abcnews.go.com Feb. 1 — By Elizabeth Lazarowitz

NEW YORK (Reuters) - The winds of war have been buffeting Wall Street, sending skittish investors to the sidelines, and the storm is only likely to intensify next week as the White House makes its last diplomatic push for Iraqi disarmament.

With U.S. forces massing in the Middle East and the rhetoric from Washington heating up, the United States appears increasingly on the brink of war. The suspense is killing stocks and has plunged key market gauges to their lowest levels in more than three months.

President Bush has said Baghdad has just weeks left to avert war, and Wall Street will be tuned in for anything that might give clues to a timeline for a possible U.S. attack on Iraq.

"Iraq will be the most important issue next week -- period," said Hugh Johnson, chief investment officer at First Albany Asset Management. Ordinarily, investors' focus would be fixed on the outlook for the economy and corporate profits, but "next week is just not going to be an ordinary week."

While brewing geopolitical events will likely shove nearly everything else to the back burner, a flood of economic reports -- particularly data on the manufacturing sector and the labor market -- could help determine Wall Street's mood.

The Institute of Supply Management's closely watched gauge of the factory sector, set for release on Monday, and the U.S. payrolls report on Friday will give investors some early glimpses of the state of the economy in January.

Evidence that the U.S. economy is pulling out of its soggy patch has been spotty, at best, and the increasing possibility of war has whipped up fears growth could stumble as corporate America puts off investment decisions and stubbornly high oil prices bite into corporate profits.

The steady parade of corporate earnings will probably also fade into the background somewhat, but Wall Street will be tuned in for results and, more importantly, forecasts from technology bellwether Cisco Systems Inc. <CSCO.O> and No. 4 U.S. long-distance telephone company Sprint Corp. <FON.N>

INDEXES DOWN

War worries have helped drive the broad Standard & Poor's 500 index <.SPX> down about 8 percent from its high for the year hit on Jan. 14 and into negative ground for the year.

Year-to-date, the S&P 500 and the blue-chip Dow Jones industrial average <.DJI> are both down around 3 percent, and the tech-packed Nasdaq Composite Index <.IXIC> is down about 1 percent.

All three finished the week lower after the S&P 500 and Dow posted their lowest closes since mid-October and the Nasdaq ended at its worst level since mid-November on Thursday.

Wall Street will be watching on Wednesday when Secretary of State Colin Powell goes before the United Nations Security Council to try to persuade doubters Iraq has weapons of mass destruction. Iraq denies it possesses banned arms.

"That stuff is in the way of the market right now. Nobody's going to want to go long in a big way until this Iraq thing gets cleared up," said Michael Vogelzang, president of Boston Advisors Inc. "It's just going dominate headlines. It's going to dominate investor sentiment."

Bush said on Friday at a joint press conference with British Prime Minister Tony Blair that the United States would resist any attempt to drag out the issue for months, but thathe would welcome a second U.N. Security Council resolution if it offers a strong signal to Iraqi leader Saddam Hussein.

Bush believes that a U.N. resolution in November gives authority for military force, but he faces opposition from major powers such as France, Russia and Germany.

Worries that a war could disrupt oil supplies, as well as a two-month strike that has crippled oil production in Venezuela, a major U.S. supplier, have helped push the price of crude oil above $33 a barrel.

Those high prices have sparked fears that corporate profits, already tepid, could take another blow as companies and consumers are forced to shell out more for energy costs.

EARNINGS, ECONOMY STILL UNSTEADY

The fourth-quarter results pouring in from corporate America have been, for the most part, encouraging. About 67 percent of the companies in the S&P 500 have reported earnings so far, and, of those, 62 percent have beaten Wall Street analysts' expectations and 22 percent have matched them, according to Thomson First Call.

What is troubling, however, is that the outlook for corporate profits in the year ahead remains decidedly murky.

"So far, the guidance continues along the lines of no visibility," said Charles White, president of investment firm Avatar Associates. "Companies don't even want to say anymore that they see things getting better in the second half, because that's what they told us last year."

Results are expected next week from technology bellwether Cisco, Sprint, medical device maker Boston Scientific Corp. <BSX.N>, consumer products company Colgate-Palmolive Co. <CL.N>, No. 2 U.S. drugstore chain CVS Corp. <CVS.N>, and No. 1 U.S. home appliance maker Whirlpool Corp. <WHR.N>.

Beverage and food company Pepsico Inc. <PEP.N> and Anheuser-Busch Cos. Inc. <BUD.N>, the maker of Budweiser beer, also have results on tap.

But with the peak of earnings season now past, the economic picture is becoming increasingly important, analysts said.

The ISM report for January is expected to slip to 53.7 from 55.2 in December, according to economists in a Reuters survey. It would be the third month in a row above the 50 level that separates expansion from contraction, potentially cementing hopes the manufacturing sector is recovering from its slump.

The report on non-farm payrolls will be the economic highlight of the week. Payrolls are seen rising by 70,000 in January after a 101,000 drop in December, while the jobless rate is expect to remain steady at 6.0 percent.

www.tribnet.com By ALEXANDRA OLSON, Associated Press

CARACAS, Venezuela (January 31, 9:09 p.m. PST) - Under international pressure, opponents of President Hugo Chavez agreed Friday to ease a 2-month-old strike - but not in the crucial oil industry, the world's fifth-largest exporter.

