December 26 2002

Venezuela's chief oil official, Ali Rodriguez, has said he will begin a series of sweeping changes - including worker lay-offs and the hiring of foreign specialists - in response to the general strike that has battered the state-owned oil company for most of the month.

Mr Rodriguez, president of the national oil company, Petroleos de Venezuela, acknowledged to American reporters that the strike, aimed at pressuring President Hugo Chavez to resign and call new elections, had brought the company close to collapse. Crude exports have plummeted, he said, from more than 2.5million barrels a day to fewer than 2million barrels this month, and refineries, wells and tankers were all but unmanned and inoperable.

The crisis in Venezuela has pushed crude oil prices to more than US$30 a barrel.

However, Mr Rodriguez contended that the strike organisers had failed. He said the Government, which has had the support of the armed forces during the conflict, had begun to regain control of Petroleos de Venezuela and operations would quickly return to normal.

When asked about the queues of cars that stretch for kilometres outside most petrol stations, Mr Rodriguez, who was appointed by Mr Chavez, acknowledged that the country had come close to chaos. He blamed strike leaders and said they would be prosecuted for conspiring to overthrow the Government.    advertisement       advertisement

Openly beleaguered, Mr Rodriguez offered a stark contrast to the demeanour of Mr Chavez, who routinely issues upbeat reports on the effects of the strike.

Mr Rodriguez, who once participated in guerilla movements and later went on to become the president of OPEC, saved his most bitter remarks for the oil executives he says are leading the strike and trying, in his eyes, to use oil to take over the country.

He said he had suspended several oil executives.

Striking oil workers said on Tuesday that he had fired 90 managers. Mr Rodriguez acknowledged that some people had been fired, but declined to provide details.

He also said the Government was preparing to sue some of the strike leaders over damage done to the oil company and, in some cases, pursue criminal prosecutions.

"In Venezuela, a group of managers, taking advantage of their positions, decided to use Venezuelan oil as a political weapon to impose their will on the state and on society," Mr Rodriguez said.

Mr Rodriguez's comments, combined with recent oil tanker departures and petrol deliveries, were the first concrete signs that the Government had succeeded in beating back the immediate threat of economic or political collapse.

Although most service stations have closed and the most important oil fields and refineries are severely crippled, Mr Rodriguez pledged that Venezuelans would have fresh supplies by next week. He also promised Venezuela's international clients that exports would resume normal levels by next month.

"I'm talking about the exports of crude," he said. "It will take time to restart the wells and to equip the plants."

Privately, supporters of the strike said they had underestimated Mr Chavez's ability to keep gas and oil flowing, even though at critically low levels, for this long. Political analysts said the conflict between Mr Chavez and his opponents had reached a kind of stalemate.

However, opposition leaders pledged to keep up the strike. The New York Times, Los Angeles Times

Reuters, 12.23.02, 7:14 PM ET

BRASILIA, Brazil, Dec 23 (Reuters) - Brazilian President-elect Luiz Inacio Lula da Silva completed the selection of his Cabinet on Monday, bypassing some of the conservative parties that supported his campaign in favor of heavyweights from his left-wing Workers' Party. Only seven of the 26 ministries went to parties that campaigned on behalf of Lula's Workers' Party, which received 14 portfolios. The remaining five posts, including the influential Trade Ministry, went to business leaders and career diplomats with no party affiliation. The only Cabinet seat awarded on Monday to a conservative ally was the Transport Ministry, which will be headed by Anderson Adauto, a member of the Liberal Party, to which Lula's vice president, Jose Alencar, belongs. The Cabinet picks, who do not require congressional confirmation, will be sworn in with Lula on New Year's Day. "Everyone may believe that the people that have been called on may have defects, which is true of any human being," Lula said when announcing his final Cabinet picks. "But the raw truth is that we've chosen, if not all, some of those who are going to give all of themselves for the better of this country." The appointments followed Lula's decision on Friday to leave the powerful opposition Brazilian Democratic Party out of his government, choosing instead to give the labor, education, energy and health ministries to members of his Workers' Party. The biggest job announced on Monday went to Lula's longtime economic adviser and fellow Workers' Party member Guido Mantega, a university professor, who was named planning and budget minister, a portfolio the president-elect has touted as all powerful in the new government. Lula previously selected one of his closest allies, Workers' Party moderate Antonio Palocci, to head the Finance Ministry, the government's other top economic post. To run the Ministry of Culture, Lula called on pop star Gilberto Gil, a founder of the counterculture Tropicalist movement that revolutionized Brazilian music in the 1960s. Gil, who sports dreadlocks, is a member of the leftist Green Party. Other key portfolios such as social security, agrarian development and the new ministries of food security and social assistance were given on Monday to Workers' Party stalwarts. Miro Teixeira, a longtime legislator of the leftist Democratic Workers' Party, was named communications minister. Ciro Gomes, who ran against Lula for president on the Popular Socialist Party ticket, was tapped to head the obscure National Integration Ministry. Last week, Lula named prominent business leader Luiz Fernando Furlan as trade minister, and former FleetBoston executive Henrique Meirelles as Central Bank president.

