money.cnn.com January 21, 2003: 9:58 AM EST

LONDON (Reuters) - World oil prices hit two-year highs Tuesday as the United States urged the U.N. Security Council not to shirk difficult choices and a military buildup in the Gulf fueled speculation that war is looming.

U.S. light crude in electronic trade rose 44 cents to $34.35 a barrel, its highest since December 2000. London Brent blend added 37 cents to $31.02 a barrel.

Dealers said a seven-week-old general strike in Venezuela that is sapping oil exports and the killing in Kuwait of a U.S. Defense Department employee near a U.S. military base also helped pull prices higher.

"The markets are still very edgy with both Venezuela and Iraq remaining the key issues against a backdrop of increasing demand and falling inventory," said Australian-based independent oil analyst Simon Games-Thomas.

"Prices appear destined to trade higher given the current set of drivers and $35 beckons exorably in the short term," Games-Thomas said.

Secretary of State Colin Powell, addressing fellow Security Council members Monday, said "We must not shrink from our duties and our responsibilities when the material comes before us next week. We cannot be shocked into impotence because we are afraid of the difficult choices that are ahead of us."

Chief U.N. weapons inspector Hans Blix will deliver a major report on Iraqi weapons to the United Nations next Monday and the Security Council evaluates the report on Jan. 29.

Blix spoke to reporters in Athens on Monday after a two-day visit to Baghdad. "The Iraqis became aware that the world is disappointed with their declaration," he said of Iraq's 12,000 page dossier.

"They have to create confidence in the world that they don't have weapons of mass destruction."

Iraq said Monday it would offer the inspectors more help and would form its own teams to search for any banned weapons.

Blix said Baghdad had refused to allow U2 reconnaissance flights over its territory. "They put up a number of conditions that were not acceptable to us," he said.

Iraq wants to accompany the planes with its own aircraft, but would be prevented from doing so if the weapons inspectors flew to the north or south of the country because of no-fly zones patrolled by U.S. and British planes since 1991.

Britain said Monday it was mobilizing some 30,000 troops to join the tens of thousands of U.S. troops already in the Gulf. Venezuela strike in day 51

In Venezuela, foes of President Hugo Chavez extended a nationwide strike into the 51st day, aiming to force the leftist leader to resign and call immediate elections.

The strike has strangled oil supplies from the world's fifth-largest exporter, which accounts for about 13 percent of U.S. petroleum imports.

Exports of only 500,000 bpd, a fifth of normal flows, have cut U.S. commercial crude stockpiles close to 26-year lows.  

www.bayarea.com

Microsoft is temporarily closing its office in Venezuela out of concern for security as a 50-day national strike has sparked rioting.

Microsoft made the decision to ensure the safety of the 85 sales and support workers in its Caracas office, said Ricardo Adame, a Microsoft spokesman.

Foreign companies including Ford Motor, Royal Dutch/Shell Group and Coca-Cola earlier shut down operations and offices in Venezuela amid the strike aimed at deposing President Hugo Chavez began Dec. 2.

