Jose Chalhoub was leader of International Analyses for PDVSA (Petroleos de Venezuela South America) between 2004 and 2016 in its Loss Prevention and Risk Control Unit. In that position, he travelled to countries where the Venezuelan oil giant was operating PetroCaribe joint ventures. In an interview with CIJN, Chalhoub outlined his concerns that senior management of PDVSA turned a blind eye to corruption. In his view, the decline of PetroCaribe and PDVSA itself was a product of the political favoritism and nepotism that kept skilled oil experts from crucial management posts.
WHAT WAS THE GOAL OF THAT LOSS PREVENTION AND RISK CONTROL UNIT?
Basically, fighting against corruption, physical security, risk analysis of facilities, intelligence analysis of facilities, situation room monitoring of operations. All things dealing with the business continuity of the whole company and internationally. That’s how the operations of this department grew up in support of PetroCaribe.
YOU LOOKED AT PETROCARIBE’S RELATIONSHIPS WITH ITS PARTNERS, ITS OVERSEAS JOINT VENTURES?
Yes, this experience of me with PetroCaribe was directly within this Department of Loss Prevention and Risk Control and in support of a team working directly with PetroCaribe during these (international) trips.
WHAT DID YOU SEE AS THE GOAL OF PETROCARIBE? WHAT WAS IT TRYING TO ACCOMPLISH?
Personally speaking, it was an interesting mechanism, okay, it was like a continuation of an international idea of PDVSA before the Bolivarian Revolution arrived to power but overstretched as the years went by, overstretched the resources of PDVSA. All the human resources and financial resources. It turned into a geopolitical strategy to, first of all, displace the U.S., the traditional U.S. and European companies in the Caribbean, trying to project the Bolivarian Revolution ideology in the Caribbean Basin.
It was part of continuation of a previous strategy of PDVSA in the Caribbean because PDVSA used to have, before the onset of PetroCaribe, many important hubs like storage facilities in Curacao and Bonaire and in other Caribbean Islands before the onset of PetroCaribe in 2005.
It was an interesting experience, but it got lost in the trajectory of the mechanism.
HOW DID IT GET LOST? AS YOU TRAVELED TO DIFFERENT PLACES TO INSPECT JOINT VENTURES HOW DID YOU SEE IT GOING OFF THE RAILS?
These trips (between 2010 and 2012) helped me to discover by myself and with my team, personally and directly, many cases of corruption in each of these islands.
For example, in Grenada, Jamaica, the Dominican Republic, El Salvador, St. Kitts and Nevis, St. Vincent, Curacao, Bonaire, and Domenica. I’m talking about my personal travel to these countries.
Nepotism. I just saw corruption everywhere, mishandling of resources by a few, actually the Directors of PDVSA of these joint ventures in each of these islands. It was, at the end of the day, very highly politically motivated.
WHEN YOU TALK ABOUT THIS CORRUPTION, DESCRIBE WHAT YOU MEAN ABOUT NEPOTISM, THE DIVERSION OF FUNDS.
For example, in the cases of nepotism, just to talk about one example was when a high, close personal friend of a Director was deployed as the director the joint venture in Grenada.
SO YOU’RE SAYING DIRECTORS OF PDVSA PUT CLOSE FAMILY OR FRIENDS OR POLITICAL ALLIES IN CHARGE OF THESE JOINT VENTURES.
That’s correct. That’s correct. That’s what I’m talking about.
CAN YOU NAME ANY OF THE DIRECTORS?
Yes. One name that came up, for example, was Asdrubal Chavez. He was almost like the Almighty Director of PDVSA’s PetroCaribe endeavor. (Asdrubal Chavez was a cousin of Venezuelan President Hugo Chavez.) He was the man in charge of all things PetroCaribe back in the day.
SO, ASTDRUBAL CHAVEZ WOULD PUT SOMEONE…A RELATIVE, A POLITICAL ALLY…IN CHARGE OF A COUNTRY OR PROJECT AND WHAT WOULD HAPPEN?