Effort presses on amid turmoil

By Marion Lloyd, Globe Correspondent, 12/25/2002

CARACAS - Dressed in a yellow crocheted sweater and seated behind a cracked Formica table trimmed with Christmas tinsel, Maria Gisela Blanco looks more like a schoolteacher than a foot soldier in a political revolution.

But as the leader of a Bolivarian Circle, she has played a vital role in keeping President Hugo Chavez of Venezuela in power. The neighborhood-based circles form a national network of watchdog groups that has supported Chavez's government through months of turmoil.

Opponents of Chavez, mostly middle-class and upper-class Caracas residents, launched a general strike Dec. 2 in an attempt to force the leftist leader to resign or call new elections. The strike has hobbled the economy and cut off gas supplies from the world's largest oil exporter, while exacerbating class tensions in a country whose income disparities are among Latin America's widest.

''This is a social movement from the ground up. We've never seen anything like it,'' Blanco said of the mass mobilization of working-class Venezuelans on behalf of Chavez. The former army paratrooper, who won the presidency in the 1998 election, has won the hearts of many of Venezuela's 24 million people through his fiery speeches railing against the excesses of the country's elite.

In part to cement support among his working-class constituents, Chavez created the watchdog groups and named them after the country's most beloved native son, Latin American independence leader Simon Bolivar. The Bolivarian Circles are modeled after Cuba's Committee for the Defense of the Revolution and serve as liaisons between the neighborhoods and the government as well as fomenting key support for Chavez.

When a coalition of business leaders and dissident army generals organized an abortive coup against Chavez in April, Blanco, 40, described how the Bolivarian Circles sprang into action. Within minutes, members began banging out warnings on hollow electricity poles, she said, rallying supporters across the city's working-class neighborhoods in a modern-day version of Paul Revere's ride.

Chavez's opponents charge that the groups also function as armed gangs whose job is to intimidate opposition protesters. They blame the groups for the shooting deaths of 19 opposition supporters in April, during a protest rally on the eve of the failed coup. But Blanco denied the groups were responsible for that and subsequent violence, which has also claimed the lives of Chavez's supporters.

''You ask if we have guns? Of course, who in Caracas doesn't,'' she said of the city known as one of Latin America's most violent. ''But we are a peaceful organization.'' She said one of her favorite activities was painting murals of Bolivar on the walls of public schools and parks. ''It's very good for boosting morale,'' she said, gesturing to a portrait of Bolivar in a soldier's uniform that steers would-be group members to her modest office alongside a freeway.

There, Blanco, a seamstress with a sixth-grade education, hosts weekly discussion groups on political issues with residents. Typically, 30 people, mostly housewives, cram into the dim concrete room that Blanco's husband built alongside their house in the working-class First of May neighborhood. This week's discussion topic was articles 70 to 72 of the Venezuelan Constitution, which specify that elected officials must complete half their term before calling new elections.

