seattlepi.nwsource.com Wednesday, January 22, 2003 · Last updated 8:27 p.m. PT By CHRISTOPHER TOOTHAKER ASSOCIATED PRESS WRITER   Finance Minister Tobias Nobrega poses after announcing in a televised address that a new foreign exchange policy will be revealed in five business days, at Miraflores palace in Caracas, Venezuela, Wednesday, Jan. 22, 2003. Venezuela's central bank suspended its foreign exchange trading for a week starting Wednesday to try to keep the country's currency, the bolivar, from further plummeting in the fallout of a 52-day-old strike that has crippled oil exports. (AP Photo/Juan Carlos Solorzano, Miraflores Press, HO)

CARACAS, Venezuela -- The government plans to impose foreign exchange controls to keep the Venezuelan currency from plummeting further amid a general strike that has crippled the economy.

President Hugo Chavez did not elaborate Wednesday on exactly what limits the government would impose on currency trade.

"We've made a decision that we didn't want to take," Chavez said. "But the situation is serious and there is a persistent speculative attack against the national currency."

The decision means that Venezuelans will be limited in the amount of foreign currencies they can buy per day. The decision is meant to stem a run on the bolivar, which has lost 25 percent of its value this year, atop a 46 percent decline in 2002.

Exchange controls will help protect the bolivar and the government's depleting foreign reserves. But it will hurt businesses that need dollars to pay for imported goods.

"This restriction is going to hurt businesses, which depend heavily on imports, especially industry," said Albis Munoz, vice president of the Fedecamaras business chamber.

Venezuela's economy largely relies on imports - about 50 percent of food is imported. Soft drink producers buy sugar abroad, newspapers import paper pulp and the automobile industry depends on foreign-made parts to keep assembly lines moving.

Ruling party member Rodrigo Cabezas, president of the legislature's finance committee, said any exchange controls would be temporary. The last time Venezuela imposed foreign exchange controls was in 1995 during an economic crisis. Those controls lasted two years.

Cabezas said a team of economists may fix a rate of 1,500 bolivars to the dollar. The fixed rate could go into effect next week. Before Chavez's announcement, the government had allowed the bolivar to float.

The bolivar reached a record low of 1,853 to the dollar Tuesday. Traders said the Central Bank has been injecting up to $70 million a day to protect the currency.

Business leaders, labor unions and opposition parties launched a strike on Dec. 2 to demand that Chavez resign or call early elections. The strike has slashed oil production by more than two-thirds.

www.sfgate.com ALEXANDRA OLSON, Associated Press Writer Wednesday, January 22, 2003

(01-22) 19:18 PST CARACAS, Venezuela (AP) --

In a setback for opposition efforts to oust Hugo Chavez, the Supreme Court on Wednesday indefinitely postponed a nationwide referendum that would have asked Venezuelans whether the president should quit.

Hours later, Chavez moved to bolster Venezuela's strike-damaged economy, saying he would impose foreign exchange controls to prevent Venezuela's currency from further plummeting. The Central Bank had suspended foreign currency trading earlier in the day.

The high court decision came just 11 days before the scheduled vote. The decision stunned the opposition the opposition that delivered 2 million signatures in November to demand the referendum and backed it up with a strike that has lasted 52 days. It was also to pay for the vote because Chavez's government refused to do so.

Opposition leaders reacted angrily to the court's decision, contending that Chavez's government was acting through the court to cling to power despite international pressure to find an electoral solution to end Venezuela's political crisis.

Government leaders rejected the claim, noting that the opposition has embraced past court decisions against Chavez -- including a ruling clearing four high-ranking officers of rebellion charges in a brief April coup.

Justices ruled that no national vote -- a referendum or election -- can be held until it decides whether elections council member Leonardo Pizani, who helped organize the referendum, is eligible to serve on the panel.

Pizani had resigned from the council in 2000, only to rejoin last November. He insisted he could rejoin because Congress, by law, had failed to formally accept his resignation.

Pro-Chavez lawmakers filed suit arguing that Pizani's two-year absence from the council made his resignation legally binding.

"This goes beyond my appointment, this is about politics," Pizani said after the ruling.

Chavez opponents vowed to step up street protests -- a stark contrast to hopes raised Tuesday by Nobel Peace Prize laureate Jimmy Carter, who presented both sides with electoral proposals to end the crisis.

