The latest sign of increasing instability in Venezuela occurred earlier this month when President Hugo Chavez ordered soldiers to seize dozens of assets from foreign oil contractors. These expropriations come as Chavez grapples with mounting debt and declining oil revenue(which accounts for more than 90 percent of the country's export revenue).
Andrew Derman, leader of the international energy practice group at Dallas' Thompson & Knight, says that while Chavez has the right expropriate such property, there is also an obligation on his government's part to pay fair market value for the seized equipment and assets.  "These most recent seizures will result in arbitrations that Venezuela will lose," Derman says. "This move underscores Chavez's desperation in trying to sustain oil production and revenue as the nation slides into a recession." Chances are slim that Venezuala will prevail in international courts, Derman says, adding: "As a consequence, Venezuela and those countries following Venezuela will begin thinking twice before expropriating property." To interview Mr. Derman on international energy issues, contact Barry Pound at 800-559-4534 or barry@androvett.com.