The decision to suspend the takeover, which would have brought under state control the only two oil refineries in Bolivia, came after Brazilian president Luiz Inácio Lula da Silva deemed the measure “unacceptable.” Lula’s social democratic government threatened to take harsher measures against Bolivia if its authorities persisted with “unilateral attitudes.”

“We can think of doing harsher things with Bolivia,” da Silva said, according to the Associated Press.

The Bolivian government issued a decree last May nationalizing the country’s natural gas and oil industry. Acting on that law, Bolivia’s minister of hydrocarbons announced September 12 that the country’s state-run oil company, known by its Spanish acronym YPFB, would take over the operation of the Petrobras refineries and set new prices for natural gas sold to Brazil.

Under the nationalization decree, taxes and royalties paid by foreign companies can be increased from 18 percent to 50 percent. Foreign energy companies were also ordered to agree to new contracts with Bolivia’s YPFB within 180 days from the date the decree was issued. During the transition period the law established that the state of Bolivia would get 82 percent of revenues and foreign investors 18 percent.

Since May, Petrobras and the Bolivian government have been locked in negotiations over taxes, export prices, and other terms of trade. La Paz had proposed an 87 percent increase in the price of natural gas exports, from the current $4 per million BTUs to $7.50, which Petrobras officials have vowed to resist.

Bolivia has the second largest natural gas reserves in Latin America, after Venezuela, with an estimated 54 trillion cubic feet. About 25 energy companies have investments in Bolivia. The biggest foreign operators there are Petrobras and the Spanish-Argentine Repsol. Others include British Petroleum, Total of France, and U.S.-based ExxonMobil. About half of Brazil’s natural gas needs are supplied by Bolivia, including 70 percent of the key industrial region of São Paulo.

Since nationalization was announced, Brazil’s government and Petrobras officials have expressed opposition to the move. Petrobras officials suspended investment and threatened to take Bolivia’s government to an international court to seek compensation for the two refineries if the measure was not revoked.

“We are not going to give up Petrobras’s investments,” said company president José Sérgio Gabrielli. “We want to sell the refineries, not give them up.” Petrobras is demanding $1.5 billion for them, an astronomical price for much less developed Bolivia.

The crisis between the two governments has highlighted Brazil’s dominant economic place in the region, and the role of da Silva’s government in defending the interest of Brazil’s capitalist class.

Petrobras is the single largest investor in Bolivia, with its operations alone producing the equivalent of 20 percent of the country’s gross domestic product.

“We have to see them (Bolivians) with the eyes of a bigger economy and help them develop,” da Silva told the press September 14.

Other foreign investors have expressed similar attitudes. Spain’s prime minister, José Luis Rodríguez Zapatero, said nationalization could affect the amount of “aid” Madrid provides to Bolivia. Working people in Bolivia have fought for years against what they see as the robbing of the country’s natural gas and oil resources by foreign energy monopolies. In the process they have toppled several governments. A central demand of the campaign that brought Evo Morales to office was for nationalization of energy resources, including higher royalty payments from foreign investors.

“The oil companies only want to continue stealing,” said Sósimo Paniagua, a leader of the Bolivian Workers Federation, according to the Internet news service Econoticias.com. “The Brazilian company only intends to keep our resources and the workers would not allow it.”

At a press conference in Havana, Evo Morales said the suspension of the refinery takeover was meant to advance negotiations with Petrobras. “We need business partners, not bosses, not owners, whether Total, Repsol, or Petrobras,” he said. His administration’s nationalization decree did not call for expropriation or expulsion of any foreign company, he pointed out, and foreign companies had a right to recover their investments
 
 
Related article:
With Bolivia against capitalist Brazil  
 
 
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