The Bolivian Gas War (Spanish: Guerra del Gas) or Bolivian gas conflict was a social confrontation in Bolivia reaching its peak in 2003, centering on the exploitation of the country's vast natural gas reserves. The expression can be extended to refer to the general conflict in Bolivia over the exploitation of gas resources, thus including the 2005 protests and the election of Evo Morales as president. Before these protests, Bolivia had seen a series of similar earlier protests during the Cochabamba protests of 2000, which were against the privatization of the municipal water supply.
The conflict had its roots in grievances over the government's economic policies concerning natural gas, as well as coca eradication policies, corruption and violent military responses against strikes.
The "Bolivian gas war" thus came to a head in October 2003, leading to the resignation of President Gonzalo Sánchez de Lozada (aka "Goni"). Strikes and road blocks mounted by indigenous and labour groups (including the COB trade union) brought the country to a standstill. Violent suppression by the Bolivian armed forces left some 60 people dead in October 2003, mostly inhabitants of El Alto, located on the Altiplano above the seat of government La Paz.
The governing coalition disintegrated forcing Goni to resign and leave the country on October 18, 2003. He was succeeded by the vice president, Carlos Mesa, who put the gas issue to a referendum on July 18, 2004. In May 2005, under duress from protesters, the Bolivian congress enacted a new hydrocarbons law, increasing the state's royalties from natural gas exploitation. However, protesters, who included Evo Morales and Felipe Quispe, demanded full nationalization of hydrocarbon resources, and the increased participation of Bolivia's indigenous majority, mainly composed of Aymaras and Quechuas, in the political life of the country. On June 6, 2005, Mesa was forced to resign as tens of thousands of protesters caused daily blockades to La Paz from the rest of the country. Morales' election at the end of 2005 was met with enthusiasm by the social movements, because he was, as the leader of left-wing MAS, one of the staunchest opponents to the exportation of the gas without corresponding industrialization in Bolivia. On May 1, 2006, President Morales signed a decree stating that all gas reserves were to be nationalized: "the state recovers ownership, possession and total and absolute control" of hydrocarbons. The 2006 announcement was met by applause on La Paz's main plaza, where Vice President Alvaro Garcia told the crowd that the government's energy-related revenue would jump US$320 million to US$780 million in 2007, continuing a trend where revenues had expanded nearly sixfold between 2002 and 2006.
Background
Gas reserves of Bolivia
The central issue was Bolivia's large natural gas reserves and the prospect for their future sale and use. The Bolivian gas reserves are the second largest in South America after Venezuela, and exploration after the privatization of the national oil company YPFB showed that proven natural gas reserves were 600% higher than previously known. The cash-poor, state-owned company could not afford the exploration costs. These reserves mainly are located in the southeastern Tarija Department, which contains 85% of gas and petrol reserves. According to the United States Department of Energy, another 10.6% is located within the department of Santa Cruz and 2.5% in the Cochabamba Department. After further exploration from 1996 to 2002, the estimated size of the probable gas reserves was calculated to be 12.5 times larger, passing from to . This number has declined somewhat to probable reserves. The proven reserves are . With the declining importance of tin mines, those reserves accounted for the majority of foreign investment in Bolivia.
The price which Bolivia is paid for its natural gas is roughly US to Brazil and $3.18 per million BTU to Argentina. Other sources state that Brazil pays between $3.15 and $3.60 per million BTU, not including $1.50 per million BTU in Petrobras extraction and transportation costs. As a comparison, the price of gas in the US as a whole in 2006 varied between US, although some years earlier the price of natural gas spiked at $14 per million BTU in California due to lack of pipeline capacity to and within California as well as due to electricity outages. While according to Le Monde, Brazil and Argentina pay US$2 per thousand cubic meter of gas, which costs from $12 to $15 in California.
In 1994, a contract with Brazil was passed, two years before 1996's privatization of the 70-year-old, state-owned Yacimientos Petroliferos Fiscales de Bolivia (YPFB). The construction of the Bolivia-Brazil gas pipeline cost US$2.2 billion.
A consortium called Pacific LNG was formed to exploit the newly discovered reserves. The consortium comprised the British companies BG Group and BP, and Spain's Repsol YPF. Repsol is one of three companies that dominate the gas sector in Bolivia, along with Petrobras and TotalEnergies. A plan costing US$6 billion was drawn to build a pipeline to the Pacific coast, where the gas would be processed and liquefied before being shipped to Mexico and the United States (Baja California and California), through a Chilean port, for example Iquique. The 2003 Lozada deal was opposed heavily by Bolivian society, in part because of nationalism (Bolivia feels resentment after the territorial losses of the War of the Pacific in the late 19th century, which deprived it of the Litoral province and hence access to the sea).
