The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  By this time, a broad coalition of opposition had emerged, encompassing both trade unions and business groups, as well as the Catholic Church. Segments of the senior military leadership were becoming wary of the way in which Chávez was taking power into his own hands and the way he was wielding it. On April 7, 2002, Chávez used his Sunday television talk show, Alo Presidente, to fire seven members of the board of PSVSA. He ridiculed each by name and then dismissed them one by one to the cheers of the studio audience.3

  Four days later, on April 11, 2002, opposition to Chávez and popular discontent exploded into a mass march of upwards of a million people in Caracas. As the march approached Miraflores, the presidential palace, guards loyal to Chávez started shooting, killing, and wounding some of those at the forefront of the crowd. Chávez went on television to denounce the marchers. But a split scene on the screen simultaneously showed the carnage in front of the presidential palace while Chávez orated, further inflaming the outrage.

  “CALL FIDEL!”

  As tension mounted, Chávez ordered the implementation of Plan Ávila, what has been described as “a highly repressive security operation.” Military units began to rebel against both the plan and the idea that soldiers would turn their guns on civilians. At 3:25 a.m., on April 12, 2002, the nation’s top military officer went on television. In light of the “appalling incidents that occurred yesterday in the nation’s capital,” he said, “the president of the republic has been asked to resign, and he has agreed to do so.” By this time Chávez had been taken into custody and was being hustled from one military base and then to another. At one point he managed to borrow a cell phone from a soldier, and reaching one of his daughters, asked her to “call Fidel . . . Tell him I haven’t resigned.” Over the next several hours, various resignation letters were presented to Chávez and negotiated over, but he never quite signed any of them.4

  Although described as a coup, what had ensued was not expected or planned, and the opposition scrambled to fill the sudden power vacuum. A prominent business figure emerged as head of a provisional civilian-military government. He proceeded to make what proved to be a fundamental mistake by dissolving the government but failing to announce that elections would be held soon, thus losing the mantle of constitutionalism—alienating the military, in particular. And there was still no resignation letter signed by Chávez.

  Chávez had been moved to the military island of La Orchila, from whence it was thought he was going to be flown out of the country, probably to exile in Cuba. But, on the mainland, confusion and fissure started to appear among the opposition, suddenly thrust into power. The military began to waver and split. Finally, in the very early morning hours of April 14, Chávez had apparently agreed to a final document that embodied his resignation. However, a couple of hours earlier, a general, one of the original members of Chávez’s group of conspirators, had already dispatched helicopters carrying commandos to La Orchila. While the letter was going through retyping, the helicopters touched down on the island, where they picked up Chávez. He was not going to Cuba after all. Instead, he headed back to the presidential palace in Caracas.5

  Less than three days after his arrest, Hugo Chávez was once again in control of the country, and he set out to quickly tighten his grip. That included further extending his direct control over the management of PDVSA, the engine of the economy and by far the largest source of government revenues. The months that followed were turbulent, for Chávez showed no interest in reconciliation. The country was deeply divided, and the opposition was very restive.

  THE GENERAL STRIKE

  Later in 2002, with the normal channels of political opposition closed in what was increasingly becoming a one-party governmental system, the unions and business community joined together to call a general strike in order to try to force Chávez into a referendum on his governance.

  Much of the country shut down. PDVSA just stopped working. Over the next few weeks, the country’s oil output plummeted from 3.1 million barrels a day to around 200,000 barrels a day—perhaps even less. Venezuela was forced to import gasoline on an emergency basis. The loss of almost three million barrels a day shifted the world market from surplus to shortage. Oil prices, which had been declining, started to rise sharply again and soon were higher than any prices seen since the Gulf crisis in 1990.

  In Washington, the disruption ignited a sharp debate within the U.S. government as to whether to release oil stored in the U.S. Strategic Petroleum Reserve to compensate for the oil lost from one of America’s biggest suppliers. The Department of Energy recommended use of the SPR. But the final decision was not to do so. The oil in the strategic reserve needed to be retained, it was said, for the possibility of a much greater disruption that could occur somewhere else—in the Middle East.

  Meanwhile in Caracas, Chávez would not budge: as the weeks went on, the general strike eroded; people drifted back to work and after sixty-three days, the strike ended altogether. By mid-February 2003, PDVSA was back up to about half its prestrike level. In the aftermath of the shutdown, Chávez was now even more intent on eliminating any political opposition to his march toward his “socialism for the twenty-first century.” He was determined to end whatever independence PDVSA still had left. About twenty thousand workers—almost half the workforce—were summarily fired and replaced with less-experienced workers; from then on, the company would be operated not as a state-owned company, but as an arm of the state. The vast amounts of money that the company generated would become inseparable from the state.