www.iht.com Judith Rehak International Herald Tribune January 20, 2003   A new populist president in Brazil, a landslide victory for an Islamic-based party in Turkey, a terrorist bombing in Indonesia, plus tensions over Iraq and nuclear saber-rattling from North Korea: Even by emerging-markets measures, the fourth quarter was unusually eventful. Nevertheless, many emerging-market funds beat their developed-country counterparts, and a few with nerves strong enough to take advantage of the turbulence turned in stellar performances. On the relatively calm side, oil and banks proved to be a profitable combination for funds that invest in Europe’s emerging markets. The Luxembourg-domiciled Pictet Eastern European Fund rose 17.4 percent, reinforced by stakes in Russian energy producers as crude oil prices spiked at $32 a barrel. Another winner for the fund was Komercni Banka AS of the Czech Republic. ‘‘The main story was that it was overprovisioned for nonperforming loans, which then did better than expected,’’ said Jack Arnoff, co-manager of the portfolio. The excess cash will now raise the bank’s book value. But the fund’s performance got an extra boost from a nimble bet on Turkey’s notoriously volatile stock market. Managers took a position before the market surged 50 percent leading up to the November elections, and then took profits before it tumbled back. ‘‘That differentiated us from our competitors, because most of them don’t invest in Turkey,’’ Arnoff said. By comparison, offerings that specialize in Asia’s smaller economies had a weak quarter. The Matthews Pacific Tiger Fund was the top U.S. offering, up 6.7 percent, compared with 2.8 percent for the sector. Mark Headley, who co-manages the growth-oriented portfolio of some 50 stocks, said that while the focus of the fund is not technology, much of its fourth-quarter performance was tech-driven. ‘‘There’s a tremendous outsourcing story going on in Asia,’’ Headley said, citing one example: Hon Hai Precision Industry Co., a Taiwan engineering company that designs everything from computers to VCRs and builds them in China. Another winner was Internet Auction Co., a South Korean company that is a dual play on domestic consumer spending and technology. The stock leaped more than 50 percent in the quarter. The company is half owned by eBay Inc., the U.S. online auction leader. But Headley also took a calculated risk in Indonesia. Already a shareholder in Astra International TBK, the big auto assembler and distributor, he bought more when the stock market plunged after the October terrorist attacks in Bali. ‘‘I don’t think Bali was about domestic problems,’’ he said. He was rewarded when Astra re bounded 85 percent from its post-attack low. The fourth quarter also showed how misleading a three-month performance can be in these unpredictable markets. Once Brazil’s political situation calmed, Latin American equity funds rebounded to the top performing category, gaining an average 16.8 percent. But that was not enough to wipe out their losses in a disastrous year when they were also hammered by Argentina’s debt default and, more recently, by political chaos and the general strike in Venezuela. But interestingly, Brazil and Columbia proved to be a catalyst for the ING II Emerging Market Debt Fund, which soared 21 percent in dollar terms in a category that beat most equity offerings for the quarter and the year. With a hefty 17 percent bet in Brazil, the fund was well positioned once the bond market began to recover. ‘‘We added before the election but also after as we became more encouraged,’’ said Rob Drijkoningen, the portfolio manager. To illustrate what fueled the fund’s outperformance, he noted that Brazilian Brady bonds, trading below 50 cents on the dollar in mid-October, are now above 70 cents. ‘‘And that’s on top of a current coupon of 8 percent,’’ he said. ____________________________ For more information: ING II EMERGING MARKETS DEBT FUND. Web site: www.ingfunds.com MATTHEWS PACIFIC TIGER FUND. Web site: www.matthewsfunds.com PICTET EASTERN EUROPEAN FUND. Web site: www.pictetfunds.com

abcnews.go.com

— LONDON (Reuters) - World oil prices surged to fresh two-year highs on Tuesday as the United States urged the U.N. Security Council not to shirk difficult choices and a military buildup in the Gulf fueled speculation that war is looming.

U.S. light crude in electronic trade rose 61 cents to $34.52 a barrel, its highest since December 2000. London Brent blend added 53 cents to $31.18 a barrel.

Dealers said a seven-week-old general strike in Venezuela that is sapping oil exports and the killing in Kuwait of a Defense Department employee near a U.S. military base also helped pull prices higher.

"The markets are still very edgy with both Venezuela and Iraq remaining the key issues against a backdrop of increasing demand and falling inventory," said Australian-based independent oil analyst Simon Games-Thomas.

"Prices appear destined to trade higher given the current set of drivers and $35 beckons inexorably in the short term," Games-Thomas said.

Secretary of State Colin Powell, addressing fellow Security Council members on Monday said: "We must not shrink from our duties and our responsibilities when the material comes before us next week. We cannot be shocked into impotence because we are afraid of the difficult choices that are ahead of us."

