money.cnn.com January 20, 2003: 6:03 AM EST

LONDON (Reuters) - Oil prices ticked higher Monday as top U.N. weapons inspectors spent a second day in Iraq and the United States said time was running out for Baghdad to prove compliance with disarmament resolutions.

London Brent blend in early trade added 19 cents to $30.73 a barrel. U.S. crude, closed on Monday for Martin Luther King day, set a new two-year high of $34 a barrel on Friday.

Washington on Sunday issued one of its clearest warnings yet to Iraqi President Saddam Hussein that non-cooperation with U.N. inspectors could be deemed a trigger for a war in the absence of a "smoking gun," or hard evidence of weapons of mass destruction -- and that a decision could be just weeks away.

"The test is, is Saddam Hussein cooperating?" said U.S. Defense Secretary Donald Rumsfeld on weekend television. "He's not doing that."

Rumsfeld, presiding over a huge U.S. military build-up of warplanes, ships and tens of thousands of troops in the oil-rich Gulf region, said a final conclusion on Iraqi cooperation could be made "in a matter of weeks, not in months or years."

"Of course Rumsfeld is a hawk, but if the test of compliance is cooperation then clearly Saddam is not cooperating," said oil broker Nauman Barakat of Fimat International Banque.

Chief U.N. weapons inspector Hans Blix and Mohammad ElBaradei, head of the U.N. nuclear watchdog, say there are big gaps in Baghdad's arms declarations, and are demanding quick answers before they report to the Security Council on Jan. 27 on Iraqi compliance.

"I think (the Iraqis) have said that there are still certain areas they are ready to provide more information. I think that in other areas they said they are ready to reconsider their position," ElBaradei said in an interview with Reuters.

"What we tried to do today at this meeting is to impress on the Iraqi authorities that the time is running out."

U.S. national security adviser Condoleezza Rice, on U.S. weekend television, said: "Clearly the 27th is an important date ... (It) probably marks the start of a last phase of determining whether the Iraqis have fully complied." Exile talk dismissed

From Beirut, a special envoy of Saddam's dismissed talk of the Iraqi president going into exile.

"As we have said before, we reiterate now that this is merely nonsense and one of the tactics of psychological warfare," said Ali Hassan al-Majeed, a member of the Revolutionary Command Council and a cousin of Saddam.

Rumsfeld said he hoped Saddam would choose exile, but he was unsure of the prospect. "There is at least a possibility," he said. "His neighboring states are in a process now of trying to avoid a conflict there by having him leave the country."

Saddam remained defiant.

"After putting our faith in God, victory is absolutely assured. We don't see it on the horizon, rather it is in our grasp and inside our chests," he told a group of army officers.

Oil traders said Venezuela's general strike, now in its seventh week, also was keeping the heat under crude prices.

Venezuelan President Hugo Chavez said Sunday he was "winning the oil war," restoring crude flows and restarting ports and refineries. He said oil output which fell to 500,000 barrels per day this month was now at 1.2 million bpd, versus three million bpd normally.

Striking oil workers said that production was only half the volume given by Chavez.

Leading OPEC producer Saudi Arabia is moving to fill the gap by raising output by between 500,000 and one million barrels a day, industry sources said.

Riyadh is opening up the taps and by February could be pumping nine million bpd, up from eight million recently, the industry sources said Sunday.

"The Saudis are cranking it up. The message is that there is a big increase on the way," said one senior Western oil executive.  

www.cnn.com From Elise Labott CNN Monday, January 20, 2003 Posted: 2:56 AM EST (0756 GMT)

NEW YORK (CNN) -- U.S. Secretary of State Colin Powell met Sunday with the foreign ministers of France, Mexico and China, addressing what the next steps should be with Iraq and the impending report from U.N. weapons inspectors.

"He is making the point that the issue is disarmament and without Iraqi cooperation, the inspections process is not going to succeed," a senior State Department official said.

After the January 27 report from chief U.N. weapons inspector Hans Blix, the official said, the discussion will entail "how to further the question of disarmament." The Security Council is expected to meet January 29 to further discuss the inspectors' report, he said.

