Quito’s Rocky Foreign Relations: Two Separate Issues Point in One Direction

Ecuador is currently handling two major foreign affairs questions – recent proposals to join OPEC and a contentious flap over UNITAS Pacific, a naval exercise that has been hosted annually by the U.S. Navy since 1959. The naval exercise involves Peru, Panama, Colombia and Chile, and is staged to encourage positive inter-American military ties and to augment naval cooperation. UNITAS Pacific is part of phase one of Partnership of the Americas, a 6 month naval mission sponsored by the Pentagon.

Almost simultaneously with the deployment of UNITAS Pacific, the twelve member nations of the Organization of Petroleum Exporting Countries (OPEC) were discussing the possible return of Ecuador to its fold, after Quito submitted an official request to rejoin the organization in June. Ecuador was a member of OPEC from 1973 until 1992, when the difficulty of keeping up with overhead payments to the organization induced it to withdraw. Since that time, Ecuador’s economy has struggled even more fitfully than it had before, as the lack of refining facilities forced the country to depend upon costly imported gasoline in spite of its ample crude reserves. In 2006, Quito ousted its largest foreign investor, Occidental Petroleum of Los Angeles, after the government claimed that the company was not adhering to its contractual arrangement with the country. This led to a harmful decline in output. It is becoming increasingly clear that the consequences of both the OPEC and UNITAS Pacific gatherings could extend to a level beyond naval, petroleum, and military collaboration.

Rafael Correa, the left-leaning president of Ecuador, is the country’s eighth chief executive in ten years. The unstable nation appears open to Correa’s plans to improve the economy and its petroleum-based energy sector by strengthening Petroecuador and becoming an active OPEC contributor; but questions have surfaced among some non-OPEC governments (notably the U.S.), based on Correa’s close relationships with Bolivia’s Evo Morales and, especially due to Quito’s kinship with Venezuela’s Hugo Chávez, as of now Latin America’s only member of OPEC.

In aspiring to rejoin OPEC, President Correa is assuming an opposite role than was the case with UNITAS Pacific, as the headquarters for this year’s exercises were abruptly moved from Ecuador to Colombia. According to officials with the U.S. Southern Command, the shift was due to an unsettled maritime border dispute involving Ecuador and Washington. Consequently, Quito decided to no longer contribute its resources to the U.S.-sponsored wargame. Pulling out of UNITAS Pacific conveyed the resentment felt by Ecuador towards participating next to the U.S. Ecuador’s Foreign Minister, María Fernanda Espinosa, commented, “in the face of this unusual, unilateral, unsolicited, and unacceptable decision, Ecuador has decided not to participate in UNITAS in 2007.” On the surface, the issue of OPEC appears unrelated to UNITAS Pacific, yet under closer examination it is clear that both initially reveal similar traits, namely, their potential to recalibrate Ecuador’s foreign relations in a direction away from Washington.

A Decade of Economic Turmoil

While the 1980s and early 1990s saw several attempts at democratic governance in Ecuador, the nation’s economy and political infrastructure have encountered sustained turbulence since 1996. A lack of stable leadership created substantial political chaos, and the absence of predictable access to natural resource production (especially petroleum) led directly to Quito’s economic crisis of 1999.

In that year, just one year after a new constitution was being drafted, Ecuador plunged into an economic free-fall. With the curse of El Niño – the periodic and devastating warming of offshore waters that, in 1999, damaged much of the country’s agricultural land – as well as an acute drop in world oil prices, Ecuador’s GDP fell 7.3 percent, and the national currency was devalued by about 70 percent. To cope with this collapse, Quito decided to dollarize in 2000, causing petroleum prices to climb. Moreover, refining capacity still remains a pertinent concern, and the future of Ecuador’s steadiness rests largely in the hands of Correa. With support from across Latin America, and with some fresh economic ideas – especially prospects of rejoining OPEC – perhaps Ecuador’s president will be able to firmly guide the nation into the international mainstream.

President Correa’s attempts to guide the nation to prominent stature in the global market could, however, be spoiled by the UNITAS Pacific controversy. From the U.S. perspective, Ecuador has been in a maritime dispute with both the U.S. and Peru. The U.S. recognized Ecuador’s jurisdiction of twelve nautical miles of territorial waters, while Ecuador insisted on a 200 mile limit. In addition, a parallel border was drawn between Ecuador and Peru based on an agreement signed in 1952. However, Peru had never accepted this decision. Peruvian President Alán Garcia dismissed this claim and denies any dispute, “border or maritime,” with Ecuador. For her part, Minister Espinosa similarly insisted that such a disagreement had been settled years earlier, verifying that it could not be used to explain the U.S. Southern Command’s decision regarding Ecuador’s nautical minutes. From Quito’s perspective, the relocation of the UNITAS Pacific headquarters was entirely unforeseen. Colombian Defense Minister Juan Miguel Santos understood that the maneuvers were moved from Ecuador because Ecuador and the U.S. had failed to come to an accord regarding the configuration of the UNITAS Pacific naval drills, further revealing the ambiguity clouding the decision.

