www.forbes.com Reuters, 01.13.03, 4:01 PM ET

NEW YORK, Jan 13 (Reuters) - Emerging market sovereign bonds edged higher on Monday as investors looked past the political and economic crisis enveloping Venezuela and focused on Brazil, where the central bank, bolstered by increased investor confidence, staged a successful debt rollover.

Benchmark Brazil C bonds <BRAZILC=RR> rose 1/2 to bid 71-1/8 after the country's central bank sold all $400 million in domestic debt on offer. It has now rolled over 97 percent of $1.8 billion in dollar-linked securities coming due on Jan. 16.

The bank was seen capitalizing on growing investor confidence in the new government of President Luiz Inacio Lula da Silva, who took office on the first of the year.

"The noises out of Brasilia from the new (government) still tend to be very positive, such as raising the primary fiscal surplus," said Suhas Ketkar, senior economist and head of emerging markets analysis at the Royal Bank of Scotland.

The statements from Lula's camp, as well as dollar inflows from a string of banks selling debt, have helped to support the debt, said Ketkar.

Brazilian bonds have rewarded holders with total returns of more than 7.8 percent so far this month, while the wider market has edged only 1.7 percent higher, according to JP Morgan's Emerging Markets Bond Index Plus.

"Today the market continued the trend we saw last week, which was basically a rally in Brazil," said Paul Masco, head of emerging market trading at Salomon Smith Barney.

Venezuelan total returns edged lower, according to the EMBI-Plus. Six weeks into an opposition strike against President Hugo Chavez, fresh street clashes broke out in Venezuela on Monday as international pressure built for a swift end to the crisis rocking the world's No. 5 oil exporter.

Venezuelan total returns have fallen 7 percent so far in January, but analysts say the wider market does not appear vulnerable to contagion from the crisis.

Monday's clashes were the latest outbreak of violence during an escalating opposition strike aimed at forcing the populist Chavez to resign. The shutdown has slashed Venezuela's vital oil exports, causing widespread domestic fuel and food shortages and jolting world energy markets.

Copyright 2003, Reuters News Service

business-times.asia1.com.sg January 14, 2003 By G Panicker

ALL the major conflicts besetting the world now have something to do with oil or energy. Saddam Hussein sits on an oil pool. And Iraq is next to Saudi Arabia, which is on another huge oil pool.

Oil is a strategic commodity and it has been a source of political and military conflict for nearly nine decades. And the dynamics of world politics since World War II has mainly been about who gets to control these resources. Today, the US says it wants to pre-empt Saddam's attempt to build a nuclear bomb - but Washington certainly has one eye on Iraq's oil. So have all the others in the United Nations Security Council.

In North Korea, Kim Jong Il is flashing his nuclear teeth. That poor nation is ostensibly mounting a nuclear power programme which Washington insists is a bomb project in disguise. It is another episode in an ongoing crisis.

In Venezuela, people are banging pots and pans to get their president, Hugo Chavez, out of power. The leftist paratrooper is pitted against striking executives of the country's powerful oil company, PDVSA, which he now wants to split. Mr Chavez portrays the strike as a class struggle against the poor by the middle classes and the rich. Venezuela's economy, almost entirely dependent on oil, has suffered some serious damage from the six-week shutdown.

In the Ivory Coast, French troops are keeping the peace in their old colony affected by civil war, involving rebels arguably backed by Liberia. The Gulf of Guinea floats in oil in a volatile continent with a long history of wars over its resources. The former Spanish colony, Equatorial Guinea, has now emerged as a major oil supplier to the West. This is boosting the Ivory Coast's own hopes of becoming an oil producer. Over in Chechnya, the Russians are fighting rebels who want to break away. Chechnya's capital, Grozny, is an important refining and pipeline centre. And, for some, the Afghan war was a two-in-one US assault to secure potential routes for the central Asian petroleum resources as well as to punish the Sept 11 attackers.

Nearer home, peace has hopefully come to Aceh, Indonesia's oil- and gas-rich province. Sadly though, barring a few exceptions in the Gulf countries, oil has not sharply changed the people's lives. Nigeria has received some US$300 billion from oil exports in the past 25 years but the World Bank still classifies the country - wracked by ethnic troubles - as a low-income country. Indonesia is in the same league. Algeria, caught up in a civil war, is even poorer.

The flow of oil wealth has obviated the need for other revenues, making people in power less accountable. It also has ignited the spirit of nationalism. There have always been calls for less reliance on oil, particularly when prices went wild. But the US administrations, dominated by oilmen and those with links to multinational companies, have not made a serious effort to wean the American economy from oil dependence. The national energy policy unveiled by the Bush administration two years ago had its primary focus on the Gulf, the region it sees as volatile.