''We discuss these points so that people understand why Chavez could not call for a vote even if he wanted to,'' she said. Chavez has resisted opposition demands for new elections, noting that without a constitutional amendment, he cannot call a vote before August, when he will have completed half of his six-year term.

Like many Chavez supporters, Blanco said her loyalty was to the president, not his Movement of the Fifth Republic party, which she called ''a bunch of useless opportunists.'' In contrast, she said the Bolivarian Circles were fomenting change through poverty reduction, such as coordinating microloans for women, rather than pushing party loyalties.

Blanco said she became involved in politics through her husband, a construction worker who was active in the urban guerrilla movement of the 1970s and 1980s. By the late 1980s, the couple was printing antigovernment propaganda against then-President Carlos Andres Perez on a secret printing press and distributing them under cover of night.

This story ran on page A14 of the Boston Globe on 12/25/2002. © Copyright 2002 Globe Newspaper Company.

Political unrest in Venezuela prompts concern Wednesday, December 25, 2002 Posted: 11:32 AM EST (1632 GMT)

WASHINGTON (AP) -- The Bush administration faces renewed requests to free oil from an emergency government reserve and counter tight supplies, especially at Gulf Coast refineries, because of political unrest in Venezuela.

The administration plans no such move, however, according to senior officials, although they said the Venezuelan situation was being watched closely.

Rep. Billy Tauzin, R-Louisiana, chairman of the House Energy and Commerce Committee, urged the administration this week to give strong consideration to tapping the government's Strategic Petroleum Reserve. He said several refineries along the Gulf Coast are close to running out of oil.

"As the economic crisis in Venezuela continues, its impact on the economy of the United States is becoming more pronounced," Tauzin wrote Energy Secretary Spencer Abraham in a letter sent Monday.

Oil prices jumped to more than $32 a barrel this week, the highest they've been in two years. Analysts cited the freeze of oil exports from Venezuela and continuing worries about possible war in Iraq. Venezuela normally accounts for about 1.3 million barrels of oil a day entering the U.S. system, about 14 percent of oil imports.

"Currently lending or exchanging oil from the Strategic Petroleum Reserve is not an active consideration," the Energy Department said in a statement last week when rumors circulated within the industry that tapping the reserve was being discussed.

White House spokesman Ari Fleischer said the emergency oil stockpile, now about 592 million barrels, is designed to deal with severe disruptions, and so far that has not occurred.

Monitoring situation

"Obviously, we're going to continue to monitor the situation very closely," Fleischer said last week. "But at this time we do not think the release is necessary."

Tauzin said the cutoff of Venezuelan shipments could cause at least two refineries to run out of crude oil by the end of the month unless Venezuela's supplies were resumed.

Government stocks are kept in salt domes along the Gulf coast in Louisiana and Texas. On several occasions, the government has provided small amounts from the reserve to specific refineries to meet temporary shortfalls, with the understanding the oil would be paid back.

Generally the reserve, which can provide as much as 4.1 million barrels a day, is to be used only in case of severe supply interruptions.

The reserve was tapped for 21 million barrels in 1990-91, in response to Iraq's invasion of Kuwait and the Gulf War; 28 million barrels in 1996-97, to pay for government operations; and 30 million in 2000, to stem soaring prices, in a swap arrangement in which companies are obligated to return the oil, plus a premium, by 2003.

President Bush strongly criticized the swap arranged by the Clinton administration in 2000, arguing during the presidential campaign that the reserve should be used only to combat severe supply shortages and not to influence prices.

On Tuesday, oil prices for February delivery eclipsed $32 a barrel before declining slightly. Spot prices on the New York Mercantile Exchange also nudged close to $32 a barrel in trading Tuesday.

A 23-day general strike in Venezuela against President Hugo Chavez essentially has halted Venezuela's oil exports. The country normally produces about 3 million barrels a day, more than a third of which is shipped to the United States. Production now is 300,000 to 400,000 barrels a day.

By Kim Housego, Associated Press, 12/25/2002 12:44

PARIS (AP) As TotalFinaElf has aggressively searched for new oil fields to explore, it hasn't been deterred by controversy.