At the end of the day and even currently, none of these projects ended well. They all represented losses for PDVSA. No permanent, skilled person from PDVSA, independent of any political connection was ever deployed to any of these Islands to handle operations in a smart way. But, as I was saying, it all depended on political connections with this guy, Asdrubal Chavez.
SO WOULD THEY DIVERT OIL FOR THEIR OWN BENEFIT? WOULD THEY DIVERT CASH FOR THEIR OWN BENEFIT? HOW WAS THIS CORRUPTION MANIFESTING ITSELF?
In different ways, I mean in mishandling resources, spending on travel expenses in dealing with trade and supply, in shipping of oil products to these Islands. It was manifested in different ways.
YOU SAID THERE WERE INFLATED TRAVEL EXPENSES, EXPENSIVE DINNERS, GOLF CLUBS…WHAT WAS IT?
Exactly (nodding his head in the affirmative) That’s what I was trying to tell you, I mean lavish spending, support for political allies.
El Salvador was a very iconic experience for me because I had a chance to see all these representatives from Farabundo Marti National Liberation Front, FMLN. (A leftist party still active in El Salvador’s politics that has twice won the Presidency.)
Many FMLN members were also in charge of the joint ventures in El Salvador which was ALBAPES (Alba Petroleous de Salvador) the joint venture with PDVSA.
I got the chance to see how our resources, or most of our resources were diverted in a highly corrupt way, mostly, for political purposes.
MOSTLY FOR POLITICS BUT SOMETIMES FOR PERSONAL GAIN?
Of course, for me those items were always deeply connected.
WHO WAS IN CHARGE OF PDVSA’S PETROCARIBE JOINT VENTURE IN EL SALVADOR WHEN YOU TRAVELED THERE?
Well, there was just one person in charge, I mean Venezuelan, in charge permanently in El Salvador, I don’t remember his name, but there were no more Venezuelans deployed to represent our case, our country, in the joint venture.
AMONG THE SALVADOREANS, WHO WAS RUNNING IT?
I was told that this person was accused of corruption recently and there was a raid in the offices of PDVSA in El Salvador two weeks ago. I knew that this was not going to end well. I mean, from the things that I saw in the 9 days that I was in El Salvador.
WHAT WAS IT SPECIFICALLY THAT TROUBLED YOU?
Specifically? For example, the facility managed by PDVSA in this joint venture was a gasoline distribution point. All the security personnel of this facility were managed by former MARA members, you know MARA the gang or gang groups operating in El Salvador, I mean this guy was the lead member of the security team of that facility.
Second of all, members of (leftist) political parties in charge of the Salvadoran part of this joint venture were feted with lavish expenditures. You know, inviting everyone to fancy dinners, in expensive cars, all of things I’m telling you, I had the chance to see it.
SO YOU SAW THEM LIVING THE HIGH LIFE AND WHO WAS PAYING THE BILLS, REALLY?
Most of the money came from PDVSA, El Salvador was never an oil-producing country. I mean Venezuela was putting almost 60% – 65% of the resources into this joint venture.
YOU SAW THIS CORRUPTION FIRSTHAND. YOU SAW GANG MEMBERS IN CHARGE OF SECURITY.
Yes, exactly. I mean former members I don’t know if they are currently operating with the MARA gangs with the MARA Salvatrucha, as they are called there in El Salvador.
I had a chance to talk to this guy (in charge of security at the joint venture operation) in an interview to see how the security issues were going. I mean, he was the one who told me that he belonged to the MARA, the MARA group. I didn’t want to go into that issue that much but I just wanted to evaluate and calibrate how the security items were in the facility and all the surrounding areas around the facility. But yes, he was the one who told me he belonged to this group, at least in the past.
DID ANY OF THESE PEOPLE HAVE ANY EXPERIENCE WITH OIL, MANAGING A GAS DISTRIBUTION CENTER?
