This anti-Venzuela propaganda segment by CNBC doesn't even get basic economics right:
For many countries, cheaper oil is helping boost economic growth. But if you're a struggling Caribbean nation dependent on energy subsidies from Venezuela, the crash in oil prices is not welcome news.
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[The fall in oil prices] has also jeopardized generous financing terms extended to more than a dozen Caribbean nations that rely on Venezuelan oil to fuel their own economies.Venezuela launched the so-called Petrocaribe accord in 2005 as it sought to become a low-cost energy provider and win political favor among small island economies heavily reliant on oil imports. But as oil prices have fallen, Venezuela's energy blessing has turned to something of a curse.
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Under the terms of the Petrocaribe agreement, the drop in oil prices has—paradoxically—raised members' oil import costs. That's because, as crude prices fall, they lose access to extremely generous financing terms that amount to subsidies.When oil was over $100 a barrel, Petrocaribe member countries paid just 40 percent of the upfront costs, and Venezuela's state oil company, PDVSA, covered the rest of the expense with a low interest rate loan payable over 25 years. Some have also paid their oil bills with bartered agricultural products or services.
The extra cash from deferred payments helped some countries finance infrastructure projects and other spending programs.
But those finance terms become much less generous as the price of oil falls, forcing member countries to pay more upfront, with payment in full when prices fall below $40 a barrel, according to RBC economist Marla Dukharan.
Lets unwrap that with an example.
When oil was at $100 per barrel the Caribbean countries paid $40 in cash plus $60 in deferred payments which were spread over 25 years.
When oil is at $50 per barrel the Caribbean countries pay $40 in cash plus $10 in deferred payments which are spread over 25 years. The money they will owe to Venezuela and will have to pay is less than it was at higher oil prices. That is certainly very good for them.
Now how is that "not welcome news"?
How has that "jeopardized generous financing terms"?
How has that "turned to something of a curse"?
How are they now to "lose access to extremely generous financing terms"?
Venezuela did not simply hand out money. It granted vendor loans bound to the purchase of its product. Not having to take out additional loans because the product is cheaper now is not losing "extremely generous financing terms" because those terms were never available for anything else.
It is unclear from the piece how the financial amateurs at CNBC got their crazy ideas and claims.
They provide a link to the RBC "analysis", written in November, which says:
PetroCaribe member countries "pay 40 per cent upfront when the price is over US$100 per barrel; 50 per cent upfront when the price is between US$80-100 per barrel; 60 per cent upfront when the price is between US$50-80 per barrel; and full payment upfront when the price is below US$50 per barrel.
So its full payment starting at $50/bl and CNBC got it wrong when it wrote "with payment in full when prices fall below $40 a barrel". The CNBC writers are obviously unable to correctly copy from the sources they linked to.
Now looking at the RBC numbers CNBC was unable to copy and paste some economically ignorant people, like those CNBC folks, might argue that the $40 upfront at above $100/bl is less than the $50 upfront at a $50/bl price. But at a price of $40/bl the cash payment would be again the same as at $100/bl. To argue from one extreme price-point when there are ranges is wrong. But that $50 cash versus $40 cash argument is also incorrect as the $40 at a $100/bl price is not the total payment. When one includes the cost to pay off a $60 per barrel loan including the interest at a $100/bl price the $10/bl additional cash payment at $50/bl will be a lot cheaper.
At the end of the CNBC piece we get to know who likely came up with the whole stupid argumentation (and also why):
With the future of Venezuelan oil sales in doubt, the White House last month invited Petrocaribe countries to Washington for a Caribbean Energy Security Summit, hosted by Vice President Joe Biden.
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Over the weekend, Maduro claimed in a televised address that Biden had tried to foment the overthrow of his socialist government during the Caribbean energy summit. Maduro claimed that Biden told the Caribbean leaders that the Venezuelan government's days were numbered and it was time they abandon their support, a claim Biden's office dismissed.
Why would anyone think that the "future of Venezuelan oil sales" to the Caribbean countries is "in doubt"? It is not as long as the dully elected government of Venezuela is in its place.
But should the U.S. be successful with its current, renewed (pdf) "regime change" attempts in Venezuela the Petrocaribe scheme would likely be in jeopardy. As the leaders of the Caribbean countries are certainly smarter than the CNBC writers they will know that the Petrocaribe deal is incredibly good for them.
Why Biden believes that he can convince the Caribbean countries otherwise is beyond me.