WikiLeaks Shows Nascent Oil Woes in Ecuador

By Adam Klasfeld, Courthouse News
17 April 2013

New York, NY – Long before Chevron's two-decade litigation over oil pits in the Amazon, its predecessor Texaco fretted with U.S. diplomats over frequent pipeline ruptures, bad press and tumultuous politics in Ecuador, WikiLeaks cables show.

Texaco started oil exploration in the Amazonian rainforest in 1964 and learned three years later that there were large deposits to be tapped from the jungle.

It gained permission to build the Trans-Andean pipeline needed to export the petroleum in 1972, the same year Gen. Guillermo Rodriguez Lara unseated Ecuador's five-time president in a military coup.

A year into the general's tenure, Ecuador joined the Organization of the Petroleum Exporting Countries. It remained one of two Latin American OPEC nations until 1992, when a center-left president took steps toward nationalization that drove Texaco out of the country.

Ecuadoreans filed a court case in New York a year later, claiming the oil giant left behind a petroleum trail that ravaged rainforest lands, polluted the groundwater and sparked cancer clusters in a region home to 30,000 people.

Chevron inherited that lawsuit a decade later when it acquired Texaco, and the company convinced the U.S. court to bring the case back to Lago Agrio, Ecuador, the center of the drilling.

That maneuver failed Chevron in 2011, when an Ecuadorean court ordered the company to pay an $8 billion judgment, subsequently raised to $19 billion.

Chevron has tried to discredit the verdict in several courts by calling it the product of an extortionate "shakedown" based on cooked evidence, judicial bribery and political maneuvering by lawyers for the Ecuadoreans.

As these claims play out, a new batch of old cables published by WikiLeaks depicts the first years oil started flowing from Lago Agrio across to Ecuador's Pacific port city of Esmeralda.

The latest WikiLeaks trove consists of 1.7 million cables from 1973 though 1976, dubbed the "Kissinger Cables" in an apparent nod to the harsh realpolitik of the then-U.S. secretary of state.

Coincidentally or not, Texaco and U.S. diplomats stepped up their pursuit of U.S. oil interests during this same time, flooding Ecuador with money and, allegedly, toxic sludge.

U.S. Ambassador Robert Brewster, appointed by Richard Nixon, sent a pair of cables on July 9, 1974, reporting torrential rains that unleashed more than a dozen landslides, slicing 800 feet from the Trans-Andean pipeline about 164 km west of Lago Agrio.

The line, he said, had been pushed 75 feet from the road and into the river.

Texaco's then-general manager Mike Martinez said the situation was "fairly bad," according to Brewster's cable.

"Five bridges are out, three small (15 to 20 meter) bridges, one bridge across the Coco River at Canon de Los Monos and the Main Bridge South of the Producing Area in Lago Agria [sic] which carried the 26' lateral pipeline bringing in crude from the Southern Fields.

"Although there is no accurate information on human losses, [Martinez] understood that nine people have lost their lives," the ambassador continued. "Others are stranded, but the Ecuadorean Army has been assisting in evacuating some of them by helicopter. Repair operations are already underway. Other oil companies in the area have been aiding in setting up ferries across the rivers to supply operations, pipeline experts are coming from the states, and a bridge expert has already arrived from Columbia to assist with reconstructing the bridges."

Ten days later, Deputy Chief of Mission Brewster Hemenway told Foggy Bottom that repairs were "progressing more rapidly than first expected," and would be partially operating again the next week.

The cables about this incident were marked "limited official use," a less restrictive form of classification.

These accidents did not slow down the "oil bonanza," Ambassador Brewster wrote in a then-confidential cable in September 1975, following an aborted coup attempt against Gen. Rodriguez Lara.

"The oil began to flow in August 1975 bringing $61 million that year, $250 million in 1973 and some $480 million in 1976," Brewster wrote.

He added that Ecuador put the money to "productive use" on the national budget and development.

"In the heady atmosphere engendered by the oil bonanza, the regime adopted an increasingly you-need-us-more-than-we-need-you attitude toward Texaco-Gulf," the cable states.

The next U.S. ambassador to Ecuador, Richard Bloomfield, believed that this alleged sentiment caused the country's "economic oligarchy" to topple the general the next year.

Bloomfield complained that Ecuadorean leaders would not bow to U.S. pressure in a missive titled, "The kind of political system we are dealing with in Ecuador and the meaning for U.S. interests," formerly classified as "secret."

