June 18, 2008 9:20 AM

Hugo Chavez's Power Broker

Posted by Daphne Eviatar

The New Yorker this week features a profile of Venezuelan president Hugo Chavez and his growing influence in Latin America and beyond. His power, Jon Lee Anderson writes, has been fueled by the skyrocketing price of oil and Chavez's ability to increase his government's stake in the profits.

In a June 2008 profile of George Kahale III, chairman of Curtis, Mallet-Provost, Colt & Mosle, The American Lawyer reveals how Kahale helped Chavez increase royalty payments and take majority ownership over all major oil producing fields in Venezuela. Kahale even goes up against the legal guns for mammoth multinationals, such as ExxonMobil, in courts around the world on Venezuela's behalf.

Success in those courtrooms has given Chavez, in The New Yorker's words, "the means to buy influence with his neighbors, usually at the expense of the United States."

Whether that makes George Kahale a hero or a villain depends on where you're sitting. As The New Yorker notes, Venezuela's oil wealth has allowed the country to triple spending on social programs, making Chavez a hero among many of his nation's poor. (He's even won over some of America's poor by offering them discounted heating oil in the United States.) To his opponents, however, Chavez is a dangerous egomaniac who is consolidating his power at the expense of Venezuelan freedom and democracy. The U.S. government's stance is, not surprisingly, even more severe. Former secretary of Defense Donald Rumsfeld once compared Chavez to Adolf Hitler.

None of this matters much to George Kahale and Curtis Mallet. After all, representing national oil companies like PDVSA is just good business. As the price of oil climbs to unfathomable heights, so does the stature of those national oil companies, which are increasingly seeking out lawyers like Kahale to renegotiate longstanding oil and gas contracts to get a better deal for their governments. Whether representing Venezuela, Bolivia (a strong ally of Venezuela under president Chavez and friend Evo Morales), Kazakhstan, or, more recently, Ecuador (a country that's also reasserting control over its oil industry despite foreign companies' objections), Kahale and his team are at the center of an increasingly lucrative legal practice.

They're also playing an important role in the geopolitics of oil. This is just good business to the lawyers; to Chavez, someone like Kahale is a crucial ally in the Venezuelan leader's Bolivarian revolution, keeping the country's controversial schemes for nationalizing domestic industries on the right side of the law, and reducing the likelihood of costly international arbitrations.

Kahale has managed to get Chavez what the ruler wants and needs: more power and an effective means of keeping most of Venezuela's corporate business partners in the game.

An update to the June story: Kahale recently was hired to advise Venezuela on the nationalization of its steel and cement industries.

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