Monday, December 30, 2002 By BARRY RENFREW Associated Press Writer

LONDON -- For most of the world, 2002 was a gloomy, tense year as nations struggled with slumping economies while watching nervously for the twin threats of terrorist attacks and war with Iraq.

From Europe to the Middle East and Asia, many hoped the United States would not attack Iraq, but resigned themselves to the possibility. Only Britain and a few allies gave strong support to Washington's tough stance on Iraq.

The world mourned the anniversary of the Sept. 11 attacks, convinced more would come. Terrorism struck heavily in Russia, Kenya and Indonesia.

After the roaring 1990s, economies were in the doldrums as stock markets slumped, business faltered and banks struggled with bad debt. Hopes at the start of the year of recovery proved brief and fear of recession intensified by fall.

The year in Europe was a search for expansion and the healing of old divisions. NATO invited seven of its former Communist opponents to join as the scars of the Cold War healed. The 15-nation European Union moved to add 10 more.

European domestic politics were less harmonious. The far right appeared to be making unprecedented gains as Europeans reacted fearfully to a flood of illegal immigrants.

Jean-Marie Le Pen stunned the world by winning a place in the runoff of the French presidential election, even though he was then thrashed by incumbent Jacques Chirac. Holland suffered its first political assassination when a rising star of the anti-immigration camp, Pym Fortuyn, was gunned down. By year's end, the far right appeared on the run, as Austria's far-right Freedom Party of Joerg Haider suffered a major defeat and Fortuyn's party, which had done well in elections, plunged into disarray.

In Germany, Chancellor Gerhard Schroeder narrowly won re-election, only to see his tenuous popularity crumble as the continent's largest economy teetered. German ties with Washington nose-dived after Berlin stridently opposed war with Iraq.

The terror Europeans feared all year struck in Moscow in October when a theater siege by Chechen rebels ended in a raid by special forces that left at least 129 hostages dead.

In Asia, India and Pakistan continued their nuclear-tipped standoff, exacerbated by the bleeding sore of the disputed territory of Kashmir. North Korea revealed it had nuclear weapons. Afghanistan, free of the Taliban after a U.S.-led campaign, struggled to escape the clutches of rival war lords.

Terrorism hit Asia when a bomb wrecked a night club in the Indonesian resort of Bali in October, killing nearly 200 people, mainly young Western tourists.

The United States continued its war on terrorism, claiming to have made important arrests. It also pressed the hunt for Osama bin Laden. But was the al-Qaida leader blamed for the Sept. 11 attacks still alive in 2002? U.S. experts concluded from a taped speech attributed to him that he was. A Swiss research institute said the tape was inconclusive.

China experienced its first orderly regime change since the communist revolution of 1949 when Hu Jintao replaced Jiang Zemin as Communist Party general secretary in November. It was part of a long-planned handover of power to a younger generation.

While China's economy continued to grow, much of Asia struggled with a 5-year-old slump. Japan's woes showed little sign of abating, even under its new, reformist prime minister, Junichiro Koizumi.

It was a year of crisis and stalemate in the Middle East. Israel's battle with the Palestinians deepened with a cycle of suicide bombings and Israeli military sweeps. Israel headed into another critical election pitting a hawk, Prime Minister Ariel Sharon, against a dovish challenger, Amram Mitzna, while some younger Palestinian leaders for the first time questioned the wisdom of continuing an uprising more than two years old.

The second half of the year was dominated by fears of a war with Iraq. Arab governments feared it would destabilize the entire region. Anti-U.S. sentiment bubbled in the streets of Arab cities.

"In general, 2002 was not a good year for the Arab world," said Abdel Maneim Said, head of the Al-Ahram think tank in Cairo, Egypt.

"I believe the crisis with Iraq created a kind of depressing environment in the region."

In Latin America, Brazil, the region's powerhouse, took a historic step away from centrist rule as leftist Luiz Inacio Lula was elected president. Economic instability, or the threat of it, hung over many nations as Argentina buckled under massive debt.

"There is no clear solution to this. No one quite sees to know how to restore growth and vibrancy in these countries," said Peter Hakim, president of the Inter-American Dialogue, a private research group.

Alvaro Uribe became president of Colombia with a promise to defeat leftist FARC guerrillas and drug barons. Maverick President Hugo Chavez clung to power in Venezuela after being briefly toppled in April.

In Africa, the AIDS epidemic continued its merciless ravages, and drought, floods and bad government raised anew the threat of famine. Ivory Coast, once held up as a model, faced civil war.

and other conflicts sputtered on unresolved.

And yet, the world's poorest continent saw signs of hope.

