Presidential advisor James Jones met this month with Brazilian officials to talk about lending billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro.  No joke, the loan been confirmed by the Wall Street Journal.

Angry yet?

It’s further along than we knew.  The U.S. Export-Import Bank told the Wall Street Journal it has issued a “preliminary commitment” letter to Petrobras in the amount of $2 billion dollars, which was fine.  Now the discussion has advanced at the presidential level to the possibility of increasing the amount.  Its not decided yet if the funds will come in the form of a direct loan or loan guarantees.

Meanwhile the U.S Treasury seems to need cash by the trillions of dollars.  Petrobras is one of the largest corporations in the western hemisphere. It’s also a pseudo national oil company or not depending on the circumstances.  Brazil is also in discussions with OPEC for becoming a new member.

On the other hand the guaranteed money for foreigner’s to drill for oil could well be a lever.  The disloyalty to America in the game to lease oil reserves could come back to haunt Obama.  It’s the simplest question – a favorite of children, dreaded by parents, if its OK for them why not the U.S.?  The offshore drilling ban lapsed last year in the midst of $4 gasoline.  Financing for those who would join OPEC seems the most completely wrong action possible.  Imagine if American oil companies lined up for loans, the hue and the cry would be deafening.

The Bush administration, (Miss them yet?) had a five year plan, no loans, by the way, to open the continental shelf for exploration plus getting on with leases in the Gulf of Mexico.  The environmentalists got a court to block drilling off Alaska.  Obama’s man Interior Secretary Salazar checked with an appeals court to see if that Alaska limit might be applied everywhere.  No, so for now the Gulf leases are back on.

It’s enough to drive a fuel consumer a little past crazy.  Spending money, other peoples’ money by the way, like stupefied drunks seems to be Congress’ main claim of accomplishments. Giving money to drill on another continent, to a prospective OPEC member with some yet to be seen sleight of the rules has to be the height of unimaginable stupidity.  No jobs, no taxes, no profits, nothing American in that, little or nothing to or for Americans in that.

Somehow I think Brazil can come up with financing or partners to get their deal done.  It’s certainly not in the interests of the American Public to be providing the capital.  Its things like this that cast serious doubt on the intentions of the White House.  Is it an American citizen there, or a “world citizen?”  One has the sense there is a certain “to hell with them” attitude about Americans in the White House now.

The contempt of Americans coming from the actions of the White House is adding up.  For all the super cool oratory, the facts of what’s happening are canceling it.

In still another hand . . .

Fred P. Hochberg, Chairman and President of the Export-Import Bank is saying, “Obama Underwrites U.S. Jobs.” All well and good, but his language belies the facts in his response.  The loan would “help,” it “increases the likelihood that American—not foreign— workers will be employed.”   Money isn’t something that can be simply not co-mingled; it’s the ultimate fungible item.

Until the Ex-Im Bank gets a deal that’s a guarantee vs. a direct loan, has a commitment from Brazil not to join OPEC and other smaller things like the money is used to buy American products the deal needs to be dead.

On the large scale this writer isn’t looking for a contest with Brazil.  But with the strange events in Ecuador vs. Chevron, the near total default by Argentina on its governmental obligations, the continuing trouble making by Chavez of Venezuela, exposure for an arm of the American people to engage so blindly seems to be a continuation of the same financial myopia that triggered the current recession.

Some alarming questions are on tap with the seemingly disconnected events.  If the Ex-Im Bank has already seen fit to guarantee business loans, a paltry $2 billion of a $175 billion five-year investment, just what does Adviser James Jones meeting with Brazilian officials have to do with the loan?  Are Mr. Hochberg and his bank about to be co-opted?  And just how is it that the custom of guarantees has become changed to a prospective direct loan?

It’s getting all very messy.  One wonders whom to trust. The obvious answer is trust no one, because when it comes to money in a foreign country, verification is not possible.  So Mr. Hochberg needs to buck it up, and get as far from this deal as possible.  When presidential advisors are talking with the government officials of your customer, you’re not doing what you think you are doing.  Or you’re going to be doing something you hadn’t expected.


17 Comments so far

  1. Al Fin on September 2, 2009 6:00 AM

    The US government is borrowing every dollar it spends at this point. Borrowing from the Chinese to help Brazil drill offshore wells — while US companies are taxed and harried into bankruptcy? They must have a good reason, right?

    Interesting story of hypocrisy and under the table double dealing in high places. But you weren’t supposed to notice.

    You’d better be nice to the Obama administration, or you won’t be invited to Ramadan dinner.

  2. Matt on September 2, 2009 7:29 AM

    Borrow money from the Chinese to give to Brazile who will eventually screw us. Only in Washington would this make sense.

    Today on AP:

    BP PLC said Wednesday that it had made a “giant” oil discovery in the Gulf of Mexico but had not yet determined the size and commercial potential of the find.

    BP has a 62 percent interest in Tiber, while Petrobras holds 20 percent and ConocoPhillips has 18 percent.

  3. Barbara Fisher on September 18, 2009 1:48 PM

    can this be proved. If so send it to newspapers. There are bound to be some that will publish it.

  4. James Johnson on October 5, 2009 6:13 PM

    I understood that China had put up $10B and the US followed with $10B just to stay in the oil flow. Can someone comment on this?

  5. JSam on February 4, 2010 1:33 PM

    The message falsely says the decision was due to an “executive order” by the president. No presidential order was required. Furthermore, none of President Obama’s appointees had joined the Ex-Im board at the time of the vote, which was unanimous, and bipartisan. The Ex-Im Bank states: “In fact, at the time the Bank’s Board consisted of three Republicans and two Democrats, all of whom were appointed by George W. Bush.”
    The message falsely claims that “we have absolutely no gain” from the loan. In fact, the loan is being made specifically to finance purchase by Petrobras of U.S.-made oilfield equipment and services. The mission of the Ex-Im Bank is to encourage exports by making such loans.

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  8. How do you feel about borrowing billions of dollars from China and then giving that money to Argentina to create jobs ? - Politics and Other Controversies -Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing on April 21, 2011 9:55 PM

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