  The crisis of production was over. But due to the haphazard way in which production was shut down, and the inexperience of many new managers brought on after Chávez’s purge, Venezuela would not regain its prestrike levels of output, let alone approach what had been its ambitious expansion goals. Still by mid-April 2003, enough oil was being produced and refined that Venezuela could once again start exporting petroleum to its customers. But by then supply was being disrupted elsewhere on the world market.

  NIGERIA: “YOU’RE A PETRO-STATE”

  Nigeria, the eighth-largest exporter in OPEC and one of the major sources of U.S. petroleum imports, certainly has the attributes of a petro-state. Oil and natural gas account for 40 percent of GDP.

  As finance minister from 2003 to 2006, Ngozi Okonjo-Iweala sought to set the budget based on a lower oil price assumption, impose fiscal discipline, and build up the government’s financial reserves. All that made her highly unpopular—and a political liability. “The pressures were enormous, which is part of the reason I’m not there today,” she later recalled. “Politicians were not happy with me. I was quite controversial for maintaining discipline. I’m sure that on the day I resigned there were more than a few high-fives.”6

  ETHNIC CONFLICT

  But oil is only part of the picture. Nigeria is a dominant force in Africa. With 155 million people, it is the most populous country on the continent; one out of every seven Africans is Nigerian. But many of them do not think of themselves as Nigerian but rather define themselves by language, religion, and tribal group.

  Nigeria is a country of 250 ethnic groups, split among an Islamic north and a Christian south, with further divisions between east and west in the southern part. It was defined as a unit by the British colonial administration, but is a nation tied together with weak institutions and a weak sense of national unity, and divided by strong religious and ethnic identities. Nigeria became independent in 1960, four years after the discovery of oil there. Its history has thereafter been defined by violent conflict over the distribution of power and resources and over the state itself. In 1967 the southeastern part tried to secede and become a separate nation of Biafra. After three years of civil war, and the loss of more than three million lives, the north won, and the country stayed whole.

  Nigeria has gone through five constitutions and seven military coups. The country’s experience demonstrates the Dutch disease in many ways. The once-vibrant agricultural-export sector has collaps
ed, and the country is a net importer of food. An effective and dedicated civil service, one of the legacies of colonial rule, was weakened, contributing to the poor governance. Oil revenues were stolen and squandered on a massive scale. The huge Ajaokouta steel complex is the poster child for revenues wasted. Built in the 1970s, it has yet to produce commercial steel. Between 1970 and 2000, Nigeria’s population more than doubled; over the same period, on a per capita basis, income actually declined .7

  Through all this, the country’s oil industry has been caught up in the struggle among regions, ethnic groups, national and local politicians, and violent groups—militias, gangs, and cults—for power and primacy, for identity—and for the money. The Nigerian government takes over 80 percent of the sale price of a barrel, but there is a constant battle over how those earnings should be split between the federal government, the states, and local communities.

  But that is only part of the battle. Violent clashes between Christians and Muslims, including massacres in which hundreds are slain, are a recurrent feature. So is the struggle over the application of Islamic sharia law in the north. Corruption is deeply embedded throughout the fabric of national life.

  The epitome of state failure was the brutal dictatorship of General Sani Abacha, who seized power in 1993. In the five years prior to his sudden death, he proved himself a champion at corruption; it is thought that he amassed as much as $5 billion. Most notoriously, in 1995 he oversaw the brutal execution of Ken Saro-Wiwa, author and environmental campaigner for the Ogoni people, and eight other Ogoni activists. His death resounded for years ofter. Abacha himself died three years later. Over the next several years, Nigeria struggled to recover some of the stolen money. Abacha’s family stubbornly maintained that the money had been honestly gained, insisting that Abacha, in addition to being Nigeria’s full-time dictator, had also been a very astute investor.8

  In 1999, in the first election in sixteen years, Olusegun Obasanjo, a former general, was elected president. Obasanjo had earned a unique position in Nigerian annals, for during a previous spell in power, he proved to be the only military ruler in Nigeria’s history to hand over power to a constitutionally elected civilian government. Prior to his return as an elected president, he served as chairman of the advisory board of Transparency International, a prominent NGO that focuses on combating corruption in developing countries. It was not an inappropriate preparation: when he returned to power as a civilian and as an elected president in 1999, corruption was one of the most intractable problems.

  VIOLENCE IN THE DELTA

  And nowhere was it more intractable than in the Niger Delta. The Delta is a vast, swampy region formed by the Niger River, Africa’s largest, as it flows into the Gulf of Guinea. The Delta is where most of Nigeria’s oil is produced, and where regional and local politicians have habitually siphoned off a great deal of wealth for their own bank accounts, and which is why a governorship of one of the Delta states is a much-sought-after position: it is a ticket to wealth.

  Officially, however, only 13 percent of total oil revenues accrue to the local states. The Delta’s decrepit infrastructure and endemic poverty, combined with the high population density, fueled hostility both toward the oil industry, which had no say over how the oil money was allocated between the federal and state governments, and the regional and national governments. There was also a legacy of environmental degradation from oil production of the 1960s and 1970s.

