www.haaretzdaily.com 22:52 10/01/2003 Last update - 22:52 10/01/2003 By Reuters

BRASILIA, Brazil - The UN nuclear watchdog agency has informally asked Brazil to clarify whether its new science minister has suggested the country should have the capacity to produce nuclear weapons, Brazil's foreign ministry said on Friday.

The International Atomic Energy Agency made the request during a meeting with Brazil's ambassador in Vienna, where the agency is based, a foreign ministry spokesman said.

The request came after comments by the science minister raised concern among international observers that the government of Brazil's new president, Luiz Inacio Lula da Silva, wanted nuclear weapons.

"Brazil is a country at peace... but we need to be prepared, including technologically," Lula's science and technology minister, Roberto Amaral, told the Brazilian service of the BBC on Sunday.

"We can't renounce any form of scientific knowledge, be it the genome, DNA or nuclear fission," the minister said.

Lula, Brazil's first president elected from a left-wing party, took office last week.

The foreign ministry spokesman said Brazil's ambassador to Vienna, Roberto Abdenur, had reiterated to the IAEA statements made by government officials this week that Brazil's nuclear research is purely for peaceful ends.

Advanced nuclear research Brazil's 1988 constitution forbids the development of nuclear weapons and Brazil has signed the Nuclear Non-Proliferation Treaty.

Wilson Rodrigues, the president of the Brazilian Institute of Nuclear Quality, which monitors Brazil's two nuclear energy plants, said Amaral's statements were misunderstood.

"This moment of tension between North Korea and the United States, the possibility of imminent conflict in Iraq...has highlighted the perception of people on this issue," Rodrigues told Reuters. "A phrase taken out of context can give the wrong impression."

Brazil and neighboring Argentina agreed to halt programs to develop nuclear weapons in the late 1980s after both countries returned to democratic rule after years of dictatorship and buried long-held regional rivalry.

Still, Brazil has the most advanced nuclear research in Latin America and has the greatest military capability in the region. The country is home to the world's sixth-biggest uranium reserves and it possesses the uranium enrichment technology for nuclear power reactors.

Brazil would need at least five years to develop a nuclear bomb, said an expert on Brazil's nuclear know-how who asked not to be identified.

www.morningstar.ca 10 Jan 03(4:33 PM) |  E-mail Article to a Friend

NEW YORK (Reuters) - U.S. oil prices slipped on Friday as expectations that OPEC will boost crude production at an emergency meeting this weekend outweighed a dearth of crude from Venezuela and concerns about a possible war with Iraq.

Traders were awaiting the decision of an emergency meeting of the Organization of Petroleum Exporting Countries Sunday in Vienna, where ministers are expected to agree an output increase of around 7 percent to help compensate for deep supply losses from a Venezuelan strike.

Crude futures on the New York Mercantile Exchange settled 31 cents lower at $31.68 per barrel. In London, Brent crude settled up 3 cents at $29.67 per barrel. On Thursday, NYMEX crude futures had jumped $1.48 per barrel on the concerns over Venezuela and Iraq.

The 40-day-old Venezuelan strike continued to raise concerns about supply and the market digested mixed signals on the likelihood of war in Iraq.

The U.S. government planned an initiative to form a group of nations to help end the strike in Venezuela, the world's fifth largest oil exporter, a U.S. official said.

Washington hoped the idea could support Organization of American States Secretary-General Cesar Gaviria's efforts to end the crisis, which pits the leftist president against opposition groups who wish to oust him, the official said.

On Friday, Chavez said he fired nearly 1,000 employees of state oil company Petroleos de Venezuela, from the thousands of PDVSA workers who have joined the strike.

Venezuela supplies about 13 percent of U.S. crude imports. The strike has knocked production down to one-fifth of its 3.1 million barrel levels, the government says. Opposition leaders say the level is even lower.

WHEN TO TAP RESERVES

Oil was also pressured by the possibility of preliminary talks at the Paris-based International Energy Agency on tapping European reserves. The acting head of IEA said Friday war in Iraq, if it coincided with an ongoing strike in Venezuela, could trigger deliveries from the IEA's strategic oil reserves.