"Today there is a dictatorship in Venezuela," said lawmaker Julio Borges, whose First Justice party led the petition drive in November calling for the referendum.

"The government doesn't care about the people's will," Borges said. "It only cares about staying in power."

Vice President Jose Vicente Rangel described the court decision as crucial. "I hope all sectors of the country will respect and adhere to it," he said.

The referendum wouldn't be binding, but opponents hoped that a poor showing would increase political pressure on Chavez to quit.

Chavez argued that Venezuela's constitution allows a binding referendum midway through his six-year term, or August. Opponents cited a constitutional clause that allows citizens to petition for referendums on "matters of national importance" at any time.

The strike has slashed oil production in the world's fifth-largest petroleum exporter by more than two-thirds -- crippling an industry that provides half of government revenue and 70 percent of export revenue.

Chavez, speaking during a military ceremony, said he would impose the new currency controls by early next week. The move will limit the amount of U.S. dollars or other currencies Venezuelans can accumulate. The move is aimed at protecting the bolivar currency, which has lost 25 percent of its value this year. Chavez did not provide further details on the new policy.

Though the move could strengthen the local currency, it could also increase costs for businesses that depend on dollars to pay for imported goods. Venezuela's economy is highly dependent on imports -- about 50 percent of food is imported.

Meanwhile, Carter proposed two plans in Caracas on Tuesday.

The first calls for an end to the strike in exchange for a government pledge to amend Venezuela's constitution to shorten presidential and legislative terms of office and allow early elections.

The second plan calls for both sides to prepare for a binding referendum on Chavez's rule in August.

Diplomats from Brazil, Chile, Mexico, Portugal, Spain and the United States were to meet at the Organization of American States in Washington on Friday to discuss Carter's proposals. The six countries, called the "Friends of Venezuela," are trying to strengthen mediation efforts by OAS Secretary General Cesar Gaviria.

Chavez was elected in 1998 and re-elected in 2000 on promises to help the country's poor majority, but he has failed to remedy the nation's economic ills.

Opponents blame Chavez's leftist policies for an estimated 8 percent economic contraction in 2002. Chavez blames it on opposition attempts to destabilize the country.

www.guardian.co.uk Terry Macalister, Ewen MacAskill, Rory McCarthy in Baghdad and Nick Paton-Walsh in Moscow Thursday January 23, 2003 The Guardian

One of the most popular themes on the placards of anti-war demonstrators across the US and Europe is that the looming confrontation is primarily about oil. US and British ministers dismiss such a charge as the stuff of conspiracy theorists, and instead argue that the Iraqi president, Saddam Hussein, has to be dealt with for one reason: the threat posed by weapons of mass destruction.

And, yet, western powers have been fighting over Iraq's "black gold" for decades. Travelling through the country, it is immediately obvious why this is such a great prize in energy terms.

Around Mosul in the north, flares from oil wells can be seen at regular intervals in the otherwise empty grasslands; even in the centre of the country, in Baghdad, the skyline is lit by the al-Dohra oil refinery; and further south, in the desert scrubland round Basra, there is a huge concentration of wells.

Iraq has the second biggest known oil reserves in the world, after Saudi Arabia. But its facilities have been starved of investment over the last few decades, partly because of war and partly because of sanctions. The vast al-Dohra facility is a symbol of all that is wrong. In an advanced state of decay, rusting pipes link a series of large, sand-coloured storage tanks, almost every one of which is crudely patched with sheets of steel.

At present Iraq exports around 1.5m barrels a day but energy experts say this could be increased to 6m barrels within five years after reinvestment. The US needs access to new energy reserves. American industry and motorists are guzzling gasoline at a rate that easily outstrips the rest of the world while domestic reserves are running out at a time when demand is set to leap.

The US energy department frightened politicians with a study in 2001 known as the Cheney report after the former head of Halliburton oil services group, now US vice-president, who wrote it. He predicted that imported oil would need to rise from 10.4 million barrels a day at present to 16.7 million barrels a day by 2020.

The report spelled out the US dependence on a stable energy market and the need for a foreign policy that would protect America's energy supply. "In a global energy marketplace, US energy and economic security are directly linked not only to our domestic and international energy supplies, but to those of our trading partners as well," it said. "A significant disruption in world oil supplies could adversely affect our economy and/or ability to promote foreign and economic policy objectives, regardless of the level of US dependence on oil imports."

