Protestors in Lago Agrio, Ecuador, seek a bigger piece of the oil pie.

Trouble in Lago Agrio as the troops move in to protect the oil wells.

Ecuadorean oil workers try to fix a vandalized pipeline in the Amazon jungle.
SOURCE: Reuters

Strife has engulfed Ecuador again, with thousands of protestors in two northeastern provinces shutting down oil wells that supply 15% of Ecuador’s GDP, 33% of Ecuador’s tax base, and 2.3% of the U.S.’s energy. The protestors didn’t just block the pipelines – someone (and I am not sure it was them) blew them up with dynamite and committed other acts of vandalism, spilling oil and harming the environment. Initial demands from the villagers were for more local jobs, more roads and infrastructure and more more environmental protections from the foreign oil companies with investments there. But now some of their leaders are interested in rewriting contracts of at least three foreign oil companies operating there – Oxy Pete, EnCana and PetroBras.

Ecuador is the U.S.’ second-largest oil supplier from South America (corrected). With both supply and refining capacity tight, that lost oil won’t be easily replaced. And because Ecuador is dollarized, the government cannot print money to finance itself. This makes the trouble there a huge crisis .

Ecuador has asked Venezuela to fill in for it on its oil supply contracts, and the disposition of the request seems to be that Venezuela will fill in, and the Venezuelan cabinet meets on Monday. There is a question of whether Venezuela can really help Ecuador, given that it already produces at full capacity and is still fighting a huge refinery fire. Oil prices have skyrocketed toward $67 a barrel.

Ecuador’s sent in troops to the restive two northeastern provinces to restore order. Troops have arrested mayors and governors, and released them for talks, but angry locals vow to fight back.

There’s turmoil in the government, with a weak president and a cabinet that cuts its own deals. Two malevolent players in this are deposed president Lucio Gutierrez who was ousted earlier this year, and Hugo Chavez, who has a couple of ministers apparently in his pocket – and they are all meeting in Havana.

Here is the news roundup:

VCRISIS AUG 5: President Alfredo Palacios fires his economy minister, Rafael Correa, for failing to inform him about a turndown of a World Bank loan. Correa, along with Foreign Minister Antonio Parra Gil, is a known Chavista. Talk began from a PetroEcuador official, Carlos Pareja, to rewrite Occidental Petroleum’s contract. He, too, was fired.

AUG 15 (no link): Strike begins in two provinces in the northeast. Villagers demand more roads, jobs and environmental protections from oil companies.

BLOOMBERG AUG 17: Lightning strikes the gigantic Amuay refinery in Venezuela, knocking production down about 75% to 150,000 barrels of oil a day. Oil prices spike upward.

REUTERS AUG 18: Canadian oil company EnCana loses 43,000 barrels a day in production due to the strike.

ASSOCIATED PRESS AUG 19: Troops sent into the Amazon to retake the 410 oil wells under occupation in two provinces.

PEOPLE’S DAILY OF CHINA AUG 19 reports that regional officials leading the strike are arrested.

REUTERS AUG 19: The defense minister, Solon Espinosa, resigns one day after sending troops in to restore oil production by retaking the oil wells occupied and vandalized. The government accuses protestors of being aligned behind forces loyal to deposed president Lucio Gutierrez who was thrown out earlier this year. Goldman Sachs accuses President Palacios of inflaming the region by talking of diverting debt-payment money to local projects, encouraging rent-seeking measures. Meanwhile, Ecuador says it will still be able to pay its debt obligations due to dollarization which has strengthened the economy.

XINHUA AUG 19: Ecuador’s new defense minister, Oswaldo Jarrin, declares that the army will use “maximum force” if necessary to restore oil production. The report also says that Jarrin’s predecessor, Solon Espinosa, was asked to resign by President Palacios.

BLOOMBERG AUG 19: Oil prices spike upward on Ecuador unrest among other things to $64.35 but is expected to come down this week. Longer term, analysts raised their price forecasts for oil in 2006. Ecuador ships 245,000 barrels a day to the states, its 10-largest supplier. Ecuador is a country that ships more oil to the U.S. than oil giants Norway or Russia.

