10 Jan 2003 19:51 www.alertnet.org

CARACAS, Venezuela, Jan 10 (Reuters) - Venezuelan President Hugo Chavez on Friday said he fired nearly 1,000 employees of state oil company Petroleos de Venezuela (PDVSA) taking part in a 40-day strike aimed at removing him from office.

"We have fired now nearly 1,000 of them (striking employees). We are cleaning up PDVSA," Chavez said in a speech to supporters broadcast live on television.

Thousands of PDVSA managers and executives, oil field and refinery workers, ship captains and dock crews have joined the strike, which started on Dec. 2 and has crippled the OPEC nation's oil sales.

The strike has severely disrupted Venezuela's economy, which relies on oil exports for half of government revenues.

Crude and product exports have fallen to less than a fifth of the 2.7 million bpd sold before the shutdown. Oil production has dropped to 450,000 barrels per day (bpd) from 3.1 million bpd in November, a PDVSA executive said this week.

The government this week announced a plan to create two PDVSA affiliates in the main eastern and western production centers, shifting power away from the current Caracas headquarters, where levels of absenteeism have been high during the stoppage.

In addition, PDVSA is seeking workers to replace some of the striking employees, according to a message posted by Planning Minister Felipe Perez on an Internet forum.

Rebel PDVSA employees have said they will not return to their jobs until Chavez resigns or agrees to early elections, and that government efforts to restart the industry using replacement staff will fail. Venezuela's oil sector normally employs about 40,000 workers. (Additional reporting by Ana Isabel Martinez)

news.ft.com By Adrienne Roberts and agencies Published: January 10 2003 18:40 | Last Updated: January 10 2003 18:40

Gold ended the week close to six-year highs after reaching a peak of $356.50 an ounce on Thursday.

The looming threat of war in Iraq, and a shaky US dollar, helped sustain buying interest in the metal.

The speculative net long position on New York's Comex was shown to have grown again. According to the latest CFTC Commitments of Traders figures, large speculators were net long 59,505 100-ounce contracts, the largest such position in almost seven years.

John Reade, analyst at UBS Warburg in London, suggested new participants might have been entering the gold market. "Since the size and durability of these flows are unknown and there are few obvious sellers of gold in evidence, then gold could hold these levels or even make further gains," he said.

He warned, however, that speculation-led rallies could end as quickly as they had started and that physical demand was "not supporting the gold price at the current levels".

Spot gold was $353.00 an ounce at London's afternoon fixing, compared with $344.50 an ounce the previous Friday.

The concerns about Iraq, as well as continued failure by Venezuela to resolve its strike, kept support under the crude oil market.

But concerns about a possible tightening in oil supplies receded as Opec signalled its willingness to step up production to compensate for loss of Venezuelan crude.

The cartel is scheduled to hold an emergency meeting on Sunday, with analysts expecting it to boost output by about 7 per cent.

On Friday, the International Energy Agency said it would consider releasing strategic oil reserves if a continued strike in Venezuela coincided with war in Iraq.

Late in London, IPE February Brent was $29.32 a barrel compared with a close of $30.77 a barrel the previous week.

By early afternoon in New York, Nymex February WTI was $31.67 a barrel compared with a close of $33.08 the previous week.

news.ft.com By Christopher Swann Published: January 10 2003 18:56 | Last Updated: January 10 2003 18:56

Gloomy employment figures cast a further shadow over the US dollar on Friday, sending it to a fresh three-year low against the euro.

Worries have been mounting in recent months that the US economic recovery is failing to generate jobs. This was underlined Friday by non-farm payrolls, which fell 101,000 in December.

Analysts are still forecasting US economic growth of around 2.7 per cent this year. But this would come under threat if the fear of unemployment starts to undermine consumer spending.

Many now believe that the dollar is in a no-win situation.

Even if, as expected, the US outpaces the eurozone and Japan by a significant margin, analysts expect the current account to drag on the currency. Growth is expected to be based on consumption and government spending, which tend to suck in imports, rather than on business investment, which tends to attract foreign capital.

On Friday the euro hit $1.055. Tony Norfield, head of currency strategy at ABN Amro, said the dollar was now reaching technically sensitive levels. "If the euro manages to close above $1.055 or $1.06, then the upswing looks likely to continue," he said. Mr Norfield added that positions by real money investors were still relatively modest. Many were likely to be tempted to hedge their portfolios against the threat of further dollar weakness.

"Low US interest rates has meant that it is now cheaper to hedge dollar exposure than at any time since 1993-94," said Mr Norfield.

The antipodean currencies also rose strongly. "The Australian and New Zealand dollars are being helped by their high yields and their perceived remoteness from geopolitical tensions," said Tim Fox, market strategist at National Australia Bank. It had looked like the Venezuelan bolivar was only going one way.

Last year the currency fell 46 per cent against the dollar. With the oil strike entering its second month, 2003 looked set for more of the same.

