Last month, President Hugo Chávez of Venezuela threatened to cut off oil supplies to the United States. This was in response to news that Exxon Mobil had obtained court orders in the U.K., the U.S., and the Netherlands to freeze $12.3 billion of assets owned by PDVSA, Venezuela’s state-owned oil company.

It’s not the first time Chávez has threatened to cut off U.S. oil shipments, but losing 63 percent of Venezuela’s oil earnings appears to be simply too high a cost for this threat to be taken seriously. This, at least, appears to be the current conventional wisdom.

That conventional wisdom may be wrong. Chávez faces a growing politico-economic crisis, and the freezing of PDVSA assets severely hinders his capacity to carry out his domestic strategy. The key point to understand here is that Chávez’s calculation is political, not economic: he wants to stay in power as long as possible, and is willing to pay a substantial economic cost to do so – as he did during the two-month national strike of 2002-03. If the Exxon Mobil case were the only issue at stake, the optimal strategy for Venezuela would be clear: reach an out-of-court settlement. Independent estimates suggest that Exxon’s participation in the Orinoco Oil Belt was worth at most $1.5 billion, so settling now could be even cheaper than waiting for a favorable verdict, given the huge opportunity cost of not being able to use the frozen assets. The problem is that the fight is not only with Exxon. Both Conoco Phillips and Eni have filed similar suits for expropriation of their oil fields, as has the Vestey group for the takeover of its landholdings.

In other words, given that Venezuela has followed a strategy of comprehensive nationalizations, negotiating would be costly, potentially raising the price for all its other nationalizations as well. And this is not just a backward-looking calculation. In the face of Chávez’s political troubles, further nationalizations may be a key part of his political strategy to reverse the effects of his December 2 referendum defeat. To stay in power, Chávez will have to offer his followers increasingly concrete benefits for their support, and expropriations – particularly of foreign firms – are one of the easiest immediate ways to transfer benefits to supporters.

Furthermore, Chávez is facing an economic crisis. The average monthly inflation rate for the past three months has been 3.7 percent (equivalent to an annualized rate of 54.6 percent). Scarcities of basic foodstuffs such as milk, rice, and black beans are chronic. Now that the crisis is nearing full bloom, the government will be seeking a scapegoat to blame, and the U.S. is as good a candidate as any.

If this strategy sounds risky, remember that Chávez has already pulled it off once. In January 2002, Venezuela had a balance of payments crisis, forcing it to devalue after spending more than $7 billion in a futile attempt to defend the currency. G.D.P. contracted by 4.4 percent in the first quarter of 2003. Chávez was able to maneuver his way out of that mess by blaming the financial collapse on his political opponents in Venezuela. The current confrontation with the U.S. allows him to stoke nationalist sentiment and shore up his political support once again. This strategy may be working. In mid-February, Podemos, the center-left political party that broke with Chávez during the referendum campaign, called on all political parties to unite behind Chávez on the Exxon issue.

As was the case with the national strike, Chávez is betting that the Exxon confrontation is one he can win. He could be right. While Chávez may turn the confrontation into a political victory at home, the same would not be true in the U.S. Republicans in Washington are unlikely to warm to the idea of a gasoline crisis in the midst of an election year, and in all probability would react by pressuring Exxon to back down. With $32 billion in international reserves, Chávez can resist the crisis for quite a long time. Republicans in Washington, on the other hand, have only until November.

Francisco Rodríguez is an assistant professor of economics and Latin American studies at Wesleyan University. From 2000-04 he served as the chief economist of Venezuela’s National Assembly.