VZCZCXRO0101
PP RUEHAG RUEHROV
DE RUEHLI #2629/01 2811054
ZNY SSSSS ZZH
P 071054Z OCT 08
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC PRIORITY 7064
INFO RUCNMEM/EU MEMBER STATES
RUEHCV/AMEMBASSY CARACAS 0087

S E C R E T SECTION 01 OF 02 LISBON 002629

NOFORN
SIPDIS

E.O. 12958: DECL: 10/01/2018
TAGS: PREL PGOV PO
SUBJECT: (S/NF) PORTUGAL: "WE KNOW CHAVEZ IS A CRAZY MAN
BUT..."

REF: A. LISBON 1155 (NOTAL)
¶B. LISBON 2596

Classified By: Dana M. Brown, Pol-Econ Officer, Embassy Lisbon
Reason 1.4 (b) and (d)

¶1. (C) Summary: Hugo Chavez visited Portugal on September 27,
at the end of a trip that included stops in Cuba, China,
Russia, and France. Portugal has warmed towards Venezuela
recently and become the EU nation most visited by Chavez over
the past year. In addition to protecting the large
Portuguese population resident in Venezuela, over the past
year the GOP has bolstered bilateral economic ties to include
a wide range of "milk for oil," "infrastructure for oil," and
"technology for oil" deals. Portuguese Prime Minister
Socrates agreed to additional cooperation during Chavez's
latest visit and they will meet again in late October at the
Ibero-American Summit in El Salvador. End summary.

------------------------------
Trade: On the Prowl for Energy
------------------------------

¶2. (SBU) Portugal imports all of its oil and natural gas and,
as part of its expanding energy diversification efforts, in
May officially signed an "oil for milk" deal with Venezuela
involving exchange of Portuguese dairy products for
Venezuelan oil. The GOP quickly added other areas of
cooperation including port infrastructure, housing,
technology, law enforcement, and commercial aviation. Over
the last year, the GOP and GOV have signed more than 40
agreements on new areas of cooperation.

¶3. (U) Some of the Portuguese companies participating in the
agreements include Montebravo (construction), Sapropor
(foodstuffs), Primor, Cerealis (foodstuffs), Ramirez (canned
fish), Cofaco (canned seafood) and Sovena (cooking oils).
All the companies began sending shipments in April 2008 prior
to PM Socrates' May visit to Venezuela.

---------------------
Protecting the People
---------------------

¶4. (C) Despite the growing economic links, Portuguese
officials stress to us that the 600,000 Portuguese residents
in Venezuela are the main reason for Portugal's close
bilateral relationship with Venezuela. MFA officials have
told us, for example, that they believe that it is important
to maintain a friendly relationship with Chavez to ensure
that the GOV does not persecute the Portuguese in retaliation
for bilateral tension. In fact, MFA Americas' Director
Helena Coutinho mentioned that Portugal would continue to be
friendly to Chavez "unless he declares a war."

¶5. (C) The GOP has reason to be concerned about the
conditions of Portuguese citizens in Venezuela, given the
deteriorating security situation there, and many Portuguese
shopkeepers recently demanded more direct government
protection. In late September, several Portuguese
businessmen sent an open letter to PM Socrates, demanding
that he raise with Chavez the worsening security situation in
Caracas suburbs. This year, 20 Portuguese businessmen were
kidnapped, and another ten were murdered (four in September
alone). Federico Ludovice, PM Socrates' Diplomatic Advisor
on Latin America, told us that Socrates would raise the issue
privately with Chavez, but noted that the security situation
in Venezuela is generally problematic and the Portuguese were
not a particular target. On September 30, Chavez announced
the creation of a special interlocutor with the Portuguese
community to address security concerns.

-----------------------
Political Repercussions
-----------------------

¶6. (S/NF) While the GOP turned down two of Chavez's
requests to visit Lisbon in 2005 because of unhappiness over
Venezuela's detention of a Portuguese pilot accused of drug
trafficking, Chavez visited Lisbon once in 2006 for a
refueling stop and again in November 2007 for a dinner hosted
by the Prime Minister. Chavez's September 2008 visit marked
the fourth visit between the two leaders this year. When we
raise U.S. concerns over policies implemented by the Chavez
administration, our interlocutors regularly assure us that
they understand our concerns and use the visits to deliver
tough messages in private. President Cavaco Silva summed it
up when he told Ambassador (ref A) that, "You have to
understand our position. We have five hundred thousand (sic)
Portuguese there. We know--and I've met him--that he's a

LISBON 00002629 002 OF 002


crazy man, but..."

¶7. (C) Despite the benefits of increased trade with Venezuela
to Portugal's ailing economy, the Prime Minister did not win
public support after Chavez's July visit to Lisbon, largely
due to Chavez's indiscretion. During that visit, Socrates
reportedly confided his concerns about the lackluster
Portuguese economy to Chavez, who then related the comments
on a Venezuelan national broadcast. Chavez claimed Socrates
had said the Portuguese economy was "stagnant," a diagnosis
far grimmer than the optimistic analyses he shares with
domestic audiences. Opposition parties PSD and CDS seized on
the news and asked Socrates to clarify his statement before
the Parliament but Socrates did not respond.

--------------------
The Latest Encounter
--------------------

¶8. (U) Chavez's September 27 visit to Lisbon once again
focused on increasing economic ties. He signed two deals
with the Portuguese government and Portuguese companies - one
to buy one million Portuguese-made computers and the other to
build 50,000 pre-fabricated houses in Venezuela ) the latter
worth two billion euros. The Portuguese media gave the visit
high profile coverage and ran photos of the two leaders arm
in arm.

¶9. (C) Perhaps in response to the uptick in visits and
Portugal's new status as the most visited EU nation, local
headlines asked, "What does Chavez want from us?" Chavez
told the press he was appreciative that Portugal had "opened
the door" to the world for Venezuela. He added that Portugal
was able to explain and defend Venezuela to its European
partners and dispel the view that Venezuela was a devil and
that he was a tyrant. During Chavez's impromptu speech,
Chavez highlighted his political agenda, including the
"silent revolution of true democracy." In his comments,
Socrates strictly focused on the GOP's concern about the
well-being of the Portuguese community in Venezuela and on
bilateral cooperation with Venezuela on education with the
computers. Socrates and Chavez are next slated to meet at
the Ibero-American Summit in El Salvador later in October.

----------------------------
Comment: Rising Costs of Oil
----------------------------

¶10. (C/NF) The GOP has heard our concerns about Venezuela but
defends its energy deals with Chavez by pointing toward
US-Venezuela oil trade. On the whole, Portugal's interest in
finding new energy suppliers has received a mixed response --
the press and public appear divided between strengthening
ties with petroleum producers like Chavez and unease over
doing business with these new, controversial partners. Given
Socrates' public discomfort over Chavez's airing his private
comments on TV, and Chavez's propensity to use the bilateral
relationship in ways that embarrass Socrates, the Prime
Minister may pause before he agrees to yet another photo op
with his "good friend Chavez." End comment.
STEPHENSON