Nor did the US have any objections to the belief systems prevalent in these regions until the twin towers of the World Trade Center fell. It dealt merrily with Osama bin Laden in the Afghan war against the Russian 'infidels' and interceded against Iraq after helping Iraq against Iran. Every one of those political manoeuvres was underpinned by the logic of keeping oil supplies flowing. So now - once again - US troops are in the Gulf, this time to get Saddam out of Baghdad, his seat of power for three decades. There are conflicting messages on what the US wants from Iraq. Regime change or disarmament - it would mean the same to Saddam.

Venezuela and North Korea have thrown a spanner in the American war-planning works. To prevent an Iraqi cut-off from roiling the markets, the US appealed to the Organisation of the Petroleum Exporting Countries for more oil. Opec was happy to do its bidding with oil prices at a two-year high and agreed to make good the shortfall from Venezuela. But Arabs do not want a war in their backyard, which is being seen as a US attempt to reshape the oil-rich region. Perhaps, as a sop, some effort is being made to convince Saddam that the game is up and that he should leave quietly.

But the fact remains that a resolution of Saddam's fate by abdication, by coup or by war will not end the oil game but will merely open another chapter about controlling that country's resources.

The writer is a journalist with BT's Foreign Desk

usinfo.state.gov

Q: What's the U.S. reaction to OPEC's decision to increase production, and how much the oil strike in Venezuela is impacting the U.S. economy right now?

MR. FLEISCHER: The President views OPEC's action to increase production, particularly given the protracted dispute in Venezuela, as a welcome step. It will increase global energy supplies and support global economic growth. The President views this as a welcome step.

I'm sorry, the second part of your question?

Q: How much the oil strike in Venezuela is impacting the U.S. economy right now?

MR. FLEISCHER: I think that's a question that I -- you can talk to any number of economists and get any number of different answers about it, particularly given the fact that OPEC is going to take this action that is, as I indicated, a welcome step that does address the situation in Venezuela.

Q: Ari, I have two questions. Just a follow-up on the OPEC decision. Is that enough? What they're doing is enough to fulfill the needs of the American people and U.S. market? And if the U.S. government had asked the Mexican government to sell the U.S. more oil in any event and -- well, in any event?

And my second question is in regard to a Mexican national. This is an article that was published in The New York Post, January the 4th. It's in regards to Salvador Martinez Gonzalez, who used to work at the White House as a supervisor of attendance information for social events. And he came to work to the White House with a fake U.S. passport. And I don't understand how this happened knowing how effective is the Secret Service when it comes to screening.

MR. FLEISCHER: Okay, on your first question about Venezuela, as I said, the President views this as a welcome step that OPEC has taken. It's a significant increase in production. Ultimately, the markets will be the determinant of whether or not it's sufficient or not. But obviously, the President views this as a welcome matter.

On the second issue, I have not had an opportunity yet to take a look into that. I'll try to do so and see if there's any additional information.

www.islam-online.net

Chavez has repeatedly warned the armed forces were ready to wage battle in defense of his social revolution CARACAS, January 13 (IslamOnline & News Agencies) - Venezuela's crippling strike entered its seventh week Monday, January 13, amid renewed violence and threats by President Hugo Chavez to beef up military efforts to end the protest that throttled the vital oil industry.

In what has become an almost daily routine, police and National Guard troops fired teargas and rubber bullets to disperse protesters in Caracas and the country's second largest city, Maracaibo, reported Agence France-Presse (AFP).

On Monday, it was Chavez supporters who were targeted by security forces, in Caracas after they hurled rocks at government opponents and in Maracaibo as they tried to stage a protest outside the governor's offices, according to television footage.

The pictures showed a group of people chanting pro-Chavez slogans and hurling rocks at a dozen government opponents who converged at a square in central Caracas for a brief ceremony before a statue of South American independence hero Simon Bolivar.

At least two people, including a National Guard member, were visibly injured by the rocks.

National Guard troops fired tear gas and rubber bullets to disperse the Chavez supporters.

On Sunday, January 12, military troops dispersed thousands of anti-government protesters who gathered outside a huge military complex in Caracas.

While some protesters Sunday taunted soldiers blocking access to the army installations, the opposition has been courting the armed forces and urging them to take sides, while Chavez insisted the military were firmly behind him.

Military Still Behind Chavez With both sides firmly entrenched in their positions, attention was closely focused on the military establishment, which to date has generally steered clear of political pronouncements on the volatile crisis.

Chavez has repeatedly warned the armed forces were ready to wage battle in defense of his self-styled social revolution threatened by the business, labor and political leaders heading the strike that was 43-days-old Monday.

Over the weekend, he announced elite army rangers were being deployed to patrol oil distribution centers and pipelines.

He also threatened to use troops to seize food processing plants idled by the strike and suggested sending soldiers with teachers' degrees to replace striking school staff.