AFX AUG 19: Goldman Sachs warns that the struggle in Ecuador is increasingly politicized. It began as a quest by locals to get more benefits from the ongoing oil boom but has since morphed into demands to renegotiate Occidental’s existing contracts. Ecuador’s weak government isn’t going to be able to do it, Goldman warns. Oil companies did accomodate the protestors’ initial demands but what followed was sabotage. Goldman warns that this signals something far different from local politics going on and warns of outside manipulation.

MARKETWATCH AUG 19: The army claims it’s retaken 95% of the seized oil wells.

AGENCE FRANCE PRESSE AUG 20: Defense minister Solon Espinosa quits, following the declaration of the state of emergency. He is replaced by a retired general, Oswaldo Jarrin.

REUTERS AUG 20: Government refused Orellana and Sumcumbios protestors’ demands to release 80 prisoners who were detained for sabotaging Ecuador’s oil wells in the east, causing production to drop to 33,000 barrels of oil a day from 201,000 barrels a day. It said it will negotiate with them once they stop sabotaging. The protestors say they will negotiate once the prisoners are released. This writeup is very good with excellent background.

MALDIVESINFO AUG 20: Ecuador has stopped exporting oil altogether. Crude oil spiked past $67 a barrel.

ASSOCIATED PRESS, VIA AL JAZEERA AUG 20: About 3000 Ecuadorean troops retook 50 or 60 of the 410 seized oil wells. Officials called the loss of oil production ‘worse than any war’ and warned that protestors had blown up at least two pipelines, one operated by Canadian company EnCana and the other by the state oil company, spilling oil and blocking technicians who can repair it, contaminating a river. The country will have to import oil for its own needs, about $140 million worth. The state has lost $125 million and private companies (which pay 25% royalties) have lost $18 million.

REUTERS AUG 20: Venezuelan foreign minister Ali Rodriguez, speaking from Havana, said Venezuela would consider Ecuador’s request to fill in for its contracts based on the current stoppage.

VOICE OF AMERICA AUG 21: Some oil production is restored, about 33,000 barrels vs 201,000 pre-strike.

REUTERS AUG 21: Protestors held pisoner, including mayors and governors, have been released and now the government says it wants to negotiate with protestors on their demands. Ecuador’s President Palacios says he got a call from Hugo Chavez saying he would be happy to fill in for the missing oil. Very comprehensive and well written report by Hugh Bronstein.

MIAMI HERALD AUG 21: Defense Minister Jarrin travels to the strike areas as the govenment struggles to restore production – military officials tell him the situation is very grave. Ecuador has lost 748,000 barrels of oil production and the finance minister says the strike will cost Ecuador $486 million. Meanwhile, ex-President Gutierrez has a strong political base of support in the two rebellious provinces and is believed to be residing in Peru.

EL UNIVERSO (GUAYAQUIL), VIA VCRISIS AUG 21: (In Spanish) Editorial says that at least six ‘Bolivarian Circles’ have sprung up around Ecuador for the purpose of re-integrating the Andean states – as was Simon Bolivar’s dream. This idea is currently being propounded by Hugo Chavez who expects to lead the new nation-state. Even President Palacios says he’s a ‘Bolivarian,’ the editorial notes. A Venezuelan embassy official in Ecuador has said this is proof that Ecuador supports Hugo Chavez. The groups are seeing official recognition and intend to reinstate 19th-century hero Eloy Alfaro as their ideal. The coordinator of the groups is constantly travelling to Venezuela. These groups say they have the ‘spiritual support’ of Chavez.

FINANCIAL TIMES AUG 21: (subscription) The IMF will pay a visit to Ecuador on Monday.

AGENCIA EFE AUG 21: The strikers warn that talks with the government only amount to a suspension and not a call-off of the strike. Whether the strike resumes will depend on the outcome of the talks that begin Sunday. Ecuador officials say the losses are immense and it will be November before full production resumes. Article also says that eleven mayors from the rebellious states will take part in the talks but the state of emergency limiting freedom of press and association will not be lifted until oil production returns to normal. The troops would guard the pipelines until then.

ASSOCIATED PRESS AUG 21: Geologists say that Colombia’s Galeras volcano, near the Ecuadorean border, is likely to blow.

REUTERS AUG 21: The government is having a difficult time recovering production to pre-strike levels.