George Bush, like Mr Cheney, is a former oil man, as are many of his close staff, so they need no lessons on how the energy world works. As politicians, they also know that their voters' commitment to cheap and available petrol for their car is seen as an inalienable right not far short of bearing arms.

Traditionally, America looked to Saudi Arabia and Venezuela for its crude supplies. But since the September 11 terrorist attacks, carried out in the main by Saudi nationals, the former important Middle East ally has been deemed unreliable while political turmoil in Venezuela has virtually halted exports to the US.

Washington has been wooing Russia and African nations to secure future supplies but there is nothing like the ultra-cheap-to-produce reserves in Iraq sitting just below the desert sands.

Professor Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam and a visiting professor at the London School of Economics, rejected the view that oil was the main driving force behind the current Iraq frenzy. "Its not all about oil. There are other factors such as US fears about weapons of mass destruction, revenge for earlier failures and the fact they believe Iraq has not behaved properly towards the US for 20 years," he said. "My own view is that an attack will lead to destruction of Iraqi oilfields as happened in Kuwait and there could be severe oil market problems in the short term. Longer-term, Russia and France have pre-emptive rights for deals done or money owned by Iraq but clearly the US will get in on the act [on redeveloping Iraqi oilfields]."

Paul Slater, who owned and ran a tanker fleet hired out to Shell and is a leading figure in the independent tanker owners association (Intertanko), is less certain. "I think oil is a major issue which cannot be left out of the equation although whether it is the major driver I don't know."

It is not just wild-eyed western peaceniks that believe oil is at the centre - or close to the centre - of the pending conflict. It is quite a commonly held view even in the conservative business world but few are willing to express such things publicly.

Fadel Gheit, a former Mobil chemical engineer and now an investment specialist with New York brokerage firm Fahnestock & Co, told 50 of the largest pension funds and financial investors in America before Christmas that the expected war was "all about oil" and that the global fight against terrorism was just "camouflage" to mask the real purpose.

Later he told the Guardian: "The Americans have nothing against the people of Iraq but our way of life is dependent on 20m barrels a day and half of it has to be imported. We are like a patient on oil dialysis. It's a matter of life and death. The smart people [in Washington] all know this but its not generally advertised on the kind of shows that most people watch: MTV and soap operas."

Mr Gheit said a strike against Iraq has become vital in the eyes of Washington because politicians and security chiefs fear that Saudi Arabia, the traditional provider of US oil, is a political "powder keg" that is going to explode from within. "Of the 22m people in Saudi Arabia, half are under the age of 25 and half of them have no jobs. Many want to see the end of the ruling royal family and whether it takes five months or five years, their days are numbered. If Saudi Arabia fell into the hands of Muslim fundamentalists and the exports were stopped, there is not enough spare oil anywhere else to make up the shortfall."

But Dr Charles Tripp, head of politics at the School of Oriental and African Studies, argues that the idea that oilfields need to be physically seized in order to be controlled is outdated. "Oil is a part of this," said Dr Tripp. "But it is as much to do with asserting American power."

Oil was key factor in the first Gulf war, along with protecting the sovereignty of a United Nations member. This time round "oil" is a word that politicians and officials in both Washington and London are almost afraid to speak, fearful of how it will play in the Arab world.

An independent working group part-sponsored by the Council on Foreign Relations has just handed over a report to Mr Bush entitled Guilding Principles for US Post-Conflict Policy in Iraq. It argues: "Iraqis have the capability to manage the future direction of their oil industry. A heavy American hand will only convince them, and the rest of the world, that the operation against Iraq was undertaken for imperialist, rather than disarmament reasons. It is in America's interest to discourage such misconceptions."

The international oil companies are already circling. The US and British accuse the Russians and especially the French of playing dangerous games with Iraq, keeping in with Baghdad in the hope of securing favourable oil contracts.

The French foreign ministry is infuriated by the suggestion. One French diplomat challenged journalists to look at what was really happening and insisted that they would find it was US companies that were making the running to secure a share of Iraqi oil.

Senior oil executives generally want to avoid talking publicly about the issue but privately they say it is "rubbish" to suggest that they need Iraq so much that they would support a war. Mark Moody-Stuart, a director of Shell and its former chairman went further, telling the Guardian that a military strike would unhinge the Middle East and was therefore a "recipe for disaster".

So what do the people at the centre of the impending war think? "Our oil is the main reason America wants to attack Iraq," said Ali al-Rawi, head of the economics department at Baghdad University. "They want to control our oil and control price and production levels. They know the future oil resources for the world will continue to come from this area for many years."