(SIGHS) I really doubt it. I really doubt it and one of the things that troubled me the most is that no skilled Venezuelan oil worker was ever permanently deployed to any of these Islands or Countries, with any significant or substantial oil experience.
We had about a 50% share in each of these joint ventures. We needed skilled Venezuelan PDVSA workers to be there, caring for all our resources in any of these joint ventures.
For example, in El Salvador, there were no skilled workers, I mean not at the level of the Venezuelan workers and I’m not trying to be exclusive or discriminatory with this comment, but I mean they were not experienced.
THEY WERE NOT EXPERIENCED, QUALIFIED OIL WORKERS.
No, not at all.
PetroCaribe, as I saw it from the beginning, was an interesting experience. It could have allowed us (PDVSA) further expansion in the Caribbean basin. We had a former presence in the Caribbean. We had deals, we had storage facilities in Grenada, we had our own facility in Bonaire. It’s not leased, it’s our own facility. It just got lost in the way, with all these things I’m telling you.
HOW ABOUT JAMAICA?
Jamaica was interesting, it was a former Shell facility as we were told there. It was a very large facility, very modern. No permanent Venezuelan work representation there, just one manager as well. What can I tell you? The security issues on the Island were very threatening.
THREATENING IN WHAT WAY?
Because of the whole situation on the Island, we were warned repeatedly that the security situation, criminal violence on the Island was very threatening for personnel who were visiting the Island and the facility.
We were also told (by members of the local team) that there were cases of oil spills, thefts and (unauthorized) pipelines connecting to the storage tanks in the Petrojam facility. They (their local security team members) were denouncing that. They were reporting to us that those cases were current and something had to be done regarding these cases.
BUT DID YOU OR PDVSA HAVE ANYONE CAPABLE OF CRACKING DOWN ON THAT DIVERSION OF FUEL?
Not at all. As I told you, for us, coming from the security department in an overall sense we always sensed and always had the feeling there needed and had to be at least two representatives from the security department in each of these Islands, each of these countries where PDVSA had deals and joint ventures within the mechanism of PetroCaribe. But no, nothing was ever done.
PDVSA saw having permanent personnel in these countries a waste of time or waste of money. You know it was ironic, but it was really weird because we had 49% of the shares in any of these joint ventures. We needed to have a safeguard in these businesses, you know?
YOU DIDN’T HAVE ONE.
No, we didn’t. We didn’t.
DID YOU KNOW WHO WAS SIPHONING OFF THE OIL, WHO WAS PROFITING, DIVERTING THE OIL AND SELLING IT FOR PROFIT?
No. No, we didn’t. Personally, my trips to these countries and these Islands were just once. ONCE. Once and then just we just went to the countries, did interviews, visited the facilities, came back to Venezuela, did the report, collecting all the evidence and just elevated the report to the Director and the managerial posts and that’s it.
DID THE PDVSA DIRECTORS IN CHARGE OF PETROCARIBE ACT ON YOUR FINDINGS?
No. It’s really sad and it’s really tragic but nothing substantial nothing significant was ever done during my experience within PetroCaribe and in support of PetroCaribe. I didn’t see anything significant, any cure or any solution to these irregularities or issues. Nothing was ever done.
BUT THE STAFF IN SOME OF THESE COUNTRIES, SAY JAMAICA, THEY CAME TO YOU AND REPORTED OIL BEING DIVERTED ON A REGULAR BASIS?
Personally, me and the team that had a chance to go there, we didn’t have any power of decision making during all of this. We were only analysts traveling, collecting evidence, following instructions and that’s it. The cases (of corruption) and denouncements (by local staff) and the allegations and all that just rested there (in their reports to PDVSA/PetroCaribe managers) and after we came back, that’s it.
