- The Washington Times - Saturday, September 13, 2008

A diplomatic proxy war escalated Friday between the United States and three Latin American countries as the Bush administration froze the assets of three Venezuelans close to President Hugo Chavez.

The actions followed Mr. Chavez’s expulsion of U.S. Ambassador Patrick Duddy and the recall of Venezuela‘s ambassador to the United States. Honduras, meanwhile, announced it was postponing the accrediting of the U.S. envoy to that country.

Bolivia touched off the tit-for-tat diplomatic conflict on Wednesday. Reacting to growing political violence that has killed at least a dozen people this week and opposition to the populist government of President Evo Morales, Bolivia accused U.S. Ambassador Philip Goldberg of conspiring with opposition parties that oppose his plans to revamp the constitution and steer natural gas tax revenue to impoverished Indians.

Washington quickly responded in kind and declared Bolivian Ambassador Gustavo Guzman persona non grata.

Specialists on Latin America said the diplomatic fray was unlikely to affect oil prices but could further hamper U.S. efforts to stop the production and trade of narcotics and reduce U.S. influence in the region, by prompting more economic and trade deals that exclude Washington.

Jaime Darenblum, director of the Hudson Institute’s Center for Latin American Studies and former Costa Rican ambassador to the U.S., told The Washington Times that Mr. Chavez’s moves were prompted in large part by a trial under way in Miami, where U.S. prosecutors have accused a Venezuelan man of being a foreign agent who tried to cover links between Venezuela and an election scandal in Argentina.

In Friday’s action, the Treasury Department accused one former and two current Venezuelan government officials of supporting FARC rebels in Colombia. The action freezes any assets the men have under U.S. jurisdiction and prohibits U.S. citizens from doing business involving those assets.

“[This] exposes two senior Venezuelan government officials and one former official who armed, abetted and funded the FARC, even as it terrorized and kidnapped innocents,” said Adam J. Szubin, director of the Treasury’s Office of Foreign Assets Control.

The Venezuelan Embassy in Washington declined comment, directing questions to the government in Caracas.

The latest actions reflect a deepening downward spiral in relations between the United States and Mr. Chavez, a fiery populist who has aligned himself increasingly with Russia and Iran, as well as other Latin leftists.

Thursday’s expulsion was the first time Mr. Chavez has expelled a U.S. ambassador.

The move came a day after Russian Tu-160 Blackjack strategic bombers landed in Venezuela with plans to return to Russia on Sept. 15. But on Thursday, Russia’s air force said the bombers would stay in Venezuela if asked by the Venezuelan government, according to the Russian News and Information Agency.

David Rothkopf, a Latin America specialist and chief executive officer of Garten Rothkopf, a consulting firm in Washington, said that Russia, Venezuela and Bolivia are part of a “growing international anti-globalist alliance to counterbalance the United States.”

Still, Mr. Darenblum said that nothing substantive is being ruptured. “None of these countries are breaking relations,” he said. “They are just targeting ambassadors.”

Larry Birns, director of the Council on Hemispheric Affairs, a Washington-based think tank, agreed.

“Both Morales and Chavez have a lot of bark and little bite,” he said.

Mr. Chavez could, theoretically, take a substantial bite out of the U.S. economy if he shut off oil exports, something he has frequently threatened to do. Venezuela is currently the fourth-largest supplier of oil to the United States, after Canada, Mexico and Saudi Arabia.

A 2006 study by the U.S. Government Accountability Office said that a six-month loss of 2.2 million barrels a day of Venezuelan oil would cut U.S. economic output by $23 billion.

On Thursday, Mr. Chavez said that if he stopped selling oil to the United States, world crude prices would immediately jump above $200 a barrel. In fact, oil prices have been dropping steadily in recent weeks.

Oil specialists said that Venezuela is too dependent on oil revenue from U.S. sales for Mr. Chavez to carry out his threat and that Venezuela’s marketing options are restricted by the poor quality of its oil. The country’s heavy crude can only be handled by a few refineries located in the Gulf Coast, which are owned by CITGO, a subsidiary of Venezuela’s state oil firm, but fall under U.S. legal jurisdiction.

“It would hurt him to cut the U.S. off, but he has shown himself willing to do things that don’t make economic sense,” said James Williams, an oil analyst for WTRG Economics.

Mr. Birns said that Mr. Chavez “can’t cut off oil now, but as he develops surrogate contracts with China, India and Russia, he will be increasingly able to do so.”

The diplomatic row likely will have a greater impact on already troubled U.S.-backed anti-narcotic efforts in the Andean region.

Mr. Darenblum said the U.S. likely will amplify longstanding efforts to link Mr. Chavez to the lucrative Andean cocaine trade.

On Tuesday, White House drug czar John Walters, attending a drug conference in Europe, told European leaders that Mr. Chavez’s policies toward the cocaine trade represent a “global threat.” Mr. Chavez has turned his back on U.S. requests to restart cooperative anti-drug efforts, and in Bolivia - one of the world’s top coca growers - Mr. Morales this week also kicked out U.S. anti-drug agents.

Others say that little stands to be lost.

“There was already very little anti-drug cooperation with Venezuela, and it was declining with Bolivia,” Adam Isacson, director of programs for the Washington-based Center for International Policy, said in an e-mail. “Now, with diplomatic relations broken, aid likely to be cut and trade incentives unlikely to be renewed, the United States is going to have very little leverage to prevent anti-drug cooperation from grinding to a total halt.”

Mr. Birns said he expects this week’s diplomatic volleys to prompt regional economic and trade deals that exclude Washington, and by doing so undermine the Organization of American States, a key group of 35 independent countries in the Americas that includes the United States.

This article is based in part on wire service reports.

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