On Sunday, Chavez warned that the armed forces would close any account they have with banks that side with the strike. Last week, several financial institutions closed for two days, and many banks work a half-day schedule in support of the protest.

Chavez had already used troops to seize from strikers installations of Petroleos de Venezuela (PDVSA), the giant state oil company that has been the main target of the strike launched on December 2 in a bid to force Chavez from office.

The embattled president has repeatedly rejected calls for his resignation or snap elections.

He also dismissed opposition plans for a February 2 referendum on his mandate, saying the constitution only allowed for a recall referendum in August, half-way through his six-year term.

His foes accuse the leftist-populist president of wrecking the economy and dividing the country. Chavez, in turn, accuses his opponents of sabotage, for choking the oil industry.

With shipments from the world's fifth largest oil exporter reduced to a trickle by the strike, OPEC agreed Sunday to increase oil production by 1.5 million barrels per day in a bid to curb a surge in prices.

usinfo.state.gov 13 January 2003

(White House Report) (830)

BUSH HAS PUT NO "TIMETABLE" ON U.N. INSPECTIONS IN IRAQ

President Bush "has not put a timetable" on how long the United Nations weapons inspections in Iraq should continue, White House Press Secretary Ari Fleischer told reporters January 13, following news reports that the inspectors said their work could take as long as a year.

"The President has not put any type of artificial timetable on how long he believes is necessary for Saddam Hussein to prove to the world that he's going to comply," with United Nations Security Council demands that Iraq disarms itself of any weapons of mass destruction, Fleischer said.

Bush "has made it very clear that the role of the inspectors is a very important part of this process. The inspectors need to be in Iraq to do the job that the world has asked them to do. And they're in the middle of their work," said Fleischer.

The inspection process, he pointed out, "included a series of dates that the inspectors would report back" to the U.N. Security Council. "We're not even through those dates yet. An important one is coming up January 27th. So, I think, frankly, other than it's a slow news day, nothing really has changed about the timing in Iraq," Fleischer said.

When asked if the U.S. military troops being sent to the Gulf could be waiting there as long as a year, Fleischer responded that "the President has not put a timetable on it. And if the President hasn't put a timetable on it, I certainly won't."

WHITE HOUSE SAYS ITS POLICY ON NORTH KOREA CONSISTENT

Fleischer reconfirmed the U.S. position that North Korea must comply with its international obligations before progress can be made on other fronts.

He noted a January 13 statement at a press conference in Seoul by U.S. Assistant Secretary of State James Kelly, in which Kelly said "Once we get beyond nuclear weapons, there may be opportunities with the U.S., with private investors, with other countries to help North Korea in the energy area."

"So the ball remains in North Korea's court. They know what they need to do and they need to take that action," Fleischer said.

"North Korea wants to take the world through its blackmail play book, and we won't play. It's up to North Korea to come back into international compliance with their obligations. If and when they do that, then the world, of course, would make clear to North Korea that ... the world was prepared to engage," Fleischer said.

"(W)hat we've always said is that North Korea needs to come back into compliance with international obligations. If they do not come back into compliance with international obligations, they'll continue to isolate themselves. And that begins with North Korea's dismantlement of its programs for the development of nuclear weapons."

The United States, the Press Secretary added, "is prepared to talk to North Korea. And the message is simple, that North Korea needs to take action to disarm.... There is a perfect consistency here. Mr. Kelly said that once we get beyond their nuclear weapons then there may be opportunities in the front in the area of energy.

"But as I made clear before, I said the United States is willing to talk, not negotiate. We are willing to talk about North Korea dismantling its facilities and coming back into international compliance with their obligations. Having done that, once they do that, then, at that point, North Korea can resume its place as a sovereign nation that is respected and treated by other nations in a manner consistent with their resuming those international obligations," Fleischer said.

BUSH VIEWS AS WELCOME STEP OPEC DECISION TO INCREASE PRODUCTION

Asked to give the Bush administration reaction to the Organization of Petroleum Exporting Countries' decision to increase production, Fleischer said President Bush "views OPEC's action to increase production, particularly given the protracted dispute in Venezuela, as a welcome step. It will increase global energy supplies and support global economic growth. The President views this as a welcome step."

Asked how much the oil strike in Venezuela is affecting the U.S. economy, Fleischer said "you can talk to any number of economists and get any number of different answers about it, particularly given the fact that OPEC is going to take this action that is, as I indicated, a welcome step that does address the situation in Venezuela."

"Ultimately, the markets will be the determinant of whether or not it's sufficient. But obviously, the President views this as a welcome matter," Fleischer said.

The Organization of Petroleum Exporting Countries agreed January 12 to lift output by 7 percent beginning February 1 to compensate in part for an estimated two-million-barrel-a-day Venezuela output reduction because of the strike.

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)