Brazil's president says he will defend country's right to Bolivian gas

President Luiz Inacio Lula da Silva said Wednesday that while Brazil respects Bolivia's right to nationalize its natural gas industry, it will defend contracts giving it rights to Bolivian gas.

Photo: Brazil's president says he will defend country's right to Bolivian gas

Silva's comments were his first public remarks on the matter since Bolivian President Evo Morales decreed the nationalization of his country's natural gas and oil industries on Monday. Brazil is Bolivia's biggest customer.

Morales' decree gives foreign energy companies such as Petrobras, Brazil's government-owned oil company, 180 days to re-negotiate and sign new contracts giving control of the industry to the Bolivian state.

Under a contract signed in the 1990s, Brazil buys up to 30 million cubic meters per day of natural gas from that Andean nation and Petrobras has invested some US$1.6 billion (Ђ1.3 billion) in Bolivia in both gas and oil development.

"Bolivia's nationalization of its gas reserves was a necessary adjustment for a suffering people seeking a greater measure of control over their own resources," Silva said. "However "the fact that Bolivia has rights does not deny the fact that Brazil has rights in the matter as well."

"There is no crisis and there will not be a crisis," Silva said. Any crisis that may emerge can be avoided if both countries "accept the need to negotiate" on issues such as gas prices, he added.

"I'm sure that we will come to an agreement," he said.

Silva and Morales will meet with Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez in Argentina Thursday for discussions on the gas issue.

Earlier, Finance Minister Guido Mantega told the Estado news agency that Brazil could seek arbitration in a New York court in the event of "exorbitant price hikes" for Bolivian natural gas.

Mantega said Brazil's main concern stemming from Morales' nationalization decree was the possibility of a major price hike in the gas Brazil receives from that country via the gas pipeline.

"Bolivia is sovereign and has the right to nationalize its natural resources," said Mantega. "But Bolivia supplies gas to Brazil under a contract regulated by international law. The contract calls for arbitration in the courts of New York", reports AP.

O.Ch.