AFX AUG 21: Oil futures spiking upward on Ecuador strife.

REUTERS AUG 21: Hugo Chavez, speaking from Havana, declared that Venezuela would cover all of Ecuador’s contractual obligations on oil – free of charge.

BLOOMBERG AUG 22: Oil trading flat in Asia, retaining high levels. Market watchers ask how Venezuela thinks it’s going to get the oil to fulfill Ecuador’s contracts.

From the bloggers:

BLOGGINGS BY BOZ AUG 19 has a good news roundup and makes the intriguing speculation that counterintuitive as it may sound, Chavez’s offer to supply oil may in the end help the U.S.

JOYCE GINATTA AUG 19 in Guayaquil has several good editorials culled from Ecuador’s newspapers (in Spanish) warning of the importance of free markets for Ecuador’s long-term future amid the current strife.

DEBT AUG 19 reports that Ecuador’s debt has taken a beating.

UNCOMMON THOUGHT JOURNAL AUG 19, a left-leaning blog, says there are growing calls to release the U.S. Strategic Petroleum Reserves. He also notes that Department of Energy forecasts for August do not generate much confidence.

SW’S ENERGY GAP AUG 19, unimpressed, sees the coverage of Ecuador as ‘every brushfire an emergency.’

DENNIS DEKAT AUG 19 has a photo of Ecuadoreans protesting in the jungle and wonders how long it takes before gringos start protesting oil prices.

VCRISIS AUG 20 reports that Ecuador’s turmoil is a result of a weak President Palacios whose cabinet is plotting and conniving behind his back. Gutierrez’s footprints are all over the strife as well. Hugo Chavez complains that he will be blamed for the unrest, but who else is there interested in this?

NATE’S TRAVEL BLOG AUG 20, a real find, this is the writing of an an oil rigger out there in the Ecuadorean Amazon who just got out ahead of the Lago Agrio protests, describes the 3-hour jungle riverboat ride to the restive Amazon village. He says the strike had been planned more than a week before it happened and that is not unusual. It may be Palacios’ biggest challenge but he’s only been in power since April and none of this is new stuff for Ecuador. Injuries have been minor and protests usually just enter an oil installation and declare they are taking it over. Oil riggers don’t want trouble so they go home or fly back to Quito or Guayaquil to wait it all out, he says. Those two large cities, he says, are unaffected. Other oil rig workers from the U.S. and Canada tell him don’t worry, it’s business as usual in Ecuador, happens all the time. Nate then follows with a long, and truly fascinating description of life working on the deep jungle rigs with Venezuelan, Ecuadorean and Canadians all in a tight team. Recommended reading.

INTERNATIONAL SECURITY AND JUSTICE AUG 20 cites and IHT piece saying that Ecuador has found the U.S.’ refusal to put its troops in Ecuador under International War Crimes jurisdiction, resulting in a $15 million cutoff of aid, has left Ecuador deeply resentful. (Note: IHT misleadingly says the U.S. has one of its largest bases on Ecuador and it’s there to fight drugs, which is true but neglects to mention it’s a small operation with only 300 troops.) The writer believes the U.S. is being paranoid in a ‘Helmsish’ way and ought to change the policy.

NARCONEWS AUG 20: Says the army’s takeover of occupied oil wells left numerous injuries and reiterated a BBC report saying that discontent has a racial component, because only white people gained from Ecuador’s oil boom. Report says that the protestors want to pressure President Palacios to drop the ‘neoliberal’ policies of ex-President Lucio Gutierrez. This report does not sound firsthand but does reflect the thinking of the far left.

BLACK INFORMANT AUG 20 says that the actions of the army on behalf of the oil companies is no different from what European and Chinese oil companies do in African countries when things get out of hand.

Live from the Lonely Planet backpacker bulletin board:

This thread has a fellow who says Lago Agrio is definitely the best jungle tourism out there in comparing different places in South America.

This thread is concerned with jellyfish problems on Ecuadorean beaches.

This thread and this thread effuse about how much fun a trip to Ecuador is to visit. (Knowing the place myself, I agree.)

Overall impression – the tourists are more interested in countries like Peru and Argentina these days – I didn’t see any unrest questions from this crowd yet.

If I’ve missed anything or anyone, email me at ammorayleon at gmail com