  The Delta had been subject to recurrent outbreaks of violence. With an estimated forty ethnic groups in the area, there was plenty of tinder for conflict. But the violence became more organized and more lethal in the first decade of this century. “Bunkering”—stealing oil from the maze of pipelines and flow stations that carry the oil to barges and on to the world market—turned into a very profitable business, and an increasingly violent one. Bands of young men began to attack the flow stations, drilling sites, and oil camps to extract money and pressure companies and local governments. They formed gangs under names like the Bakassi Boys, the Icelanders, the Greenlanders, and the Niger Delta’s People’s Volunteer forces; and they waged war with rival gangs, fueled by drugs, alcohol, demonic initiations, and occult superstitions.

  In the run-up to elections in 2003, as had become the custom, local politicians patronized various armed groups to violently promote their victories and steal oil as a way to raise campaign funds. In March 2003, gangs attacked a series of production sites in the Delta. The oil companies evacuated their personnel, and more than a third of Nigeria’s production—over 800,000 barrels a day—was shut down.

  After the 2003 elections, the militias, operating independently, began to acquire more weapons and build themselves into more formidable forces. They stole increasing amounts of oil—sometimes estimated at over 10 percent of Nigeria’s total production (which in 2010 would amount to over $5 billion stolen oil)—in collaboration with former oil workers, corrupt government officials, an international network of oil smugglers, and pirates operating widely in the Gulf of Guinea. Stealing and sabotage were largely responsible for the oil spills that despoiled the Delta. Violence was already so endemic and at such a level that by the end of 2003, an internal report for one of the major oil companies said that “a lucrative political economy of war in the region is worsening” and warned of “increasing criminalization of the Niger Delta conflict.”

  The funds from the bunkering, in turn, enabled the militia leaders to further increase their arsenals and acquire much more lethal weapons and, in the words of one observer, “take militia activity to a new dimension of criminality.” As the head of one of the most notorious militias put it, “We are very close to the international waters and it’s very easy to get weapons.”

  The wells and gathering systems are strung out through the swampland, mangrove forests, and shallow waters of the Delta, crisscrossed by creeks and streams—all of which provides for good cover and quick getaways on speedboats mounted with machine guns. The region is very densely populated, the birth rate is very high, and poverty is widespread. The inequities breed anger and resentment, on which the militias feed.

  In September 2004 a leader of one of the gangs, a self-described admirer of Osama bin Laden and an advocate that the Ijaw ethnic group should secede and form its own country, threatened “all-out war” against the Nigerian state. That threat “pushed oil over $50 per barrel for the first time.”9

  That was it for President Obasanjo. He summoned the leaders of two of the most violent groups to the federal capital of Abuja, where he met with them in the cabinet room and hammered out a peace accord. It lasted through part of 2005. But then the Delta began to descend back into violence and gang warfare.

  “THE BOYS”

  In January 2006, four foreign oil workers were kidnapped from a platform in the shallow waters of the Niger Delta, and then gunmen aboard speedboats attacked another oil facility in the Delta, killing 22 people, setting buildings afire, and severely damaging the equipment for managing the flow of oil.

  A heretofore unknown group took credit—the Movement for the Emancipation of the Niger Delta. MEND, as it became known, declared that it sought “control of resources to improve the lives of our people.” Claiming several thousand men under arms, MEND warned that it would unleash further attacks that would “set Nigeria back 15 years and cause incalculable losses,” and said it aimed “to totally destroy the capacity of the Nigerian government to export oil.” 10

  A few days after the January 2006 attacks, in the snow-covered Swiss Alpine village of Davos, at the World Economic Forum, Olusegun Obasanjo, Nigeria’s president, was meeting in a seminar room to discuss his country’s economic prospects. Two of the participants, a venture capitalist from Silicon Valley and a world-famous entrepreneur from Britain, urged Obasanjo to get off oil and emulate Brazil and launch large-scale cultivation of sugarcane to make ethanol. A bemused Obasanjo, president of one of the world’s major oil producers, nodded with feigned enthusiasm and promised to give the
idea serious consideration.

  Toward the end of the meeting, as Obasanjo was about to leave, he was asked about the those recent attacks a few days earlier in Nigeria and whether they presaged a new wave of violence.

  It was nothing to get too concerned about, he said with confidence. “The Boys,” as he called them, would be brought under control.

  That was not an unreasonable expectation. After all, some of the militia and vigilante groups, including the Bakassi Boys, had been subdued over the previous few years. Moreover, it was difficult to distinguish among all those who attacked the oil industry infrastructure. They all operated with the same kind of tools—those fast speedboats, sometimes with machine guns mounted on them, AK-47s, and stolen dynamite. The picture was further complicated by the shadowy connections between those in speedboats and those in power.