People Power Forces Oxy Oil Contract Cancellation

Demonstrators march in Quito during a protest May 9 against the U.S. oil company Oxy. (Photo: Rodrigo Buendia / AFP-Getty Images)

In a victory for the broad-based popular movement against the proposed free trade agreement between Ecuador and the United States (TLC), energy minister Ivan Rodriguez announced on May 15 that the contract for oil exploration and exploitation by U.S.-owned Occidental Petroleum was being cancelled. The minister said the decision was based on legal transgressions by the company, including the unauthorized sale of 40 percent of the operation to Canadian company Encana.

Occidental has been accused of 42 legal violations, including environmental destruction and spying on protesters. Rodriguez said the government-owned oil company Petroecuador has the technical and economic capability of assuming Occidental's operations — an average daily production of 100,000 barrels of crude oil.

United Press International reported on May 23 that Ecuador is seeking a deal with Venezuela's sate-owned oil company PDVSA to refine Ecuadorian crude oil, which would reduce costs for Ecuador by hundreds of millions of dollars.

Roberto Aspiazu, spokesperson for the Committee of Ecuadorian Business, told the Quito-based daily El Commercio on May 16 that "The confiscation of the property of Oxy [Occidental] will go against the treaty of reciprocal investments with the United States" and predicted that Washington could take reprisals against Ecuador. "It buries all options of reinitiating the negotiations for the TLC with the U.S."

More than 200 people rallied in the eastern oil town of Franscisco de Orellana on May 16 to celebrate the government's decision. The majority were workers from the provincial council, leaders of the barrios (neighborhoods), teachers and residents, according to the May 17 El Commercio. Local prefect Guadelupe Llori told the crowd that the application of Ecuadorian law, pressure from the provincial assembly of Orellana and Sucumbios, and a 4000-strong march on May 9 in Quito "buried the North American petrol company."

"This is the first step toward the nationalization of petroleum. Now, for sure, our economic resources are going to remain in Ecuador," Llori said.

The U.S. government responded sharply.

"We've been deceived by the decision of Ecuador, which appears to constitute confiscation of the property of a United States business," Charles Shapiro, the U.S. State Department's assistant secretary for Latin American affairs was quoted as saying in the May 17 El Commercio. He called for an explanation from the Ecuadorian government.

Blasco Solah, president of the Ecuadorian Chamber of Commerce, demanded legal charges against President Alfredo Palacio for "actions against development." Palacio refused to receive Shapiro when he arrived on May 16 in Ecuador's largest city, Guayaquil.

On May 17, Oxy presented a demand for arbitration against the Ecuadorian government with the International Center for the Settlement of Differences Regarding Investments in Washington, and stated that the treaty on investments with Ecuador would be invoked. That same day, the managing director of Occidental dismissed all employees and left them free to do "whatever they want, stay or go."

Oxy's operations in Ecuador have long been controversial. In 1982 the company took over 200,000 hectares of protected areas for oil exploration, including the biological reserve of Limon Cocha, the protected forest of Panacocha, the fauna reserve of Cuyabeno and the Yasuni national park. Under the original secret contract, the Ecuadorian government agreed to pay all the company's investment costs for exploration and set-up.

The indigenous party Pachakutiq described the cancellation of Oxy's contract as "a triumph of the mobilization of the indigenous peoples," according to the May 18 edition of the daily El Universo. The organization demanded the nationalization of all hydrocarbons as well as the nationalization of basic services.

Marcelo Larrea, presidential candidate for the Alliance for the Third Republic, said that if he were elected president in the October 28 elections, he "would not hesitate in nationalizing and socializing the petroleum industry."

Blanca Chancoso, a director of a school for the development of indigenous women leaders and an organizer of the indigenous protest movement, told Green Left Weekly:"The decision means dignity and sovereignty for the people. Oxy and the TLC were an attack on the economic independence of Ecuador; more than that, the TLC was an attack on the life of all the people. It was a means of annexing the country, to make it a colony of the U.S.A. It was a form of unequal trade."

According to Chancoso, the TLC "was not just a matter of products and contracts, but they were negotiating away the whole country. It was not just trade, but political: the U.S. military base at Mantra, Plan Colombia [the U.S. plan to suppress left-wing guerrillas in Colombia under the guise of fighting the drug trade] and control of the frontiers. It was an agreement covering everything."

"This process now means recovering the rights of the indigenous people and other social sectors," Chancoso said.

"The dollarization of the economy [in 2000] meant the domination of the free market. To support our demands, we organized marches. The indigenous movement was attacked by the U.S. and the government, which wanted to destroy us.

"Each time, we returned to confront the government again. We continued the fight, going on marches, and strengthening the movement. We wanted consultation, but also a constituent assembly to protect our sovereignty against the TLC. But they didn't listen to us, and continued the negotiations.

"In March this year, we decided to mobilize in the streets, and march in each province and state, with blockades of the principal routes. Big business organized a march against us, of workers for the TLC. The army was called out and a state of emergency declared. Many companeros were persecuted; tear gas was used and shots were fired at the people. People were blinded and others were wounded.

"But we decided to continue the fight. There has been considerable help from other sectors, the students and workers in the cities. We have now achieved success with the Oxy decision, but we have to continue. The war has not ended."

Maria Gusto Calle, representing Altercom, an alternative Internet-based news service in Quito, agreed that "We are all very happy, but we must remember that we have won the battle and not the war."

"I believe that the U.S. is going to take serious action against Ecuador. Oxy is the biggest exporter of petroleum in Ecuador, and [U.S.] President Bush has interests in the company. There is a strong fight inside the government here over the issue.

"The social organizations in Ecuador began their fight against the TLC, including CONAIE [the main indigenous federation], the unions, the students and Oxy petrol workers. In our political group called Comuna, we analyzed that the first fight should be against Oxy, which has no supporters in Ecuador, unlike the TLC. Once Oxy has been removed, the next step will be against the TLC. The final, most difficult fight will be against Plan Colombia."

On May 22, the Venezuelan newspaper Diario Vea reported that CONAIE president Luis Macas declared the Oxy contract cancellation a triumph for Ecuadorians who fought in defense of their sovereignty, and for the social and indigenous movements that mobilized. Macas called for the nationalization of hydrocarbons, and for a constituent assembly in which the people can "establish the basis of a state that serves everyone."