- The Washington Times - Monday, May 7, 2007

CARACAS, Venezuela — Venezuelan President Hugo Chavez warned last week he could nationalize the country’s banks and largest steel producer in an apparent bid to strong-arm the businesses to contribute more to local industry.

Delivered in a wide-ranging speech in which he promised that Venezuela is headed for a classless society, Mr. Chavez’s threat Thursday did not seem to signal an imminent takeover.

But coming after recent moves to nationalize telecommunications, electricity companies and the oil sector, the warning was a sign the Venezuelan leader is serious about deepening his socialist revolution.

“Private banks have to give priority to financing the industrial sectors of Venezuela at low cost,” Mr. Chavez said. “If banks don’t agree with this, it’s better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits.”

It was not clear if Mr. Chavez was referring only to Venezuelan banks like Mercantil Servicios Financieros CA and Banco Provincial SA, or also major foreign banks with subsidiaries in the country, like New York-based Citigroup Inc. and Spain’s Banco Bilbao Vizcaya Argentaria SA and Banco Santander Central Hispano SA.

Mr. Chavez also warned that his government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA. Ternium’s U.S.-traded shares fell $1.05, or 3.9 percent, to $26.15 Thursday.

Sidor “has created a monopoly” and sold most of its output overseas, forcing Venezuelan producers to import pipes from elsewhere, Mr. Chavez said.

The company should be giving priority to supplying national industries, he said, ordering Mining Minister Jose Khan to come back from Sidor’s headquarters with a recommendation in 24 hours.

Sidor and banks in Venezuela did not respond to requests for comment.

“I don’t think it’ll happen immediately. They’re just threats,” said Franklin Rojas, director of Caracas-based economic institute CIECA.

Mr. Rojas noted that Mr. Chavez would likely run up against his close ally, Argentine President Nestor Kirchner, if he tried to nationalize Sidor, whose parent company, Ternium, is controlled by a major Argentine conglomerate, Techint Group.

Mr. Chavez began a nationalization drive in January to impose state control over “strategic” companies. His government took over multibillion-dollar oil operations from major foreign-oil companies last week and announced on Thursday that it would not be paying them cash compensation.

“We do not expect to pay out money in order to arrive at some arrangement with the companies,” said Oil Minister Rafael Ramirez, according to the transcript of an interview with state television.

Mr. Ramirez did not elaborate on how else the government might compensate BP PLC, ConocoPhillips, Exxon Mobil Corp., Chevron Corp., France’s Total SA and Norway’s Statoil ASA, which have invested more than $17 billion in the projects.

Mr. Ramirez also said that one of the companies, Houston-based ConocoPhillips, would be expelled from the country and barred from staying on as a minority partner in a state-run joint venture if it continues to resist the state takeover. ConocoPhillips is the only oil company that has not signed an agreement in principle recognizing state control.

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