CARACAS: The high cost of electricity produced by oil has been a major factor constraining economic growth in most Caribbean countries, leading to their dependence on oil from Venezuela provided through the PetroCaribe — a facility that allows part payment and part deferral as loans.
But with Venezuela sinking deeper into economic crisis, one of the aims of US President Barack Obama’s trip to Jamaica where he met with leaders from the Caribbean, was to announce a United States offer of US$20 million in funding for clean energy projects. While in Kingston with the president, the US Department of Energy signed a statement of intent with Jamaica’s Energy Ministry to cooperate on infrastructure, storage and diversification of fuels. This will serve to deepen US energy ties with the region, all of this is in anticipation that the Congress will soon allow the export from the US of natural gas. The initiative and its timing is motivated by economic, geo-political and security concerns.
First, from the point of view of US security the impending demise of Venezuela’s PetroCaribe could destabilise an already economically fragile region. The Caribbean is the third border of the US and any disruption has potential serious national security implications. Second, the US will soon have natural gas and oil to sell thanks to fracking and its private sector can own or finance the transportation, docking facilities and storage of LNG in the region with Jamaica as a possible hub. Third, the supply of energy is the new instrument to restore/confirm US influence in the Caribbean Basin.
The geo-politics is that once the Caribbean becomes dependent on US energy, then Venezuela, let alone Trinidad and Tobago, will wield no influence in the Caribbean Basin. It will also serve to counter growing Chinese influence in the Caribbean. Interesting news but there are problems.
The first problem is that US$20 million is not going to be enough to finance the level of clean energy investments required to construct the infrastructure necessary for a transition from fossil fuels to LNG, solar and wind. No doubt the US will push the World Bank and the Inter-American Development Bank to lend more to the region.
The second problem is that the Caribbean countries are among the most indebted in the entire world and should/cannot borrow any more and there is no guarantee that foreign direct investment will fill the gap.
The third problem is an unknown. If PetroCaribe is continued in any form, even a scaled down facility, Caribbean governments that benefit are not likely to abandon the arrangement with Venezuela.
A possible solution is the difficult proposition of the establishment of a very large multilateral fund of say several billion US dollars involving the United States, Venezuela and China and supported by the World Bank, the Inter-American Development Bank and the new BRICS development bank and with the participation of assorted donors such as the European Union. Interesting, isn’t it?
But we know interesting ideas don’t always make it past the vested interests to the negotiating table.