"Iraq and Venezuela both being out would certainly be enough for the IEA to think about an emergency release," Acting Executive Director William Ramsay told Reuters in an interview.

"But we don't need to wait for a war, if there is one, because we've already lost 3 million barrels a day from Venezuela."

He said talks could start as early as a scheduled governing board meeting on Jan. 17 at IEA headquarters in Paris, depending on the oil market's response to Sunday's OPEC meeting.

The United States has not tapped national reserves. The Department of Energy said this week it has allowed U.S. oil companies to defer deliveries of a total of 3.1 million barrels they had owed national petroleum reserves to September.

Prices rose strongly Thursday after comments from chief United nations weapons inspector Hans Blix hardened the case for a U.S.-led invasion of Iraq.

Prior to a U.N. Security Council briefing, Blix told reporters that, after seven weeks in Iraq, the arms inspection team had found no "smoking guns" but that he was dissatisfied with Iraq's 12,000-page weapons declaration.

"We think the declaration failed to answer a great many questions," he said.

But a spokesman for British Prime Minister Tony Blair said a Jan. 27 deadline for the U.N. inspectors' full report was not a deadline for a decision on war.

And Secretary of State Colin Powell backed up the British view. "It's not necessarily a D-day for decision making," he said.

www.nytimes.com From the Council on Foreign Relations, January 10, 2003

Julia Sweig, the Council on Foreign Relations' deputy director of Latin America Studies, says that strikes and demonstrations against Venezuelan President Hugo Chavez could continue for months and even worsen. Although President Hugo Chavez's popularity is at only 30 percent, Sweig says that unless the fractious opposition can unite behind one candidate, Chavez may well win the next election - whenever that occurs. The Bush administration would like early elections by next month, but Sweig says that August may be a more realistic goal.

Sweig, author of the new book Inside the Cuban Revolution, was interviewed on January 8, 2003, by Bernard Gwertzman, consulting editor for cfr.org.

Q. What's the situation like in Venezuela? A. It's extraordinarily chaotic and fluid. The strikes have now been going on for over a month, but they really have been coming in fits and starts for more than a year. They have been very dramatic in the last month because of the strikers' ability to shut down the oil industry. No one is talking about an imminent resolution.

Q. What's causing the constant eruption of street demonstrations? Is there a terrible dictator in charge? Are people seeking a change in government? And how does oil figure into all this? A. I don't think Hugo Chavez can be described accurately as a "terrible dictator." He's a democratically elected head of state, who, in 1992, launched a coup from his paratrooper barracks. It failed, but he became a national political figure overnight for his efforts against a government widely considered corrupt. He was sent to jail, then emerged in the mid-1990s with a new political party explicitly opposed to establishment parties.

Since taking power he has governed in a very clumsy and, some would argue, undemocratic, in-your-face, authoritarian way. When he was elected the first time, in 1998, he pulled in 56 percent of the vote, and in 2000, he won with 59 percent.

Q. And the previous political parties, which had dominated Venezuelan politics, more or less evaporated after the 1998 election? A. They did evaporate, and they have yet to reorganize and resurface. The opposition today is a very diverse amalgam that spans from Marxist on the one hand to Chamber of Commerce types on the other. It includes the traditional labor federation, which has played a very large role, as well as the management and workers in the oil industry.

Q. Let's focus on the oil industry. What caused the strike that began last month? A. I have to go back a bit to the April 2002 brief coup. The oil industry was very important in the coup. The oil workers joined a strike that led to a one-day overthrow of Chavez by the military. The workers' principal beef was that Chavez had put his own cronies into the governing structure and the top leadership of the state oil company, Petroleos de Venezuela [PDVSA]. The Chavez appointees were associated with leftist ideologies and were not people who had cut their teeth on what is described as a meritocracy within PDVSA. But public protests demanded Chavez' return and the military allowed him to return as president.

