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Amid the ever-escalating rhetoric between the United States and Venezuela, the president of the oil-rich Latin American country, Hugo Chavez, has been busily scoring points with low-income American consumers.

Under a program sometimes dubbed petro-diplomacy, Citgo, Venezuela's wholly-owned gas and oil subsidiary, has been providing discounts of up to 60 per cent on heating oil to poor communities in the U.S.

The program is currently operating in Maine, Massachusetts, Pennsylvania, Delaware, Pennsylvania, Vermont, Connecticut, and Rhode Island. Most local politicians, desperate for ways to reduce energy costs for their constituents, have welcomed it with open arms.

Citgo says the program has benefited more than 180,000 households - and is now attracting some big-name supporters. In New York, the powerful Harlem Congressman Charles Rangel facilitated expansion of the program into upper Manhattan, and a new permutation has been enthusiastically embraced by former Massachusetts Representative Joe Kennedy.

Typical of the way the program works is the deal Citgo struck with three nonprofit organizations in the Bronx to deliver five million gallons of heating oil at 45 percent below the market price. Citgo says the deal will amount to a savings of $4 million for the 8,000 low-income households slated to benefit from the plan.

Citgo says it initiated the heating oil program late last year in an effort to help low-income families in the U.S. to cope with the cold winter and high oil costs. The Venezuelan government says the program costs Citgo relatively little because the oil is being supplied directly, without middlemen, who usually make substantial profits.

But Venezuela's "oil for the poor" program has not all been smooth sailing. In Chicago last October, Citgo proposed to substitute diesel fuel for home heating oil, which is used only by a small number of Windy City residents. Instead, it offered a 40 percent discount on 7.2 million gallons of diesel to be used for Chicago's public buses. Though the deal could have saved the city approximately $15 million, the offer was rejected by Chicago's transit authority over the objections of other elected officials and labor groups.

Undeterred, Chavez is now proposing a second phase of the program. He told a delegation of beneficiaries of the program that in addition to the 40% discount, only 30% would go towards Citgo's expenses and the remaining 30% would be set aside for a special local development fund, to help unemployed in the communities to set up cooperatives. The products of such cooperatives could then be sold to Venezuela, Chavez suggested. The idea was endorsed by Mr. Kennedy, a member of the U.S. delegation to Caracas and a key figure in facilitating the heating oil program in Boston via his not-for-profit Citizens Energy Corporation.

"This concept allows families to work out of poverty; it helps them by giving them the tools such as money to build a roof over their head, instead of just a one-shot benefit," said Kennedy.

Chavez also announced that the program will be doubled next year from its current level of 40 million gallons. "No one should believe that this is just a momentary interest," Chavez told the group. "Leave at ease and tell your neighbors of the communities you represent that the program will continue; it has just begun," he said.

Chavez insisted that the program was not designed to buy support in the U.S., as many critics claimed, but is rather an example of corporate responsibility because Citgo, which is now making large profits in the U.S., is now giving back to communities in which it does business. "Citgo has done good business in the U.S. We believe companies, along with making a profit need to have social responsibilities for the people they sell to," said Chavez.

Chavez pointed out that in the 20 years Venezuela has owned Citgo, the company never paid dividends to the Venezuelan state. Only in 2004 and 2005 has it begun to repatriate some of its profits to Venezuela, he said.

He also cited the program as "an example of his government's efforts to move towards socialism, in which countries relate to each other on the basis of cooperation, solidarity, and complementarity." Venezuela also provides discounted fuel to other countries in Latin America.

Meanwhile, despite a State Department spokesman's comment that the U.S. has "no objections" to Citgo's offers, the Bush Administration continues to ramp up its war of words - and equipment - on Chavez and his allies, principally Cuba, Bolivia and, more recently, Iran.

The fiery Chavez has provided the administration of President George W. Bush a lot to respond to. He proposed a new free trade pact between Venezuela, Cuba, and Bolivia. He pledged to help Bolivia's new President, Evo Morales, with $1.5 billion in energy investments. He also made it clear his country would remain a reliable oil-supplier to his role model, Cuban President Fidel Castro.

Bolivia has the second-largest natural gas reserves in South America after Venezuela. Venezuela's state-owned oil company, PDVSA, and Bolivia's state-owned YPFB, are expected to produce natural gas in a joint venture.

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William Fisher has managed economic development programs in the Middle East and elsewhere for the US State Department and the US Agency for International Development. He served in the international affairs area in the Kennedy Administration and now (more...)
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