Government ministers hoped to use the gas profits to bolster the sagging Bolivian economy and claimed the money would be invested exclusively in health and education. Opponents argued that under the current law, the exportation of the gas as a raw material would give Bolivia only 18% of the future profits, or US$40 million to US$70 million per year. They further argued that exporting the gas so cheaply would be the latest case of foreign exploitation of Bolivia's natural resources, starting with its silver and gold from the 17th century. They demanded that a plant be built in Bolivia to process the gas and that domestic consumption had to be met before export. As Le Monde puts it, "two reasons plead for the industrial exploitation of the gas, which the multinational companies now have the capacities of doing. The first is related to the necessity of satisfying the Bolivians' energy needs. The second demonstrates the interest of exporting a more profitable product rather than selling raw material". According to the French newspaper, only La Paz, El Alto, Sucre, Potosí, Camiri and Santa Cruz are now connected to the gas network; making an interior network which would reach all Bolivians would cost $1.5 billion, notwithstanding a central gas pipeline to link the various regions together. According to Carlos Miranda, an independent expert quoted by Le Monde, the best industrialisation project is the petrochemical complex proposed by the Brazilian Braskem firm, which would create 40 000 direct or indirect jobs and cost $1.4 billion. This figure is equivalent to the amount so far invested by Repsol, TotalEnergies and Petrobras.
Santa Cruz autonomy movement The eastern departments of Santa Cruz, Beni, Tarija, and Pando recently had been mobilizing in favor of autonomy. An important issue was opposition to the seizure of resources though nationalization. Community leaders are supported by the Comite Pro Santa Cruz, local co-ops, and by business organizations such as cattle ranchers and farmers. A strike against the new constitution was recently held which was observed in Santa Cruz, Beni, Tarija, and Pando. Tensions have been raised by the cultural and philosophical rift exposed by the push for a new constitution. As a basis for a new constitution, the western, Altiplano-based MAS party envisions a "council of indigenous peoples" along with a curtailment of private ownership, while Santa Cruz looks to western culture and capitalism. Cultural divisions exist because people in eastern Bolivia, called "Cambas" (meaning "friends" in Guarani), are primarily of mestizo descent (mix of European and several native tribes the largest of which are the Guaraní), while the western Altiplano is dominated by a small white elite and a historically oppressed Quechua and Aymara majority.
The first signs of the modern autonomy movement occurred in 2005 when a march for autonomy was attended by hundreds of thousands of people.https://web.archive.org/web/20080213184514/http://www.elmundo.com.bo/Secundarianew.asp?edicion=29%2F01%2F2005&Tipo=Comunidad&Cod=2510 El Mundo – Prensa Mayor A result of this was the change in law to allow the election of departmental prefects. Another area of tension was the result of ongoing population shifts and the resulting demands for proportionally greater representation in Bolivia's Congress to reflect these shifts by Santa Cruz. A compromise was reached to allow Santa Cruz to receive some of the seats warranted by population growth, and for the highlands to keep seats despite population losses.
Left-wing intellectuals Walter Chávez and Álvaro García Linera (former Bolivian Vice President and MAS party member) published an article in the Monthly Review asserting that autonomy has been historically a demand of the Santa Cruz region, "contemporarily imbued with far-right, populist sentiments." They also qualified Santa Cruz autonomy as a "bourgeois ideology" of the "free market, foreign investment, racism, etc.", which pits the "modern", "whiter" Santa Cruz elite against the short, dark-skinned and anti-capitalist Aymara and Quechua peoples of the western region of Bolivia."Left-Indigenous Struggles in Bolivia: Searching for Revolutionary Democracy", by Jeffery R. Webber, Monthly Review September 2005
Dispute over pipeline route The dispute arose in early 2002, when the administration of President Jorge Quiroga proposed building the pipeline through neighboring Chile to the port of Mejillones, the most direct route to the Pacific Ocean. However, antagonism towards Chile runs deep in Bolivia because of the loss of Bolivia's Pacific coastline to Chile in the War of the Pacific (1879–1884).
Bolivians began campaigning against the Chilean option, arguing instead that the pipeline should be routed north through the Peruvian port of Ilo, 260 km further from the gas fields than Mejillones, or, better yet, first industrialized in Bolivia. According to Chilean estimates, the Mejillones option would be $600 million cheaper. Peru, however, claimed the difference in cost would be no more than $300 million. Bolivian proponents of the Peruvian option say it would also benefit the economy of the northern region of Bolivia through which the pipeline would pass.
Supporters of the Chile pipeline argued that U.S. financiers would be unlikely to develop processing facilities within Bolivia.
Meanwhile, the Peruvian government, eager to promote territorial and economic integration, offered Bolivia a special economic zone for 99 years for exporting the gas at Ilo, the right of free passage, and the concession of a 10 km2 area, including a port, that would be exclusively under Bolivian administration.
President Jorge Quiroga postponed the decision shortly before leaving office in July 2002 and left this highly contentious issue to his successor. It was thought Quiroga did not want to jeopardize his chances of re-election as president in the 2007 elections.
After winning the 2002 presidential election Gonzalo Sánchez de Lozada expressed his preference for the Mejillones option but made no "official" decision. The Gas War led to his resignation in October 2003.
Escalation
The social conflict escalated in September 2003 with protests and road blockages paralyzing large parts of the country, leading to increasingly violent confrontations with the Bolivian armed forces.