A Trip Follows Disaster: Negroponte’s Attempt to Reduce Tension

In May 2007, U.S. Deputy Secretary of State John Negroponte traveled to Colombia, Ecuador, Panama and Peru intending to meet with Latin American heads of state and discuss policy issues. The U.S. has recently turned down a Free Trade Agreement (FTA) with Colombia, and has set back by several months the forging of FTAs with Panama and Peru, which had been in the works. This put Ecuador in an unsurprising outsider position, considering that President Correa recently declined the U.S.’s offer to enter into such a bilateral pact. On top of Ecuador’s already rocky relations with the U.S. due to the UNITAS Pacific decision, it is no surprise that Negroponte’s trip could have provoked some awkward moments. Upon meeting with Negroponte, the Ecuadorian leader verbalized a subtle but provocative reference when he said, “Ecuador has a government which loves democracy and liberty deeply but, like the U.S., it also loves its sovereignty.” The value and concern Ecuador has placed recently on its national sovereignty has been a vehicle in helping to trigger increasingly chilled feelings between the U.S. and Ecuador.

Latin American “Brothers and Sisters”: Harmful or Beneficial?

The consequences of Ecuador’s UNITAS Pacific decision surface when Ecuadorian officials compare their relationship with neighboring Latin American countries to their relationship with the U.S. Support from the U.S. for leftist political leaders like Venezuela’s Hugo Chávez is nonexistent; yet, the tri-lateral relationship between Venezuela, Ecuador, and the U.S. generates an enticing illogicality. Although a healthy relationship seemed to exist separately between both Ecuador and the U.S., and Ecuador and Venezuela, Washington has repeatedly challenged the policies of the Chávez administration and its counter-hegemonic tendencies. Ecuadorian officials should consider this contradiction when expressing support for the Chávez administration while simultaneously anticipating that the U.S. will support them when it comes to other pressing issues like the Andean Trade Protection and Drug Eradication Act (ATPDEA). While it is possible that Correa is allying his administration with specific Chávez policies in order to give his own government more leeway, caution remains essential for Ecuador to ensure comfortable relations with Washington, as it pursues membership in OPEC.

The Correa-Chávez Equation

In its mission statement, OPEC identifies two goals for its member nations: “[To] coordinate their oil production policies in order to help stabilize the oil market and to help oil producers achieve a reasonable rate of return on their investments.” During Ecuador’s previous involvement in the cartel, it produced very little petroleum in comparison to most of OPEC’s members – only the small African nation of Gabon exported less. With the recent encouragement and support from Chávez, Ecuador can potentially fulfill more of the first objective in an effort to maximize the second.

Correa is not the only Ecuadorian president to foster oil-based relations with Venezuela. In May 2006, Chávez visited Quito and signed several energy agreements, including one contract to refine as much as 100,000 barrels of crude oil per day. Ironically, while the U.S. and other developed nations balk at high gas prices and hunt around the Middle East in hopes of acquiring new petroleum production, Ecuador sits on reserves that it cannot afford to exploit. Meanwhile, Quito’s petroleum industry is horrendously prone to accidents and lost production, quickly wilting away the treasured Amazon by its casual environmental standards while alienating Ecuador’s relatively large population of indigenous peoples. Between 1990 and 2005, over 20 percent of Ecuador’s forest coverage was destroyed because of oil operations. Additionally, Texaco’s massive oil operations spilled nearly 17 million gallons of crude oil into Ecuador’s waterways in the 25 years that it held an oil stake in the country.

It is nearly inevitable that Ecuador will join OPEC – an occasion that is expected to provide a considerable economic boost to the struggling nation. However, it is also certain that any increase in oil extraction is likely to be extraordinarily deleterious to the surrounding environment. In attempts to counteract the expansion of pollution, Correa has made a novel appeal to the international community by asking for funds to refrain from opening new oil fields in the Ecuadorian Amazon: “Ecuador doesn’t ask for charity, but does ask that the international community share in the sacrifice and compensate us with at least half of what our country would receive, in recognition of the environmental benefits that would be generated by keeping this oil underground.” It is virtually hopeless that the petrol-hungry industrialized world will accommodate such a radical, if logical, form of preservation, and therefore it is inherently necessary that the world acknowledge Ecuador’s cries: Quito is unable to afford much of its own refining. Meanwhile, its environment has suffered immeasurably. With the untapped fields of the Yasuni National Park estimated to contain between 900 million and one billion barrels of crude oil, the question arises: is the international community willing to pay in order to prevent this irreplaceable resource from being destroyed by exploitation?