Underlying this conflict and PDVSA's involvement in opposition to Chavez is a debate that has been taking place in Venezuela-and I suspect in other oil-producing countries-about the role of the state in managing oil revenues and exploration and investment. For a time in the early 1990s, you had people running PDVSA who wanted a policy of "opening" the Venezuelan oil industry, which had been nationalized in the early 1970s. They no longer wanted Venezuela to adhere to OPEC [Organization of the Petroleum Exporting Countries] production quotas. The argument of the market advocates was "let a thousand flowers bloom." They said open up the industry, not only to foreign investment, but to Venezuelan capital and individual investment, which would reduce the role of the Venezuelan state in controlling the market and industry.

That argument is pitted against the people around Chavez, who believe that Venezuela should be a member in good standing of OPEC that should gain market share, not through production but by keeping prices up through production quotas. It's an oil industry debate, now taking place in Venezuela, but it has become highly symbolic of who controls oil revenue. And it is very, very politicized. Venezuela, of course, is a major oil producer, and is the third largest exporter to the United States.

Q. Chavez and his supporters want the state to continue to control the oil industry? A. That is correct. They say that in any joint venture, there should be a 51-49 split. They do not want Venezuelan private capital to have the right to invest in Venezuelan oil and they want to keep majority control in the hands of the Venezuela state.

Like many presidents before him, Chavez has called PDVSA a "state within a state," arguing it is a bloated, inefficient bureaucracy controlled by the nation's elite. Chavez, unlike past presidents, however, is willing to risk applying his ideological focus to PDVSA by using the spoils for social programs. This is anathema to PDVSA management as they have their own interests, contrasting ideology, and pride in being one of the most prestigious state-run, but autonomous oil companies in the world. The debate is whether making PDVSA an arm of the state's social program coffers would undermine the efficiency and profitability of the company.

Q. How did this affect the current efforts to unseat Chavez? A. When Chavez was reinstalled after the April coup, he pulled his cronies out of PDVSA. He brought the head of OPEC, who is a Venezuelan, back to run PDVSA, and attempted to make peace in the oil sector. But he failed. He failed less for oil-specific reasons than for the generalized polarized climate that he allowed to develop and which the opposition fomented as well. When the PDVSA workers got directly involved in the strike again in December, there was a mobilization in front of the PDVSA offices. Chavez's troops fired tear gas and wounded a few PDVSA employees. That particular moment unleashed the pent-up anger at Chavez and produced what you see today- a general strike that threatens Venezuela's existence as a reliable oil-producing nation for the first time ever.

Q. Describe the opposition. Who are they? A. It is a vague opposition, known as the Democratic Coordinator. There are three principal institutions: the PDVSA, the Confederation of Venezuelan Workers (CTV), and Venezuelan Chamber of Commerce. The opposition also includes individuals from the national assembly who have created their own political parties. For example, Primera Justicia, not well known until about two years ago, is a broad amorphous coalition. It does not have one, single leader. There is an enormous amount of fighting within the opposition. I think the moderates in both the Chavez government and the opposition have a hard time controlling their extremists. That's why the potential for violence is so strong.

Q. Can an election be held in August? A. Yes. Under the Venezuela constitution, a referendum on the presidency can be held in August, and Chavez says he will stand for reelection.

Q. But the opposition wants him out now? A. Yes. They want something to happen in February. You can call it a non-binding referendum, which is permitted under the new constitution, but the opposition wants it changed to a binding referendum-in effect a new election.

Q. What has the Bush administration said? A. The administration got stung badly by its apparent association with and support for the coup in April. After April, it took a low profile. It has attempted to let the Venezuelan actors on the scene play this out, while trying to signal it does not support coups and wants a constitutional, peaceful electoral solution.

Now, though, because of the war in Iraq and its timing, and the potential for great humanitarian toll in Venezuela, Bush administration officials have stepped up their statements a bit. And while they are supporting the OAS' [the Organization of American States] mediation [to try to resolve the crisis], they have said very clearly they want early elections, and they don't mean August. They are backing the proposal that some kind of electoral event take place in February, and they want the referendum to become, in essence, a presidential election, just as the opposition does.

