"Breakdown, takedown, you're busted."
-- Bob Seger, "Shakedown"

Hugo Chavez, that wacky tinhorn dictator of Venezuela, is at it again. In an ongoing attempt to squeeze foreign oil companies, the Venezuelan government has once again unilaterally and retroactively changed the rules of the game. Given that Harvest NaturalResources (NYSE:HNR) does practically all of its business in Venezuela, that's bad.

This goes far beyond the last little escapade, during which the government decided to hold up new drilling licenses as a means of strong-arming foreign companies like Harvest into agreements that were blatantly more favorable to the state. This time, Venezuela has announced that PDVSA, the state-run oil company, will no longer pay more than two-thirds of the market value for oil deliveries.

What's more, some unspecified percentage of that amount will now be paid in Venezuelan bolivars. Between the state of the Venezuelan economy and the fact that the Venezuelan government has currency controls in place, I would caution investors not to value those bolivars much more highly than they would pretty, colored toilet paper.

Oh, wait! It gets better.

Chavez has also decided that foreign oil companies aren't paying their fair share. So in addition to hiking royalty payments last year from 1% to 16.6%, the government is now retroactively changing the tax laws. The tax rate for 2001 is being changed from 34% to 67% and thereafter to 50%, from the current rate of 32%. To add a little extra "oomph" to this proclamation, the beloved, benevolent dictator has threatened to shut down any and all foreign companies that don't comply.

So what's going to happen? So far, pretty much all of the foreign players -- including Harvest, Royal Dutch/Shell (NYSE:RD), Motley Fool Income Investor recommendation Total SA (NYSE:TOT), Chevron (NYSE:CVX), BP (NYSE:BP), and Petrobras (NYSE:PBR) -- are saying all the right things. Royal Dutch/Shell has even gone so far as to say that it will put more money into the country if investing conditions are "right."

But then, what do you expect these companies to say? Chavez could sweep away their rights entirely and just nationalize the whole kit 'n' kaboodle if he wanted to, so most of these players are probably figuring that some income is better than none.

I really have no idea what's going to happen. It's a pretty sure thing that Chavez isn't going away -- by choice or by force -- as long as he is still, by and large, popular with the masses.

While this is all clearly bad news for Harvest, it's not going to really hurt the big boys so much. And that's the lesson here -- if you're going to invest in small energy companies who operate only in shaky overseas markets, you've got to prepare yourself for some eventual instability. Even though things are good now for single-country operator PetroKazahkstan (NYSE:PKZ), you get a coup here or a nationalistic party election there, and who knows what could happen?

Things could still work out fine for Harvest in the end, but there's no telling about the "if" or "when" parts of that scenario.

For more Foolish takes on the oil sector:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).