Venezuela Moves Bank Accounts After Exxon Freeze

Venezuela has begun moving oil revenue into Swiss banks to avoid a possible seizure of funds by Exxon Mobil in a legal tussle that pits leftist anti-U.S. President Hugo Chavez against America's biggest company.

Hugo Chavez
Howard Yanes
Hugo Chavez

The Texas energy giant won court rulings that froze assets belonging to Venezuelan state oil company PDVSA in a hardball maneuver meant to ensure the OPEC nation pays compensation for taking over a multibillion-dollar oil project last year.

Chavez Sunday vowed to fight back, threatening to stop oil sales to the United Statesif it kept up its "economic war" against Venezuela through proxies such as Exxon.

The administration of President George W. Bush dismissed the warning as "something that we've heard before."

Traders told Reuters that PDVSA had told clients all of their payments should be made to UBS bank in Switzerland, days after Exxon lawyers told Dutch Antilles banks that PDVSA accounts would have to maintain their existing balances.

"It all has to go to UBS in Switzerland now," said one trader who asked not to be identified because of the sensitive financial nature of his comments. A PDVSA spokesman said he did not have immediate comment on the issue.

Exxon's gambit is the boldest challenge yet by an oil major against governments from Russia to Ecuador that have taken advantage of record-high oil prices to extract concessions from energy-hungry foreign oil companies.

Chavez, a self-styled socialist revolutionary who describes the United States as a decadent empire, Sunday labeled Exxon a group of "imperial, American bandits."

"If you freeze us, if you really manage to freeze us, if you damage us, then we will hurt you. Do you know how? We are not going to send oil to the United States. Take note Mr. Bush, Mr. Danger," Chavez said on his weekly TV show.

The bank account shift showed PDVSA appears to be reacting slowly to aggressive legal maneuvering that Venezuelan authorities say they have known about for weeks.

Court filings in New York showed PDVSA's lawyers were apparently caught off guard after Exxon won a ruling freezing a U.S. bank account holding some $300 million in PDVSA funds.

Chavez's threat to cut off oil helped push crude prices up by $2 per barrel Monday.

But industry analysts believe he is unlikely to carry out the threat. It would hamper PDVSA's business as the company faces a growing cash crunch due to heavy spending on the social programs that keep Chavez popular among the nation's poor.

The former soldier last year took over multibillion-dollar heavy oil projects in the Orinoco belt, pushing out Exxon Mobil and ConocoPhillips in the process and leading both to announce arbitration suits against Venezuela.

Industry analysts believe other companies could follow Exxon's lead if it prevails in a court battle that could take several years.