A pro-government representative has drafted a constitutional amendment in the national assembly [that would allow elections to take place earlier than August]. The United States wants the national assembly to vote on the constitutional amendment, the Supreme Court to authorize its constitutionality, and an election to take place in less than a month. This seems like a very tall order. I think, this is due, in part, to the possibility of war with Iraq.

Q. You mean if there is a war in Iraq, there is concern about oil supplies? A. Yes. Venezuela is the third largest exporter of oil to the United States. Also, I think that neither the opposition nor the government can contain the peaceful protests between now and August, and if this drags on too long it will explode and explode violently.

Q. What are the odds of the crisis being resolved peacefully? A. It is hard to imagine a peaceful resolution, as the polarization is stark and neither the government nor the opposition seems ready to agree to a timetable for elections. The best option, and the one most likely to yield a fair and manageable outcome, is a recall referendum in August of this year. But the opposition is dead set against waiting. My sense is that a low level of violence could continue until August as long as the Venezuelan military stays out of the streets. If provocations from any side get out of control, the conflict could rapidly escalate into a very violent scenario.

Q. If there was an election in February, who would win? A. It is hard to tell. Perhaps, if a governor of a state which is in central Caracas, Enrique Mendoza, runs he could win. He is from the old political system but nevertheless well regarded. Chavez's popularity has gone down to about 30 percent. But that is higher than other presidents in Latin America. Chavez also could win if the opposition fails to get united behind one candidate.

Q. Who still supports Chavez? A. Chavez' 30 percent support of the population represents the poorest and the working poor, who for 40 years felt cut out of the political system in Venezuela. And the interesting thing is that Chavez has not really delivered much in the way of concrete economic or social benefits to the poor. But instead, Chavez has delivered a sense of empowerment. He has given them a voice and is viewed by them as one of them.

Q. Is his popularity in part based on race? A. Chavez is not of white European descent. He is mestizo. But I would not stress the racial element. If you look at the crowds protesting him, they are of all colors and backgrounds. His backers are the most disadvantaged, along with a whole cadre of trained leftist cadres, who are intellectuals, labor lawyers, union activists, even former guerrillas. You could rattle off a much longer laundry list of those who oppose him.

Q. Has the OAS meditation been effective? A. I think the mediation of [OAS Secretary-General] Cesar Gaviria has prevented violence from erupting in full force. He has been in Caracas for the last two months. He has not gotten the government and the opposition to agree to anything. But I think if he leaves the country and no one else more senior replaces him, the whole thing will blow up. He needs support from other states. There have been muted statements at best from the region. Besides the new president of Brazil, [Luis Ignacio] Lula [da Sliva], and Fidel Castro, no one is particularly fond of Chavez, but he was democratically elected.

abcnews.go.com Jan. 10 — By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Embattled Venezuelan President Hugo Chavez vowed to "tighten his grip" on Friday to fight a 40-day-old opposition strike after a grenade attack and bomb threats targeted foreign embassies in Caracas.

Vowing to resist opponents' calls to resign, the left-wing former paratrooper said he would do everything necessary to counter the strike, which has crippled oil output and exports in the world's No 5 petroleum exporter.

A grenade exploded late on Thursday at the Caracas residence of the ambassador from Algeria, which has offered to assist the Venezuelan leader in his fight to beat the strike.

The oil industry shutdown, now in its sixth week, is pushing up oil prices. In London, Brent crude was up 21 cents at $29.85 while U.S. light crude traded up 12 cents at $32.11.

Venezuelan banks and supermarkets closed their doors for the second consecutive day on Friday in support of the grueling strike, called by opposition leaders to press the leftist president to quit and call early elections.

Chavez, an outspoken populist who was elected in 1998 and survived a coup in April, seems determined to hang on.

In an angry speech Friday, he said the government had fired 1,000 striking employees of the state oil giant PDVSA.

The shutdown has cut off millions of dollars of oil income and caused shortages of gasoline and some basic foodstuffs.

