U.S. Suspends Free Trade Talks With Ecuador

After the South American government canceled the oil exploration rights of U.S.-based Occidental Petroleum, the U.S. suspended free trade talks with Ecuador an official said May 17. "We are very disappointed at the decision of Ecuador, which appears to constitute a seizure of the assets of a U.S. company," said Neena Moorjani, a spokeswoman for U.S .Trade Representative Rob Portman.

"We will seek an immediate clarification from the government of Ecuador, including whether it intends to fully compensate the company as required under our bilateral investment treaty," Moorjani said.

The Ecuadoran government told Occidental on May 15 that it was canceling the U.S. firm's rights to an oil field in the Amazon region and taking control of its production infrastructure. The decision followed a prolonged dispute over Occidental's sale of part of its exploration rights in Ecuador.

"For a country to attract investment, and certainly to be a prospective FTA (Free Trade Area) partner of the United States, it must obey the rule of law with respect to foreign investors," said Moorjani.

"These issues should not be mixed up," said Interior Minister Felipe Vega. "This would be inadmissible blackmail between sovereign nations."

Ecuador's state-owned Petroecuador is to take over Occidental operations in the Amazon jungle, where the Los Angeles-based firm extracted 100,000 barrels of oil per day. Officials said they would consider teaming up with another South American state-owned firm to operate the oil fields.

The expulsion of Occidental followed a protracted legal dispute over the company's decision in 2004 to sell a 40% share in its operations to EnCana Corp. of Canada, without first consulting the Ecuadoran authorities.

Copyright Agence France-Presse, 2006

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