- The Washington Times - Wednesday, May 3, 2006

SANTA CRUZ, Bolivia — Oil and gas executives said well-armed troops were guarding installations yesterday after the nationalization of hydrocarbon companies, and appeared to be preparing to seize sensitive corporate documents.

“They have dropped the big hammer. Soldiers have taken our control room, and we can’t leave the building with anything except our clothes on. No one is allowed to take any documents or laptops out of the building,” said Edwin Miller, an American executive of a major oil company based in Santa Cruz.

Bolivia’s leftist government said yesterday it would extend control over mining, forestry and other sectors of the economy after President Evo Morales nationalized the country’s huge natural gas industry. Foreign governments warned relations could be damaged.

In raising the ante, Mr. Morales said Monday that the gas decree “was just the beginning, because tomorrow it will be the mines, the forest resources and the land.”

Yesterday, Vice President Alvaro Garcia Linera said mining companies could face higher taxes and royalty payments and that the government will intensify enforcement of existing laws to break up big underdeveloped land holdings, apparently to turn them over to the poor.

The government also will crack down on foreign timber companies violating conservation laws, Mr. Garcia said, and would steer companies to export finished wood products rather than raw timber.

A peasant leader of the ruling Movement to Socialism (MAS) party said “our guys” had been sent into industry offices “to seize information from the companies.”

“We are going to find out exactly how they got their contracts,” said the party leader, who had turned up to show support for military police standing outside the local oil company Transredes.

The Bolivian army took control of corporate offices along with major oil and gas facilities in a surprise move during May Day celebrations Monday, which caught foreign executives and their Bolivian concessionaires largely off guard.

Mr. Morales had been elected last year on a pledge to nationalize the country’s hydrocarbon reserves and impose new contracts on foreign corporations. But few had expected him to move so abruptly.

“Evo fooled us,” said Colin Dunlop, the British manager of an oil service company in Bolivia who considers the action “illegal.”

“It looks like expropriation,” he said.

In a visit to the oil town of Camiri more than a month ago, Mr. Morales reiterated his nationalization plans but said they would not take effect until July 12. Just last week, he told supporters to be patient as the process would be “complicated” and “take time.”

Sources in the oil industry said yesterday that they think Mr. Morales deliberately misled, or “sedated,” the companies so they would not delete or destroy information that the government can use against them.

According to a U.S. corporate executive, Mr. Morales plans a major audit of the oil companies as part of his strategy to force their acceptance of new contracts that would give his government control over a major part of their oil and gas revenues.

Mr. Morales told a crowd of 15,000 supporters outside the presidential palace in La Paz last night, that “from now on 82 percent of the income from our hydrocarbons will go to the Bolivians and only 18 percent to the transnationals.” Any companies that don’t accept the new rules should “leave Bolivia,” he said.

Mr. Morales issued his televised nationalization decree and ordered the army to seize corporate facilities just one day after a meeting in Havana with Venezuelan President Hugo Chavez and Cuban dictator Fidel Castro.

Their stated purpose was to sign a “People’s Commerce Treaty” in competition with U.S. efforts to set up a free trade zone in the Americas. But oil and gas executives suspect Mr. Morales also sought and obtained support at the meeting for his move against the energy companies.

A high-ranking industry executive, who asked not to be identified for fear of retaliation, said Mr. Chavez has sent 30 to 40 auditors from Venezuela’s oil company PDVSA to help Mr. Morales’ government investigate the oil companies.

“They are going to review the books of each company,” said the executive for a service company in Santa Cruz that does business with Exxon Mobil Corp., British Gas, Spain’s Repsol, Brazil’s Petrobras and other foreign corporations.

Mr. Dunlop, the British service company executive, said the auditors will likely find at least minor violations. “There is so much bureaucracy and paperwork involved in setting up a business operation in Bolivia that it’s pretty easy to trip them up,” he said.

Several companies have already threatened to take legal action against Bolivia if their assets are seized.

Petrobras could be the worst hurt by the nationalization measures. A top executive of the company said by telephone last night he was “deeply worried,” and Mr. Linera predicted that the nationalization would cost Petrobras $1.5 billion over the next 12 years.

Brazilian President Luiz Inacio Lula da Silva, a center-leftist who has tried unsuccessfully to lure Mr. Morales away from his radical allies, characterized the Bolivian measures as “unfriendly” in an official statement.

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