US administration's foot on the gas

George W Bush Unsuccessful Texas oilman. His prospecting company, Arbusto, was on the point of going bankrupt when it was bought out by another company, Spectrum, which in turn was bought out by another oil firm, Harken, which kept Bush on the board for his contacts, primarily with his father.

Dick Cheney Before becoming vice-president, Cheney, below, was the chief executive of Halliburton, the world's largest oilfield services company. Halliburton does not drill for oil but it sells everything to the corporations that do the drilling. It also provides housing and services for the US military.

Condoleezza Rice Before coming to the White House the national security adviser sat on the board of Chevron. They were clearly happy with her strategic advice and Bush family contacts as they named an oil tanker after her.

Don Evans Old Bush friend from Texas oil days. Evans stayed in the oil business. Before becoming commerce secretary, he was the chairman of Tom Brown Inc, a $1.2bn oil and gas company based in Denver, and also sat on the board of TMBR/Sharp Drilling, an oil and gas drilling operation.

Gale Norton Environmentalists objected to her appointment as interior secretary because of her oil links. As a lawyer she had represented Delta Petroleum. She also ran an organisation called the Coalition of Republican Environmental Advocates, co-funded by BP Amoco.

· Source: Centre for Responsive Politics

www.guardian.co.uk David Teather in New York Thursday January 23, 2003 The Guardian

Venezuela yesterday suspended foreign exchange trading in an effort to stem the exodus of capital and prevent its crippled currency, the bolivar, from falling further.

The central bank has closed the markets for five days amid the economic and political turmoil that has gripped the Latin American country for the past few months. The bolivar has declined by 25% so far this year after losing almost half its value during 2002.

Venezuela has been brought to a grinding halt by a seven-week old general strike aimed at forcing President Hugo Chavez into resigning or calling early elections.

US-owned multinational corporations including Microsoft and Ford have begun to close local offices and pull people out of the country as street protests have turned into often violent clashes between opponents and supporters of the president. One person died and more than 20 were injured on Monday.

The central bank has been trying to prop up the currency, and Venezuela's foreign reserves are falling fast, currently standing at just over $11bn.

The strike has caused oil production in Venezuela to dry up - before the stoppage, the country was the world's fifth largest oil exporter; the country has lost more than $2bn in sales. The state-owned oil industry provides 70% of export revenue and half the government's income.

There are growing food and fuel shortages and inflation is rampant.

Opposition leaders called the strike, accusing President Chavez of tilting the country into recession.

President Chavez has refused to bend to the demands and maintained that under the constitution a referendum on his leadership can not be held until August - the midpoint of his six-year term.

The central bank said it would announce a new currency policy next week, likely to impose restrictions on the amount of dollars that can be bought and the transfer of funds into foreign accounts.

Opposition and government negotiators are studying proposals from former US president Jimmy Carter to end the deadlock.

The Nobel peace prize winner put forward two plans earlier this week. The first would entail calling a general election and the second would call for a binding referendum on the presidency in August.

A group of six countries with close links to Venezuela, including Spain, the US and Brazil will also meet in Washington tomorrow to consider other means of ending the standoff.

www.gulf-daily-news.com RIYADH:

Opec will not be able to compensate an expected shortfall of supplies of around five million barrels per day (bpd) in case of war on Iraq, Algerian Oil Minister warned in remarks published yesterday.

Chakib Khelil told the Saudi newspaper Al-Watan that only two Opec members, Saudi Arabia and the UAE, have a real excess production capacity.

"There is a question over Opec capability to supply the market needs because the maximum available (extra) capacity is only three million bpd ... from Saudi Arabia and the UAE," Khelil said.

The shortfall could occur because of a marathon strike in Venezuela and the complete halt of Iraqi production in case of a US attack on Baghdad.

The Opec oil cartel agreed on January 12 to increase oil production by 1.5m bpd in a bid to curb a surge in prices triggered by the strike in Venezuela and the threat of war in Iraq.

This will raise the output ceiling of the Organisation of Petroleum Exporting Countries from 23m bpd to 24.5m bpd, with effect from February 1, 2003.

Khelil said the price hike is being driven by the tense political situation rather than supply and demand mechanism.

The adjusted ceiling will be reviewed at the next Opec ordinary meeting, on March 11.