Though several U.S. allies on the council have said publicly the inspectors need more time, the official said that during the meetings "they all agreed Iraq is not cooperating."

"Everyone agrees Iraq is not meeting the terms of [U.N. Security Council resolution] 1441," the official said, noting previous comments by Blix and others about "passive" or "superficial" cooperation by Iraq.

Powell plans more meetings Monday on the sidelines of a Security Council meeting on combating terrorism. In addition to Iraq, he will be discussing the crises in North Korea and Venezuela.

The United States faces growing opposition from several council members, including France, Russia and Germany, which favor giving inspectors more time. Even British Prime Minister Tony Blair, the Bush administration's closest ally in its effort against Iraq, has suggested inspections might be allowed to continue.

But Powell was expected to make the argument against that scenario, State Department officials said, because Baghdad's continued lack of cooperation with inspectors thus far is sufficient proof that Iraq is in material breach of U.N. resolutions and that military action is justifiable.

"Saddam is not doing what he is supposed to be doing, which is disarming," one senior State Department official said, pointing to chemical warheads found by U.N. inspectors last week. "It's not just doors opening, it's not even that inspectors have found things. Is Iraq disarming? No, it is not."

Officials say that while the United States may have no "smoking gun" to prove Iraq has amassed weapons of mass destruction, Iraq's unwillingness to cooperate is far more important.

"It's easy for this process to get away from us," another official said. "Everyone keeps putting the onus on us to find a smoking gun, but the onus is on Iraq. Iraq is on parole, and it has to show it is ready to rehabilitate itself."

This official said that Powell will push council members to focus on securing more intrusive inspections to "test Iraq's due diligence," including certain statements made by Iraqis about their willingness to cooperate and their previous weapons declarations.

This official likened Iraq's cooperation to "opening yourself up to an audit."

"If you have nothing to hide, you do everything you can to prove you are innocent," the official said. "We have yet to see this type of cooperation."

Although Powell said earlier that a "convincing case" would exist by the end of the month that Iraq was not cooperating, the official acknowledged the United States could give inspectors more time.

"We could give them (Iraqi officials) some more rope to hang themselves," this official said, adding the time frame could last until the end of February.

www.afxpress.com Page Last update 01:05:02 GMT

CARACAS (AFX) - Daily crude production has risen to 2 mln barrels and the government has regained control of the country's main oil installations, said Ali Rodriguez, president of state-owned Petroleos de Venezuela SA.

New managers, supervisors and workers are now in place to run the sites, daily El Nacional quoted him as saying on its website.

President Hugo Chavez said Friday that production would be ramped up to 2 mln bpd within a month.

Venezuelan oil output, normally around 2.8 mln bpd, has been brought close to standstill in recent weeks by a long-running strike.

Strike organisers have consistently estimated daily production levels at far below the figures the government has claimed.

newsdesk@afxnews.com

www.voanews.com VOA News 20 Jan 2003, 08:06 UTC

Venezuela's President Hugo Chavez has threatened to order more raids on private food producers taking part in a seven-week-old strike aimed at driving him from power.

The strike has created severe shortages of many necessities in Venezuela, including milk, bottled water, flour, and gasoline.

On Friday, government troops seized bottles of water and soft drinks from two bottling plants and distributed them to the public. And Mr. Chavez warned Sunday he will again send soldiers to raid the warehouses of private companies refusing to distribute their goods to the public.

President Chavez also said the government is winning what he called the oil war with striking workers, which has crippled the country's oil industry. He said output was recovering, but a strike leader said the industry remains paralyzed. Prior to the strike Venezuela was the world's fifth-largest oil exporter.

Meanwhile, Mr. Chavez has suggested the government might leave talks sponsored by the Organization of American States, if the opposition continues to seek his ouster through what he calls unconstitutional means.

Opposition leaders accuse Mr. Chavez of leading Venezuela to ruin with leftist economic policies that mirror the Cuban system.

In another development, President Chavez named two generals to key posts. He appointed General Jorge Garcia Carneiro, a close ally, to command the country's army and General Lucas Rincon as his new interior minister.