Washington’s Position on Ecuador; Manta Base to Expire in 2009

The relationship between Ecuador and Venezuela is important to evaluate because close ties may have strong implications both within OPEC and across the international community. Prior to his election, Correa announced that he greatly anticipated closer relations with Venezuela, but adamantly denied any need for Venezuelan assistance. Chávez quietly supported Correa throughout the campaign, and at Correa’s January inauguration, Chávez presented Correa with a replica of Simón Bolivar’s sword.

While this may seem inconsequential, it is not so for the Bush Administration, which loses no love over Chávez’s leftist government. The election of Correa may have significant implications for Washington: Ecuador is the U.S.’s second-greatest supplier of South American makeshift oil and is the home of the only U.S. military base in South America. In January, Correa announced that Quito will not renew its leasing arrangement with Washington for its Forward Operating Location (FOL) situated in Manta, Ecuador, which ends in 2009. The basis for this action is that it is not aligned with Ecuador’s national sovereignty.

The Eloy Airfield in the northern city of Manta was originally intended to provide a site from which the U.S. could regulate and provide surveillance of drug trafficking flights in the region as a counter-narcotics component of Plan Colombia. The lack of emphasis by the U.S. on the renewal of the Manta base may clarify the rather fuzzy explanations for the motivation behind the UNITAS Pacific controversy; it could be maintained that the decision of the U.S. Southern Command to move the headquarters was a form of retaliation for the refusal of upholding Manta as an FOL. The U.S. push for a military base in Manta reaches beyond its anti-drug trafficking itinerary. Its closure highlights the possibility that Ecuador will be less keen on welcoming Colombian refugees, a fear now rooted in the hearts of the vulnerable group. Nonetheless, Minister Espinosa has made Ecuador’s intentions quite clear: “Ecuador is responding to feelings and desires of the Ecuadorian people who do not support the presence of foreign armed forces; from where these armed forces are is irrelevant.” Clearly, Correa is aiming for Ecuador to play a stronger role in regional politics while steering away from relations with Washington, a position that could be greatly accelerated by Quito’s acceptance into OPEC.

A Change of Course: Logistical Problems

Some OPEC member states have expressed a desire for Ecuador to repay the $5 billion debt it owed OPEC upon its withdrawal from the organization in 1992. Correa, however, seems set on the prospect of re-joining, despite the country’s inability to compensate its creditors: “the decision to return to OPEC has been taken and this will open up a lot of opportunities, among them access to credit in Middle East banks.” The outlook became even more positive for a hopeful Quito, as the OPEC Secretary General, Abdullah Al-Badri, expressed the conviction that he “expects” and “hopes” that Ecuador will be accepted as a member at the September meeting of OPEC states in Vienna, Austria.

It is an intrinsic necessity that the developed world not only applauds and encourages the advancement of Ecuador in the hemispheric market, but that it also is mindful of the warnings and dangers of environmental and humanitarian dereliction. The major imperative for the U.S. is pursuing energy dependence before it will consider helping a small player like Ecuador. As the Bush Administration continues to claw for an alternative fuel agenda, perhaps a more logical route is for it to acknowledge Correa’s help and pleas to prevent the destruction of one of the world’s most treasured natural habitats by purchasing pre-production rights from Quito. In 2006, the U.S. accounted for 54 percent of Ecuador’s exports, the primary being petroleum. While OPEC should help to bolster Ecuador’s economy and increase its presence in the world market, the receiving market needs to heed Quito’s warnings and seek alternative agendas. Surely Ecuador’s acceptance into OPEC could help foster more positive relations that may have been tarnished from the UNITAS Pacific matter. The UNITAS Pacific decision has the potential to stoutly affect the bigger geopolitical picture: Ecuador’s position in the eyes of its neighboring countries and the U.S. Ramifications of the UNITAS Pacific decision may manifest themselves in formally unrelated issues, such as OPEC, and likely will play a significant – if not central – role in Ecuador’s future.

This analysis was prepared by COHA Research Associates Anna Gangadharan and Erin Nagy
July 27th, 2007