SO, GIVE US AN IDEA OF HOW THESE DIVERSIONS WOULD TAKE PLACE. DID THEY SIMPLY HOOK UP THESE PIPELINES BETWEEN STORAGE TANKS TO SOME OUTSIDE SOURCE, SAY A TANKER TRUCK THEY COULD USE TO STEAL THE OIL AND SELL IT?
That’s exactly, more or less, exactly the denouncements we received. I mean, stealing the oil and selling it at higher prices, in Jamaica I’m talking about.
BUT WAS IT A COMMON PROBLEM THROUGHOUT THE CARIBBEAN THAT THESE JOINT VENTURES WERE NOT PROPERLY MANNED, YOU DIDN’T HAVE THE PDVSA STAFF IN ANY OF THESE COUNTRIES SUFFICIENT TO REALLY MONITOR WHAT WAS GOING ON AND CONTROL EACH OPERATION?
No. No Permanent and that’s the correct word, mechanism of security, auditing, financial control or anything related to control and monitoring of the operations there, no.
DID YOU OR YOUR COLLEAGUES EVER ASK WHY PDVSA WAS ALLOWING THIS TO GO ON?
Of course. Many times. Many times. We were really worried. We were really worried because after collecting all this evidence throughout all our trips I mean were continually worried and concerned but I mean, there was nothing significant or substantial that we could ever do because we were not part of the directorate (management.) We were in a department that was sometimes, you know, sidelined.
When we found any delicate topic or any delicate issue, the reports were shelved and that’s it.
HOW WOULD A PDVSA TEAM LIKE YOURS GO TO THESE JOINT OWN FACILITIES – ONCE A YEAR? ONCE EVERY MONTH?
Well, it was like, all these trips were in a timeframe of 2 years. And that’s it. Visiting Islands, there were trips of like, 2 days or 3 days or 4 days to any of these countries and we just came back. As I told you, just one trip to any of these countries and that’s it. No more.
We didn’t do any follow up to any of these countries or any of these cases because we weren’t instructed to.
DO YOU THINK THAT WAS ONE OF THE MAJOR REASONS THERE WAS SO MUCH CORRUPTION AROUND THESE JOINT VENTURE PROJECTS AROUND THE WHOLE PETROCARIBE PROJECT?
One of the many.
WHAT WERE SOME OF THE OTHER FACTORS THAT LED TO THE DEMISE OF PETROCARIBE?
The leadership from higher directors at PDVSA, that’s the main reason for me. I mean there were people that were not interested in the higher ranks of PDVSA that were not interested in the many and varied cases of corruption when they were discovered. For me, that’s the main cause.
DID YOU GET THE NOTION SOMEONE INSIDE PDVSA WAS GETTING KICKBACKS FOR ALL THIS CORRUPTION ON THE CARIBBEAN ISLANDS?
Probably, but we didn’t get any specifics of these allegations. Those were suspicions that we had, of course.
YOU’RE OUTSIDE OF PDVSA NOW. PATROCARIBE IN YOUR OWN WORDS, IS IN COMPLETE DECLINE. IS THERE ANY PROSPECT OF SAVING THE PROJECT OR IS IT FINISHED?
To sum it up, PDVSA needs to, first of all, recover itself. Recover itself and for that we need a lot of assistance, we need a lot of revamping internally in order to recover PetroCaribe.
For now? Based on my experiences in the past, I see PetroCaribe (right now) in complete decline. It’s still safeguarding Cuba. Cuba was the “untouchable” and it’s still the “untouchable” for political and ideological reasons.
ARE THE CARIBBEAN STATES GRATEFUL?
Only time will tell if the money is going to be repaid anytime soon. Only time will tell that. I won’t generalize, I can’t speak for all the countries I visited, because I have found people grateful for all the Venezuelan cooperation and support but, yes, in some cases I felt these countries saw us and Venezuela as a nation trying to exert some influence, some political, some ideological influence.
Only time will tell how all this related to PetroCaribe will turn out. But right now, I see the mechanism in complete decline and lost.