Wars in Congo, Angola, Somalia and Somalia died down as belligerents turned to the negotiating table. The African Union, a new grouping of 53 nations, promised an era of peace and prosperity.

"We are starting a new chapter in the history of our continent," South African President Thabo Mbeki said at its launch.

Venezuelian troops guard petrol supplies

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Venezuela's opposition threatened on Monday to add a tax revolt to a strike that has blocked oil exports and jolted world energy markets but so far failed to make President Hugo Chavez resign.

The leftist leader has thumbed his nose at massive marches, one of which brought a million demonstrators onto the streets of Caracas, and at a 29-day-old strike that has closed down shipments from the world's fifth-largest oil exporting nation.

"We're bashing up against a wall," one of the protest leaders, Carlos Fernandez, president of Venezuela's main business chamber, Fedecameras, said.

The opposition demands immediate elections and has refused Chavez's offer of a referendum on his rule in August, saying that if it waits that long he will wreck the country. Chavez says under the constitution August is the earliest date an election may be held to assess popular support for his rule.

"Today we are taking the road of legitimate civil disobedience," said another strike leader, union boss Carlos Ortega. "We will refuse to pay taxes to a regime which renders no accounts and squanders the money of the people."

The opposition could also call an assembly to rewrite the constitution, Fernandez said, adding that the law allows for such a move if it is clearly shown to be the will of the people.

Tax evasion is rife in Venezuela at the best of times.

Chavez, a former paratrooper who was jailed after a botched coup in 1992 but was elected in 1998, has fought hard against the strike, firing executives from state oil giant PDVSA and ordering troops onto halted oil tankers.

In a major role-reversal for the oil-rich nation, he has imported some gasoline to ease lines hundreds of cars long at filling stations. The government said that oil output would climb back to a third of normal next week, but PDVSA rebels said efforts to kick-start petroleum production were failing.

The squeeze on Venezuelan exports, which normally provide 13% of U.S. oil imports, have spooked world energy markets already fretting about a possible war in Iraq. US crude futures jumped to a two-year high early on Monday before sliding sharply to US$31.45 a barrel as the OPEC cartel indicated its readiness to come to consumers' rescue by boosting output.

The opposition, backed by business and unions but attracting support from most Venezuelans, accuses Chavez of authoritarianism, corruption and economic incompetence in what they say is a quest to establish a Cuban-style dictatorship.

Chavez condemns as "fascists" his opponents, who also backed a failed coup against him in April. His class war rhetoric and lengthy speeches that ramble from references to his grandmother to threats against his enemies make Venezuela's educated elite apoplectic.

The president, whose term is due to run until 2007, has seen his popularity plunge, even among his core constituency, Venezuela's poor majority. But, with about 30% support, he is more popular than any individual opposition figure.

Meanwhile, the country's economy is suffocating without petroleum, which normally provides 80 percent of exports and 50% of government revenues.

Markets could panic

While Chavez points to US$15 billion in Central Bank reserves to allow him to withstand the strike, analysts say the economy, already in deep recession, could buckle if world financial markets panic about Venezuela in the new year.

Caracas-based political analyst Janet Kelly said she has hoped an agreement would be reached before economic pressures explode. But she said personal animosity between Chavez and the strike leaders was a barrier.

"Chavez is crazy, but like a fox. I wouldn't underestimate him. A critical rule of negotiation is never reveal that you're willing to give in tomorrow," she said.

"The opposition has equal problems, because if they really bring the country to a total crisis, of economic isolation, there is a point at which the country turns against them."

The opposition still holds cards it has yet to play, such as a march on the presidential palace in the Chavez stronghold of central Caracas. Many fear this could lead to violence, remembering the 19 deaths during a similar march before last April's coup.

Strike leaders are also organizing a nonbinding referendum in early February, although Chavez says he will pay no attention to the result even if 90% vote against him.

While holding firm around its petroleum core, the strike was fraying around the edges, with many smaller companies and restaurants opening their doors.

Several hundred thousand opposition supporters marched in Caracas on Sunday, but the protest was a fraction of the size of a million-strong demonstration a week earlier.

Talks between the opposition and the government, brokered by the Organization of American States, have made little progress. In public, communication between the two sides is largely limited to threats and insults.

"Chavez treats this like a war. He's a soldier and soldiers think of war as victory or defeat. If he were a democrat, which he isn't, he'd be giving some," said Fernandez.

