Venezuela Signs Cheap Oil Pact That Includes Cuba

By Jim Burns | July 7, 2008 | 8:08 PM EDT

( - Venezuelan President Hugo Chavez has signed an agreement to supply cheap oil to Central American and Caribbean countries. Insiders say the new accord is part of attempt by Chavez to bolster the region's developing economies and to gain more influence in the region.

Under the new accord, Venezuela will double the 80,000 barrels of oil it already provides each day, on favorable terms, to 11 of its neighbors. When crude oil prices exceed $15 a barrel, Venezuela will finance up to 25 percent of the cost of that oil, offering fifteen-year loans.

Chavez created the new initiative, after Mexico rejected his proposal to expand the so-called San Jose accord of 1980 to include Cuba and other countries.

Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua and Belize all signed the new accord, and Cuba is expected to follow suit when Fidel Castro visits Venezuela next week.

A former Reagan administration official believes the new agreement is an example of Chavez' pro-Castro inclination.

Former Assistant Secretary of State Elliott Abrams said that by including Cuba on the list of countries getting cheap oil, Chavez "isn't going to be pro-American. He seems to take real pleasure in distinguishing his own views from those of the United States, and he is certainly pro-Castro."

Abrams also believes the new oil deal gives Chavez a way to reach out to Castro.

"He's met with Castro, and this cheap oil is certainly a tremendous help to Castro. It's obviously very welcome to Castro to get any economic help that he can. He certainly needs it, given the state of the Cuban economy, which is terrible," Abrams said.

Abrams concluded that Chavez' new deal is a symbolic way for Chavez to thumb his nose at the United States.

Other critics say the accord provides no benefits for Venezuelan exporters and, in fact, could be harmful to business.