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Cablegate: Nicaragua - Venezuela Memorandum of Understanding

VZCZCXYZ0014
RR RUEHWEB

DE RUEHMU #0639/01 0682306
ZNR UUUUU ZZH
R 092306Z MAR 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 9409
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1000
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS MANAGUA 000639

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, EEB/ESC

E.O. 12958: N/A
TAGS: ENRG EPET EAID NU VE
SUBJECT: NICARAGUA - VENEZUELA MEMORANDUM OF UNDERSTANDING
ON ENERGY SECTOR COOPERATION BETWEEN PDVSA AND PETRONIC

1. (SBU) Summary. As part of a series of Bolivarian
Alternative agreements between Nicaraguan and Venezuela
signed on January 11, 2007, respective Foreign Relations
Ministers signed a Memorandum of Understanding for Energy
Sector Cooperation between Petroleos de Venezuela (PDVSA) and
La Empresa Nicaraguense Del Petroleo (PETRONIC). The MOU
outlines areas for cooperation between PDVSA and PETRONIC,
including the formation of joint enterprises engaged in
refining, distribution, supply, and marketing petroleum
products, the supply of petroleum and refined products, the
construction of a refinery in Nicaragua, and the direct
supply of gas from Venezuela to Nicaragua via pipeline. End
Summary.

2. (SBU) The MOU for Energy Sector Cooperation between the
Venezuelan Oil Company (PDVSA) and the Nicaraguan Oil Company
(PETRONIC) was one of a series of thirteen commitments with
Venezuela negotiated by the Ortega government before it came
to power on January 10, 2007.
PETRONIC President Jose Francisco Lopez and PDVSA President
Rafael Ramirez Carreno signed the MOU on January 11, 2007.
The substance of the MOU, along with the other commitments
made that day, was kept from the public for weeks. This
cable reports on an unsigned copy of the MOU.

Preambular Language
-------------------
3. (SBU) Preambular language recognizes the importance of the
expansion and intensification of social and economic
cooperation between the parties, in consideration of the
opportunities that the energy sector offers for cooperation
with a major emphasis on the social development. The parties
reiterate their political will and interest in encouraging
regional energy integration, based upon the principles of
cooperation, complementarity, self-determination, shared
solidarity between peoples, respect for sovereignty, and the
sovereign right to establish criteria that assure the
utilization of renewable and non renewable natural resources
for the equitable and sustainable development of their
peoples.

Article 1: Objective
--------------------
4. (SBU) The objective of this MOU is to establish a general
framework for the execution of cooperative activities of
mutual interest to PDVSA and PETRONIC in the area of energy.

Article 2: Modalities
----------------------
5. (SBU) With the purpose to put into practice what is
foreseen in Article 1, the parties agree to deepen mutual
cooperation with a view to continuing the advancement of
studies and strategies that may be required to realize
development in the following areas:

-- formation of mixed enterprises between state enterprises
for the development of refining, distribution, supply, and
marketing projects for petroleum products, and other
objectives of common agreement between the parties.

-- construction of a refinery in the territory of the
Republic of Nicaragua, with the participation of PDVSA and
PETRONIC.

-- direct supply of gas to the Republic of Nicaragua via land
through a pipeline.

-- supply of petroleum and refined products up to the volumes
agreed upon by the parties and established mechanisms for
payment.

-- other forms of cooperation that the parties may agree.

Article 3: Competent Authorities
--------------------------------
6. (SBU) Competent authorities for the execution of this MOU
shall be PDVSA and PETRONIC.

Article 4: Control and Oversight
--------------------------------
7. (SBU) With the purpose of assuring the prompt execution of
this MOU and in as much as agility is required in making
decisions, officials of the competent authorities will meet
alternatively in the territories of the parties on dates that
they decide by common agreement. In this way, executive
working groups may be established to effect cooperative

relations in the different sectors.

Article 5: Utilization of Information
-------------------------------------
8. (SBU) The parities may freely utilize all information
exchanged by virtue of this MOU, except that which a party
restricts or places reservations for use or dissemination, or
has classified as confidential. In no case will information
exchanged by virtue of this MOU be transferred to third
parties without prior written consent by the relevant party.

Article 6: Financing
--------------------
9. (SBU) Parties agree that expenses resulting from defined
cooperative activities will be born by the party that incurs
them, through its competent authority, unless another so
agreed in writing.

Article 7: Labor Relations
--------------------------
10. (SBU) Personnel commissioned by each party will continue
under the direction of the institution to which they belong,
so as to not create relations of a labor character with the
other party. They shall work under the norms and regulations
of the institutions from which they are lent. Such staff
will not be able to dedicate themselves to any activity
outside of their functions, nor receive remuneration beyond
what is established without prior authorization from the
competent authorities. Each of the parties is responsible
for labor accidents and damages to their own property,
independent of the place where it occurs, unless it is a
consequence of grave negligence or hurtful conduct, in which
case corresponding indemnities should provide cover.

Article 8: Third Parties
------------------------
11. (SBU) This MOU does not confine the parties to any
exclusivity, nor does it impede signing other agreements of
this type with third parties.

Article 9: Modifications and Termination
-----------------------------------------
12. (SBU) This MOU may not be terminated, modified, or any
article omitted, without previous written consent indicated
by both parties.

Article 10: Resolution of Disputes
----------------------------------
13. (SBU) Disputes that may arise with because of
interpretation or the application of this MOU will be
resolved by the parties in a friendly manner through direct
negotiations and common agreement.

Article 11: Duration, Entry into Force, and Withdrawal
--------------------------------------------- ---------
14. (SBU) The duration of this MOU will be 5 years after
having entered into force upon signature, without lessening
fulfillment of constitutional and internal legal requirements
that each country may have. This MOU will remain in force
unless one of the parties communicates to the other its
intention to terminate it at least 6 months before the
expiration of the agreement. The termination of this MOU
does not imply the cessation of agreed upon projects during
the period within which this agreement was in force, which
may be executed until their culmination unless the parties
agree to the contrary. This MOU may be amended by mutual
consent of the parties; amendments will enter into force in a
form agreed upon by the parties.
TRIVELLI

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