By Bradley Brooks UPI Business Correspondent

     RIO DE JANEIRO, Brazil, Dec. 30 (UPI) -- Brazil's president-elect is widely expected to name a relatively unknown Workers' Party senator to head the state-run oil giant Petrobras, as talk of reinstating price control swirls about the country. Top Stories • Powell insists N. Korea not a crisis • A sad ending and a happy one • Kim Jong-il a schemer in shadows • Panama wins in China-Taiwan spat • 'Total chaos' awaits travelers at airports

     President-elect Luiz Inacio Lula da Silva said Monday he won't unveil the name the new leader of Petrobras until Tuesday or after he takes office on Wednesday, but market chatter and the consensus in the local press is that Sen. Jose Eduardo Dutra will get the nod.

     Dutra -- who has served in the Senate since 1994 -- worries market players because few know much about him. And what they do know they don't necessarily like.

     A geologist by training, Dutra, 45, raises red flags for many because of his lack of experience on the business side of the oil industry. The fact that he will likely take over one of the country's most profitable companies and a heavyweight on the local stock index doesn't lessen concerns.

     The handling of Petrobras is being closely watched by many in Brazil for its clues as to how Lula -- as the president-elect is known -- and his team will shape economic policies.

     Some fear that Petrobras will be used by the government as a means of artificially holding down inflation by not allowing the company to implement price increases.

     Over the weekend, Dilma Roussef, tapped by Lula to be his mines and energy minister, said that price controls were being considered by the next government.

     "To define pricing policies, the petroleum policy, the policy of Brazil's electric energy ... is the role of the ministry, of the state," Roussef told reporters on Sunday.

     It was just in January that Brazil tentatively gave Petrobras the freedom to increase the prices of its products. Before that, the government set prices every few months on cooking gas and gasoline.

     Petrobras has come under fire this year for raising prices, spurring inflation in Brazil, which will be more than 10 percent for the first time since 1994.

     As for the electricity sector, companies can increase prices but only with the approval of Aneel -- the country's energy regulator -- and without the blessing of the ministry of mines and energy, a situation Roussef has criticized.

     While there was no official word from Lula, the local press also reported Monday that a professor and physicist was offered the presidency of Brazil's energy holding company, Eletrobras.

     Luiz Pinguelli Rosa told a local news agency that he had accepted the offer to head Eletrobras. He said he wanted to make the energy sector in Brazil attractive and a low-risk bet for investors, but gave no details on how that might happen.

     The bid for the presidency of Petrobras has been politically charged as smaller parties in Lula's nascent coalition government have pushed to have one of their own officials in the post.

     Rank and file members of Lula's Workers' Party, though, have demanded they take control of the company, and it was never too much in doubt that this would be the case.

     It has long been known that Lula would replace the current Petrobras head, Francisco Gros, whom the future president has criticized.

     During his campaign, Lula made an issue out of the fact that Petrobras had extended a contract for the construction of a $500 million sea-drilling platform to the Singapore-based Jurong Shipyard.

     In a campaign television ad, Lula said that the building of the platform would "be done in Brazil, period."

     Lula said the project could create about 25,000 jobs in Brazil and could mean some $1 billion in business.

     Earlier there were rumors that Anthony Garotinho -- who made an unsuccessful run for the Brazil's presidency -- would be named to head Petrobras in exchange for throwing support to Lula in the second round of the presidential vote.

     Investors were worried about the possibility of Garotinho -- or any official without solid CEO credentials -- taking over Petrobras. While the markets seem to have more trust in Dutra than the populist Garotinho, most are still quite concerned about the direction of the company.

     On Monday, Petrobras stock was up more than 3 percent, with investors' concerns about Dutra offset by the company's Sunday implementation of a 12.8 percent increase in the price of gasoline and a 7.7 percent increase in the price of cooking gas.

From the National Desk Published 12/30/2002 7:15 PM View printer-friendly version

NEW YORK, Dec. 30 (UPI) -- Crude futures tumbled Monday after Venezuela again vowed to gets its strife-ridden oil industry back in operation and OPEC ministers indicated that an increase in crude production was possible in the coming weeks.

The bearish news was by no means set in stone, however it was real enough to prompt a busy pre-New Year's sell-off that sent February prices down $1.35 to $31.37 per barrel after gaining as much as 75 cents earlier in the day and reaching a two-year high of $33.65 per barrel.

The sudden turnaround after a week of gains wrapped around Christmas was also seen in the NYMEX refined products pits where January gasoline fell more than 5 cents per gallon and heating oil fell 4 cents per gallon.

February crude closed 50 cents lower at $29.66 per barrel on London's International Petroleum Exchange.

Much of the selling on NYMEX appeared to be profit-taking ahead of the holiday and was based in part on media reports from the Middle East that OPEC was inclined to increase its output of crude next month by some 500,000 barrels per day to offset shortfalls in Venezuela caused by political unrest and a stubborn strike against the nation's oil industry.

