotiate in Warisata, then the insurgent Aymara communities would surround La Paz and cut it off from the rest of the country — a tactic employed in the Túpaj Katari uprising of 1781. Another campesino leader who organized the road blockades, Felipe Quispe (also a member of Congress) stated that he would not participate in dialogue with the government until the military withdraws from blockaded areas. The government refused to negotiate with Quispe, claiming that he did not have the authority to represent the campesino movement.
As the protests continued, protesters in El Alto, a sprawling indigenous city of 750,000 people on the periphery of La Paz, proceeded to block key access routes to the capital, causing severe fuel and food shortages. They also demanded the resignation of Sánchez de Lozada and his ministers, Yerko Kukoc, Minister of Government, and Carlos Sánchez de Berzaín, Minister of Defense, who are thought to be responsible for the Warisata massacre. In addition to clamors for popular sovereignty over Bolivian gas, protesters also voiced their opposition to the Free Trade Area of the Americas, currently under negotiation by the U.S. and Latin American countries, but declared "burried" by Venezuelan leader Hugo Chavez during the 2005 Mar del Plata Summit of the Americas.
Faced with escalating civic unrest, Sánchez de Lozada complained in an interview with the BBC on October 1 that "they want to govern from the streets, not from parliament and within our institutions." He also declared to Bolivian newspapers: "I'm not going to resign, because my wife doesn't want to". However, he did eventually resign, after repressing during a week the social movement in El Alto, killing 80. After supporting Lozada and criticizing the demonstrators, the US embassy eventually accepted his succeeder, Carlos Mesa, whom pledged not to kill anybody during his term, a promise which has been kept .
[edit] Martial law in El Alto
On October 12, the government imposed martial law in El Alto after sixteen people were killed and several dozen wounded in violent clashes which erupted when a caravan of oil trucks escorted by police and soldiers deploying tanks and heavy-caliber machine guns tried to breach a barricade.
On October 13, the administration of Sánchez de Lozada suspended the gas project "until consultations have been conducted with the Bolivian people." However, Vice President Carlos Mesa deplored what he referred to as the "excessive force" used in El Alto (80 deads) and withdrew his support for Sánchez de Lozada. The Minister of Economic Development, Jaime Torres, of the MIR party, also resigned.
The U.S. Department of State issued a statement on October 13 declaring its support for Sánchez de Lozada, calling for "Bolivia's political leaders [to] publicly express their support for democratic and constitutional order. The international community and the United States will not tolerate any interruption of constitutional order and will not support any regime that results from undemocratic means." Template:Ref label.
On October 18, Sánchez de Lozada's governing coalition was fatally weakened when the New Republic Force party withdrew its support. He was forced to resign and replaced by his vice president, Carlos Mesa, a former journalist.The strikes and roadblocks were lifted.
Among his first actions as president, Mesa promised not to kill anybody during his term, a referendum on the gas issue and appointed several indigenous people to cabinet posts. The gas referendum took place on July 18, 2004.
[edit] The 2005 Hydrocarbons Law
On May 6 2005, the long awaited Hydrocarbons Law was finally approved by the Bolivian Congress. On May 17, Mesa failed to either sign or veto the Bolivian congress’ controversial Hydrocarbons Law, thus constitutionally requiring Senate President Hormando Vaca Díez to sign the measure and put it into effect.
The new law returns legal ownership to the state of all hydrocarbons and natural resources, keeps royalties at 18 percent, but increase taxes from 16 to 32 percent, gives the government control in the commercialization of the resources, allows for continuous government control with annual audits, and mandates companies to consult with indigenous groups when gas is found on their land. Protesters argue that the new law does not go far enough to protect the natural resource from exploitation by foreign corporations, demanding a complete nationalization of the gaz. The law stated that the 76 contracts signed by foreign firms must be renegociated before 180 days, which hasn't been done.
Due to the incertainty of the renegociation of the contracts, foreign firms have practically stopped investing in the gas sector. Forein investments thus virtually came to a standstill in the second half of 2005. Supply constraints - very similar to those observed in Argentina after the 2001 price-fixing - are deepening in diesel, LPG, and begin to be apparent in natural gas. The May-June social unrest affected the supply of hydrocarbons products to the internal market, principally LPG and natural gas to the occidental region. Brazil implemented a contingency plan - led by the Energy and Mines Minister - to mitigate any potential impact from gas export curtailment. Although the supply was never curtailed, the social unrest in Bolivia created a strong sensation that the security of supply could not be guaranteed. Occasional social action has continued to affect the continuity of supply, especially valve-closing actions.
[edit] Carlos Mesa's June 2005 resignation
May 24 2005 More than 10,000 Aymara peasant farmers, from the twenty highland provinces, came down from El Alto's Ceja neighborhood into La Paz to protest.
On May 31 2005, residents of El Alto and the Aymara peasant farmers returned to La Paz. More than 50,000 people covered an area of nearly 100 square kilometers. The next day, the first regiment of the National Police decided, by consensus, not to repress the protests and have been internally reprimanded by the government.
Approximately half a million people mobilized in the streets of La Paz, on June 6. President Mesa offered his resignation. Riot police used tear gas, as miners amongst the demonstrators set off dynamite in clashes near the presidential palace, while a strike brought traffic to a standstill. The protestors demanded the nationalisation of the gas industry and reforms to give more power to the indigenous majority, who were mainly from the impoverished highlands.
Caretaker President Rodriguez has proceeded to implement the Hydrocarbons Law. The new tax IDH has been levied from the companies that are paying 'under reserve'. A number of upstream gas companies have invoked Bilateral Investment Protection Treaties and entered the conciliation phase with the state of Bolivia, under such treaties, as step prior to potential arbitration by a controversed court dependent on the World Bank, which could force Bolivia to pay indemnization to the companies.
[edit] Other countries
The social conflicts of the last few years, which can be accounted to the Gas exportation vs. industrialization conflict and to various indigenous and social revindications, has paralyzed Bolivia's political life. The neoliberal Washington consensus, personalized by Gonzalo de Lozada's administration, has led the way, as of 2006, to newly elected president Evo Morales. In the meantime, South American countries are contemplating other ways to aprovision themselves in gas. Chile is thinking about importing liquified gas from Indonesia or Australia; another project aims at linking the Camisea gas reserves, located in Peru, to Argentina, Brazil, Chile, Uruguay and Paraguay. Linking Pisco (south of Peru) to Tocopilla (north of Chile) - 1 200 km - would cost $2 billions. However, experts doubt the Camisea reserves are enough for all the Southern Cone countries.
Another gas pipeline project, of a 8 000 km lenght, has been officialized in December 2005, to link Venezuela to Argentina, via Brazil. Its cost is estimated between $8 and 12 billions. But this would force Venezuela to double its amount of exploitation wells (it now has 20 000 of those).
50% of Argentina's and 25% of Chile's energy consumption are based on gas, while other South American countries are lot less dependent on this resource. It must be noted that the gas market is more regional than worldwide, as distance increase a lot costs Template:Ref label.
[edit] Endnotes
- Template:NoteTemplate:Note labelTemplate:Note labelTemplate:Note labelTemplate:Citenews
- Template:NoteTemplate:Note label October 13, 2003 US State Department Call for Respect for Constitutional Order in Bolivia
[edit] See also
- Cochabamba anti-privatization protests
- History of Bolivia
- List of dead in Bolivian Gas War
- Bolivian gas referendum, 2004