The French energy giant has provoked outrage in other countries by doing business with such pariahs as Iran and Myanmar. And the world's fourth-largest oil group has positioned itself to profit when Iraq is free of U.N. sanctions.

''We have to go where the oil and gas is,'' said Christophe de Margerie, executive vice president in charge of exploration and production. ''Though not at any cost.''

The secret behind Total's success has been its exploration program.

It has the widest geographical spread of any major oil company and has made some of the biggest oil and gas discoveries over the last decade, notably in Angola, Iran, Venezuela and Kazakhstan where costs are lower and profits are higher.

The company's assertive stance has allowed it to surpass its larger competitors. While industry giants ExxonMobil, Royal Dutch/Shell and BP PLC have downgraded oil production targets amid tumbling profits, Total says it's on track to lift output by 10 percent this year.

''TotalFinaElf has been able to expand production and, above all, do it profitably,'' said John Parry, analyst at U.S.-based petroleum consultancy John S. Herold.

The company posted net profits of $4.65 billion in the first nine months of this year, down from the same period in 2001 but still in line with expectations.

Total's expansion into politically sensitive countries has angered the United States and human rights groups.

The company brushed aside U.S. objections and invested heavily in Iran during the mid-1990s, then insulated itself from the threat of U.S. sanctions by selling its American activities.

At the same time, it opened negotiations with Saddam Hussein's government to develop two vast oil fields under the Iraqi sands once the United Nations lifts sanctions imposed after the Gulf War.

Elsewhere, Total has angered separatist rebels in the disputed Western Sahara by signing a contract with Morocco to develop an offshore oil rig.

Does expanding into unstable countries not leave the company more vulnerable to Third World political risks such as coup d'etats, nationalization or terrorism?

De Margerie, who sees Total's diversity as one of its greatest assets, says no.

''We split our risks,'' he said in an interview at Total's headquarters just outside Paris. ''No one country has such an exposure that it would put our company at stake.''

Furthermore, de Margerie said rising demand over the next 20 years means oil companies will need to find much more oil but ''it's not easy to find new opportunities, it's a big fight.''

''When we see new opportunities we are very aggressive,'' he said. ''But we will never operate in a country unless we are certain we can uphold our rules of conduct and respect the laws.''

That wasn't the case in Myanmar, according to labor unions who lodged a complaint in a French court in August alleging the company used forced labor during the construction of a pipeline there. Total denies any wrongdoing.

De Margerie rejected calls by some rights groups for Total to leave the country because of the ruling junta's poor human rights record, citing the company's commitments to local communities there.

Asked about Iran, de Margerie said Washington's decision to bar U.S. companies from doing business there did not apply to Total.

Now the company is focused on Iraq. It is anxious for the opportunity to develop vast new energy deposits in a post-Saddam Iraq. But it also fears that two tentative agreements it has signed with Saddam's regime could be voided by U.S.-led military action.

''The contracts ... would be a major addition to the French company by giving them access to cheap oil,'' said Dr. Fadhil Chalabi, director of the Center for Global Energy Studies in London. ''Therefore it is essential for them to secure these two agreements.''

Iraq has the second-largest proven oil reserves on the planet an estimated 112 billion barrels just after Saudi Arabia. And that is just what is known.

''We would like to develop those fields as soon as possible,'' de Margerie said.

Total, formed two years ago in the merger of Total Fina and the former state-owned oil company Elf Aquitaine, has also had to contend with damage to its reputation at home.

Total Fina first took a beating after an aging tanker it contracted sank off France's Brittany coast in 1999. Some 10,000 tons of gluey oil washed up on the country's beaches.

Two years later, an explosion in a TotalFinaElf subsidiary's fertilizer factory killed 30 people, injured hundreds, and damages scores of buildings in the southern city of Toulouse.

A year ago, activists removed window panes from a chateau belonging to the group's chairman to protest the disaster. TotalFinaElf, France's biggest company, is responding, de Margerie said.

''We have taken new measures to ensure maximum possible security,'' he said, adding that the company would invest $500 million in additional precautions over the next four years. ''We must be more transparent and less defensive.''