Venezuelan President Hugo Chavez vowed Sunday to break the strike and get the state oil company, PdVSA, back to its full production capacity of nearly 3 million barrels per day of crude and refined fuels by the end of January. Venezuela is the world's fifth-largest oil exporter.

"My plans are for an offensive and an attack," Chavez said in a broadcast address.

As they had with Chavez's past demands that the strike end, opposition leaders showed no signs of giving in Monday on their demands for early elections -- something that Chavez has repeatedly refused to agree to.

Horacio Medina, president of a group of striking oil managers, told The New York Times Sunday that the opposition would urge protestors to keep up the pressure on Chavez in January, possibly by refusing to pay taxes.

"People are still willing to stay out of work for many more days," Medina said.

Meanwhile, tensions between the United States and Iraq continued to simmer Monday. While additional U.S. forces moved into the Persian Gulf region, a senior Iraqi military official Monday told a sympathetic group of visitors from Spain that the U.N. arms inspections would uncover no signs of an underground weapons of mass destruction development program.

"My country stands on a solid ground and we do not fear any military confrontation with the U.S. and Britain, which claim that we still possess weapons of mass destruction," said Brig. Gen. Amer Rashid al-Saadi. -0- (Reported by Hil Anderson, UPI Chief Energy Correspondent)

Mon December 30, 2002 07:21 PM ET By Jason Webb

CARACAS, Venezuela (Reuters) - Venezuelan police on Monday detained a dissident general, goading the opposition who have blocked massive oil exports with their strike but failed to force President Hugo Chavez to resign.

The leftist leader has thumbed his nose at a 29-day-old strike that has closed down shipments from the world's fifth-largest oil exporter and at huge marches, one of which brought a million demonstrators onto the streets of Caracas.

Police did not say why they had taken away National Guard Gen. Carlos Alfonso Martinez, a prominent member of a group of dissident armed forces officers who have been camping out in a Caracas square since October calling for Chavez to step down.

But the government accuses Martinez and other officers of involvement in an April coup which briefly toppled the leftist president before he was restored to power by loyalist troops.

A lawyer speaking for Martinez said the general had not been charged and that his detention was illegal.

"Whoever is responsible for this, whether it's Hugo Chavez, the interior minister or the head of the National Guard, we'll identify and charge them," said lawyer Cipriano Heredia.

The opposition, backed by business and unions, accuses Chavez of authoritarianism, corruption and economic incompetence in what they say is a quest to establish a Cuban-style dictatorship.

Chavez has kicked many of the renegade officers out of the armed forces and threatened to chase them from the square, but detaining Martinez is the toughest act against them so far.

A few dozen opposition sympathizers gathered outside a police station where Martinez was being held, and were pelted with rocks by supporters of the populist president.

One man, standing with the opposition militants, fell to the ground, bleeding and twitching as blood poured from his head. He was holding a pistol.

Opposition leaders earlier threatened to add a tax revolt to its strike which has sapped an already recession-bound economy of its petroleum lifeblood. Oil normally provides 80 percent of exports and 50 percent of state income.

OPPOSITION WANTS IMMEDIATE VOTE

Strikers demand immediate elections and have refused Chavez's offer of a referendum on his rule in August, saying that if they wait that long he will wreck the country. Chavez says under the constitution August is the earliest date an election may be held to assess popular support for his rule.

The president, a former paratrooper who was jailed after a botched coup in 1992 but was then elected in 1998, has fired bosses from state oil giant PDVSA and ordered troops onto oil tankers.

"We're bashing up against a wall," one of the protest leaders, Carlos Fernandez, president of Venezuela's main business chamber, Fedecameras, told Reuters.

The president, whose term is due to run until 2007, has seen his popularity plunge, even among his core constituency, Venezuela's poor majority. But, with about 30 percent support, he is more popular than any individual opposition figure.

In a major role-reversal for his oil-rich nation, he has imported gasoline to ease lines at filling stations. The government said that oil output would climb back to a third of normal next week, but PDVSA rebels said efforts to kick-start petroleum production were failing.

The squeeze on Venezuelan exports, which normally provide 13 percent of U.S. oil imports, has spooked markets already fretting about possible war in Iraq. U.S. crude futures jumped to a two-year high early on Monday before sliding sharply to $31.37 a barrel as the OPEC cartel indicated its readiness to come to consumers' rescue by boosting output.

Strike leaders are organizing a nonbinding referendum in early February, although Chavez says he will pay no attention to the result even if 90 percent vote against him.

Talks between the opposition and the government brokered by the Organization of American States have made little progress.

(Additional reporting by Ana Isabel Martinez)