"Unlike other small, economically dependent Latin American nations, it has not let its weakness relative to the U.S. and its neighbors inhibit it from taking us on when it has felt its national interests require it," Bloomfield wrote. "Ecuador is now entering a period of political change, if not instability. In these circumstances, it occurs to me that it might be helpful to Washington to have some insight into the forces underlying the surface political phenomena which we will be reporting in the months ahead, as well as some indication as to how this process may impinge on U.S. interests."

Later, the diplomat argues that Rodriguez Lara was overthrown because the "productive economic sectors, i.e., the economic oligarchy" got fed up with "the failure of its petroleum policy and the attendant damaging effects on the economy."

"Attempts to squeeze Texaco-Gulf resulted in deliberate reduction in production by the consortium; hardline petroleum regulations scared off other companies," he added.

He wrote that the unspecified Powers That Be gathered three of Ecuador's military branches against the general, replacing him with Vice Admiral Alfredo Poveda.

Weeks into Admiral Poveda's rule, a cable from Quito titled "Petroleum: Texaco-Gulf Pressured to Accept Tougher Conditions" reached Washington. The National Archives and Records Administration marked this cable with a "withdrawal card," meaning that it still has not been declassified and released, according to WikiLeaks.

Formerly secret cables that were not withdrawn show Admiral Poveda assuring Washington that he had no plans to nationalize the oil industry. Poveda instead asked diplomats to persuade Texaco to remain in Ecuador.

Tensions continued anyway over the next few months, as several cables detailed possible kidnapping threats against Texaco Gulf officials, and two related to Ecuador snubbing a visit by Henry Kissinger.

In July 1976, more landslides bent the pipeline again, suspending operations and causing mounting criticism against Texaco, Bloomfield reported .

"Major Quito daily El Comercia carried editorial July 25 asking reasons for frequent breaks in the pipeline, and El Tiempo carried editorial column July 28 complaining that Texaco-Gulf had either used poor construction methods or was purposely damaging the line," he wrote again for "limited official use."

The diplomat did not offer an opinion about El Tiempo's allegation.

The simultaneous breach of a gas line "from the coast to Quito" operated by the state-run company, Corporacion Estatal Petrolera Ecuatoriana (CEPE), eased some of the pressure Texaco faced, according to the cable.

"The gasoline shortage – with long lines and increasing public irritation – had focused public criticism on CEPE and the [Government of Ecuador]," Bloomfield wrote.

Chevron blames Petroecuador, CEPE's successor, for liability over the petroleum pollution.

According to another portion of the cable, "El Comercio petroleum reporter told Embof," short for embassy officer, "[on] July 24 that Minister of Natural Resources [Col. Rene] Vargas asked the newspapers to carry articles criticizing Texaco-Gulf construction and maintenance of the pipeline."

Hemenway, who stayed on as U.S. deputy chief of mission in Ecuador under the new administration, said Vargas was "strongly disliked by American petroleum executives".

"[Vargas] is trying to kill the goose that is laying the golden eggs," Hemenway complained in another cable , adding that "anyone who accuses him of being overly harsh against Texaco-Gulf can so easily be made to look like a stooge for the companies."

Kissinger reported, in another cable to Quito:"[Texaco-Gulf] executives believe Minister Vargas is embarked on a policy of harassment, probably with the objective of nationalization."

It is unclear whether Vargas was one of the "statist and 'leftist' colonels" that Ambassador Bloomfield worried might stage another coup, in his screed about Ecuadorean politics.

"If the 'colonels' were to try such a fundamental change (and their ability to seize power remains uncertain), they would have to do better than Rodriguez Lara, who proclaimed just such a 'national revolution' in 1972 and then in the ensuing four years failed to carry it out," he wrote (parentheses in original). "We doubt that the colonels would be able to do much better, essentially because we do not believe they have the guts or the savvy to break the back of the business elite."

The transition, as it turned out, was much more peaceful.

Military rule over Ecuador ended after Admiral Poveda adopted a new constitution before ceding power in 1979. Ecuador claimed control over its pipeline following an election about a decade later.

Meanwhile, Ecuador continued its tradition of vexing U.S. diplomats last year by granting asylum to WikiLeaks editor-in-chief, Julian Assange, who faces questioning by Swedish authorities on sexual misconduct allegations by two women.

The WikiLeaks chief claims that the Swedish prosecution is a ruse to extradite him to the United States for disclosing secrets provided by former Army intelligence specialist Bradley Manning, who could face life imprisonment if convicted this summer of "aiding the enemy."

Unlike the cables Manning provided, the website's latest trove of cables was not leaked or otherwise illicit.

Assange published them, appropriately enough, from inside the Ecuadorean embassy in London, where he has been living since August.

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