But suggestions that the US may be poised to mediate has helped push the dollar back from 1,621 bolivars to 1,471 bolivars.

There has also been a realisation, said Marc Chandler, chief currency strategist at HSBC in New York, that the financial vulnerability of the country has been overstated.

"Venezuela has about $14bn in hard currency reserves, about four times its sovereign debt servicing obligations this year," he said. He added that the US had a powerful motive for bringing the strike to an end, since the curtailment of oil exports from Venezuela had added upward pressure on gasoline prices and inventories are falling.

10 Jan 2003 18:40 www.alertnet.org

By Arshad Mohammed

WASHINGTON, Jan 10 (Reuters) - The United States supports forming a "group of friends" of Venezuela of key nations in the region to try to break an impasse between Venezuelan President Hugo Chavez and opposition groups who have crippled Venezuelan oil exports with a strike, a U.S. official said on Friday.

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.

The United States backed the idea in part because Gaviria's efforts so far to end the 40-day-old strike that has throttled oil exports by the world's fifth-largest petroleum exporter have not succeeded and it hoped that a gesture by other nations in the region might nudge both sides to compromise.

The strikers want Chavez, accused by his foes of autocratic rule, to resign and hold early elections, something he has so far refused to do.

"Are we trying to find a way to break the impasse -- absolutely. We want to try to find a way to end the political crisis," said the U.S. official, who asked not to be named, stressing the U.S. view that there needs to be an "electoral solution" allowing Venezuelans to express their views.

"The notion of a group of friends is one among a number of ideas to inject new energy and new thinking into the process, but most importantly if both Chavez and the opposition are exposed to a unified international view that they both need to compromise, there's increased pressure," he added.

"In other words, (so) that Chavez doesn't think he's got support from friendly governments to hold the line and (so) that the opposition doesn't think it has support from groups in the hemisphere that it can continue the strike indefinitely," the official said.

However, the U.S. official stressed that the United States wanted the "group of friends" idea to support Gaviria's efforts, not to act in competition with them.

"Gaviria ... is the key player there. All we want to do is to support his efforts," the official said, saying Washington had held off from endorsing the idea until it became clear to U.S. officials that Gaviria supported it.

The U.S. official said the loss of Venezuela oil exports as a result of the strike was one factor, but not the dominant factor, in the United States decision to back the idea of a group of friends. Prior to the strike, the United States imported about 13 percent of its oil from Venezuela.

"I wouldn't say that it (oil) weighed disproportionately," the official said.

The Washington Post, which first reported that the United States favored the "group of friends" idea, said an initiative was expected to be rolled out within the next week.

A U.S. official said that any initiative would complement Gaviria's efforts.

"We remain supportive of Gaviria and the OAS effort and if something's appropriately structured that would help that, we would support it," he said. "I wouldn't call it a major new initiative but it is an effort to break the impasse. We want to get regional leaders focused on helping to do that."

Washington lost credibility in Venezuela when it appeared to welcome a coup last year that briefly ousted Chavez.

But it hopes the plan will head off an initiative by left-leaning Brazil to form its own "group of friendly nations" to resolve the crisis that the United States believes would be counterproductive, the Washington Post reported.

A U.S. official said Washington did not see the group of friends idea as a way of injecting itself into the Venezuelan situation, acknowledging Latin American sensitivities about the history of U.S. influence in the region.

But he said the United States was likely to get blamed if things went badly, so it had might as well do what it could.

"If things go badly, the United States (will) be blamed, so we might as well be engaged in trying to make sure that things go well," the official said.

www.voanews.com VOA News 10 Jan 2003, 19:02 UTC

The United States says it is concerned about the political crisis in Venezuela and supports international efforts to resolve the situation.

White House spokesman Ari Fleischer told reporters Friday Washington remains "deeply concerned" about what he calls the "deteriorating situation" between the Venezuelan government and the opposition.

Mr. Fleischer says the head of the Organization of American States, Cesar Gaviria, has been "quietly" discussing possible resolutions with OAS members. The spokesman says the United States supports the OAS efforts, which include forming a so-called "Friends of Venezuela" group.

The Washington Post reports Friday the grouping would bring together representatives from Brazil, the United States, Mexico, Chile, possibly Spain, and the United Nations.

The newspaper says the representatives would guarantee a compromise proposal for early elections. It says the initiative is expected to be presented within the next week.

Meanwhile, opponents of President Hugo Chavez rallied in the streets Friday for anti-government protests. Bank workers stayed off the job for a second day to support a crippling, five-week general strike aimed at forcing Mr. Chavez to resign or call early elections.

Venezuelan officials say the opposition is to blame for a grenade explosion late Thursday at the Algerian ambassador's residence in Caracas. No one was injured. Algeria has offered to assist Mr. Chavez in efforts to end the strike.

The work stoppage has halted shipments of 1.5 million barrels of oil a day to the United States and has contributed to an increase in world oil prices.