Chavez, who has sent troops to take over strike-bound oil installations, also threatened to seize if necessary privately owned food warehouses, accusing business opponents of deliberately hoarding supplies of maize and rice.

"The government is ready to tighten its grip wherever we have to," he bellowed in a speech in rural Cojedes state.

Fitch Ratings lowered Venezuela's credit standing by two notches on Friday, downgrading its sovereign debt rating deeper into "junk bond" territory. It also slashed the ratings of strike-hit PDVSA and some Venezuelan banks.

The blast at the Algerian residence caused damage but no injuries. It followed bomb threats Thursday against the German, Canadian, Australian, Polish and Russian embassies.

DIPLOMATIC MOVES

No one claimed responsibility for the attack. But Algeria and other members of the Organization of Petroleum Exporting Countries (OPEC) have offered to help Venezuela counter the effects of the strike. Algeria has sent oil technicians.

Chavez's government blamed the blast on hard-line "terrorist" political opponents supporting the shutdown. "This is the coup-mongering face of the Venezuelan opposition," Foreign Minister Roy Chaderton told Reuters.

In recent months, there have been grenade attacks against the offices of anti-Chavez union and business groups and media organizations. The opposition has blamed the government.

Government officials said security at foreign embassies would be increased. The grenade attack and threats may galvanize international efforts to resolve the crisis, which has disrupted Venezuelan oil shipments to clients as different as the United States and communist-ruled Cuba.

The United States and other members of the Organization of American States are studying the idea of creating a "Friends of Venezuela" group of nations to support current OAS efforts to broker a negotiated, electoral solution to Venezuela's conflict. Brazil has also been working on such an initiative.

"We remain deeply concerned about the deteriorating situation in Venezuela," White House spokesman Ari Fleischer told reporters in Washington.

The United States normally receives more than 13 percent of its crude oil imports from Venezuela.

Chavez said he had spoken by phone Wednesday with United Nations Secretary General Kofi Annan. "I told him ... here we are, men and women of democracy, fighting against a bunch of terrorists, coup mongers and fascists," Chavez said.

The president says his opponents are trying to topple him through the strike. His foes accuse him of ruling like a dictator and trying to implant Cuban-style communism.

Chavez also accused a billionaire Venezuelan media magnate based in Miami, Gustavo Cisneros, of playing a leading role in the opposition campaign to force him from power.

In a statement to government and opposition negotiators taking part in peace talks brokered by the OAS, Venezuela's Catholic bishops urged all sides to seek a peaceful solution to the crisis and to avoid "the abyss of violence."

Two people were killed in clashes a week ago involving anti- and pro-government demonstrators and troops and police.

abcnews.go.com Jan. 10

— WASHINGTON (Reuters) - Home heating demand and utility bills are expected to soar as a blast of Arctic air sweeping over the United States will create the coldest two-week period from the Rockies to the Atlantic coast since the winter of 1995-96, forecasters at AccuWeather Inc. said on Friday.

The cold weather could compound low U.S. crude oil inventories caused by a workers strike in Venezuela, the fourth largest oil supplier to the United States, the forecasting company said.

Joe Bastardi, who is AccuWeather's long-range forecast expert, said the Jan. 10 to Jan. 25 period will be the coldest two-week period in seven years for a large part of the United States and will probably last for the remainder of January.

Many areas that have experienced mild weather so far this winter, such as the Upper Mississippi Valley and the Plains, will receive a wake-up call that the cold season is not going to pass them by, according to Bastardi.

"For people who have been enjoying warmer-than-normal temperatures and lower energy costs, these cold winds will be a slap in the face when they step outside, and a kick in the wallet when they get their heating bills," he said.

"The mild weather in the Plains and Midwest will be a memory," Bastardi added.

The specter of a prolonged cold snap is even more significant because the U.S. Energy Department predicts that, even if temperatures are normal the rest of the winter, home heating bills will still remain high.

The department forecasts that winter heating bills will be up 43 percent for heating oil, 34 percent for natural gas and 12 percent for electricity compared with last winter.

This does not take into account the impending cold snap, which could increase energy bills even further, Bastardi said.