Chief U.N. weapons inspector Hans Blix will deliver a major report on Iraqi weapons to the United Nations next Monday and the Security Council evaluates the report on January 29.

Blix spoke to reporters in Athens on Monday after a two-day visit to Baghdad. "The Iraqis became aware that the world is disappointed with their declaration," he said of Iraq's 12,000 page dossier.

"They have to create confidence in the world that they don't have weapons of mass destruction."

Iraq said on Monday it would offer the inspectors more help and would form its own teams to search for any banned weapons.

Blix said that Baghdad had refused to allow U2 reconnaissance flights over its territory. "They put up a number of conditions that were not acceptable to us," he said.

Iraq wants to accompany the planes with its own aircraft, but would be prevented from doing so if the weapons inspectors flew to the north or south of the country because of no-fly zones patrolled by U.S. and British planes since 1991.

Britain said on Monday it was mobilizing some 30,000 troops to join the tens of thousands of U.S. troops already in the Gulf.

STRIKE, DAY 51

In Venezuela, foes of President Hugo Chavez extended a nationwide strike into the 51st day, aiming to force the leftist leader to resign and call immediate elections.

The strike has strangled oil supplies from the world's fifth-largest exporter, which accounts for about 13 percent of U.S. petroleum imports.

Exports of only 500,000 bpd, a fifth of normal flows, have cut U.S. commercial crude stockpiles close to 26-year lows.

By ALEXANDRA OLSON | Associated Press 01/21/2003

CARACAS, Venezuela — One person was killed and dozens were injured in bloody clashes between foes and followers of President Hugo Chavez. The violence overshadowed efforts by former President Jimmy Carter to help resolve Venezuela's crisis and end a strike that has crippled the world's fifth largest oil exporter.

One man died and 27 were injured Monday when gunfire erupted as Chavez supporters confronted opposition marchers in Charallave, a town 19 miles (30 kilometers) south of Caracas. Both sides threw rocks, bottles and sticks at each other as police struggled to keep them apart, but it was not clear who fired the live ammunition.

Opposition leaders blamed the violence on the government, saying Chavez sympathizers attacked their march.

"The only one responsible is the government," said Juan Fernandez, an executive fired from the state oil monopoly, Petroleos de Venezuela S.A., for leading the strike.

Carter, who won the Nobel Peace Prize in October, attended negotiations Monday between the government and opposition and met separately with Chavez and strike leaders. His Atlanta-based Carter Center, the Organization of American States and the United Nations are sponsoring the talks.

Business leaders, labor unions and opposition parties launched the strike on Dec. 2 to demand that Chavez resign or call early elections. After two months of negotiations, the two sides seem little closer to an agreement.

Chavez threatened Sunday to walk out of talks, accusing the opposition of trying to topple him even as they negotiated.

Strike leader Carlos Ortega said opponents would continue negotiating, but called Chavez undemocratic and said he would never accept a vote on his rule.

Ortega, president of the 1-million member Confederation of Venezuelan Workers, said Gaviria and Carter should "convince themselves once and for all that we are dealing with a regime that is not democratic, and that as long as Chavez stays in power there is no possibility of holding elections."

The National Elections Council, accepting an opposition petition, agreed to organize a Feb. 2 nonbinding referendum asking citizens whether Chavez should step down.

Chavez says the vote would be unconstitutional and his supporters have challenged it in the Supreme Court.

The strike has slashed Venezuela's oil production by more than two-thirds and caused shortages of gasoline, food and drinking water. It has cost Venezuela $4 billion, according to the government, and contributed to the plummeting of the bolivar currency.

Six countries - Brazil, Chile, Mexico, Portugal, Spain and the United States - began an initiative called "Friends of Venezuela" to help end the crisis. Chavez warned the six nations his government will not allow interference in domestic affairs.

The 48-year-old Chavez was elected in 1998 and re-elected in 2000 on promises to redistribute the country's vast oil wealth among the poor majority.

His opponents accusing him of steering the economy into recession with leftist policies and running roughshod over democratic institutions.