Strike organizers said factories, schools, malls and franchise restaurants would be urged to open next week, at least on a restricted schedule.

The decision came after many of those participants were already considering abandoning the strike, fearing bankruptcy.

Most small businesses never joined the stoppage, which began Dec. 2 under the organization of a combination of labor unions, business leaders and opposition political parties.

But Chavez opponents insisted the walkout would continue in the oil industry, which provides half of government income and 70 percent of export revenue. The strike has slashed production by two-thirds.

Carlos Fernandez, president of Venezuela's largest business chamber, said the decision to ease the strike came at the request of diplomats from six countries - the United States, Brazil, Chile, Mexico, Spain and Portugal. The diplomats were in Caracas seeking a deal on early elections and an end to the strike.

Fernandez suggested that continuing the strike could weaken the opposition, allowing the government to "destroy the business sector and increase unemployment, then build the totalitarian model over the ashes."

With the strike dying down, opposition leaders- who accuse Chavez of ruining the economy with leftist policies and trying to accumulate too much power - are hoping international pressure on Chavez to negotiate will help revive their drive for early balloting.

But Foreign Minister Roy Chaderton said the government had no intention of pledging to end Chavez's term early.

"The government has no interest in doing away with itself," Chaderton said Friday.

Diplomats urged both sides to make concessions during negotiations mediated by Cesar Gaviria, the secretary-general of the Organization of American States.

"Reconciliation and healthy coexistence require mutual concessions," said Gilberto Saboia, Brazil's undersecretary for bilateral political affairs, reading a brief statement late Friday. "We reiterate the need for both sides to reach an constitutional, democratic, peaceful and electoral agreement."

The diplomatic group is urging both sides to accept one of two proposals made by former Nobel Peace Prize winner Jimmy Carter.

One is to hold a recall referendum on Chavez's rule halfway through his six-year term, or August. Venezuela's constitution allows opponents to petition for such a vote by gathering signatures from 20 percent, or 2.4 million, of the country's 12 million registered voters.

The other - favored by Chavez opponents - calls for ending the strike in exchange for a government pledge to push through quickly a constitutional amendment cutting Chavez's six-year term to four years, clearing the way for early elections.

Tens of thousands of Chavez opponents marched through Caracas on Friday to protest government investigations into three television stations accused of supporting the strike.

The government has managed to raise oil production beyond 1 million barrels a day - a third of normal, signaling that Chavez was regaining control of the state oil monopoly, Petroleos de Venezuela S.A., or PDVSA.

Strike leaders insist production will never return to normal unless the walkout ends.

In another sign the strike was weakening, private banks announced they would restore normal working hours next week after two months of opening just three hours a day.

The Bush administration has promoted early elections as a solution to the crisis.

Chavez has irritated Washington by cozying up to Cuba and criticizing civilian deaths in the U.S.-led bombing campaign against Afghanistan. Chavez tried unsuccessfully to widen the negotiating group to include governments more friendly to him.

The government estimates the country has lost $4 billion in the strike. Private economists warn the economy could shrink 25 percent in the first three months of the year after contracting an estimated 8 percent last year.

www.wsws.org By Bill Vann 1 February 2003

In a remarkable comment to the international press last month, Colombia’s President Alvaro Uribe Velez called upon Washington to mount a military intervention in his country equal in scope to the one that is now being prepared against Iraq.

“I believe that the drug-trafficking and terrorism conflict in Colombia is more serious for the democratic stability of the continent in the medium and long term than the Iraq conflict itself,” said Uribe. “If they are mounting this deployment in the face of Iraq, why don’t they consider a similar one to put an end once and for all to the transport of cocaine between Colombia and California, for example.”

Uribe, a right-wing pro-Washington politician who took office six months ago, made the comments at the swearing in ceremony for Ecuador’s new president, Lucio Gutierrez, in Quito January 14. He repeated the statement in several interviews and told other Latin American presidents present for the inauguration that he intends to press for his proposal in bilateral meetings with Washington as well as in multilateral forums. He indicated that European countries as well as Latin American military forces could be invited to contribute naval and air power to interdict traffic in drugs and arms.

The plea for a full-scale US military intervention in the region is a reflection of the desperation of Uribe and the Colombian oligarchy that he represents in face of the country’s deepening economic and social disintegration. Even as the military presence has increased in Colombia, there is a sense within the country’s ruling elite that the attention of official Washington is fixated exclusively on the Persian Gulf and that it is not paying attention to the mounting crisis in Latin America.

Colombia is already the third-largest recipient of US military aid, with some $2 billion having gone to Plan Colombia, a military program initiated by the Clinton administration ostensibly to combat cocaine production in the country. The Bush administration has since September 11, 2001 designated the US intervention in Colombia as part of its worldwide “war on terrorism.” It has explicitly permitted the use of US military assistance in prosecuting a counterinsurgency campaign against two Colombian guerrilla movements: the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN).

Last month, the Pentagon carried out a qualitative escalation of the US intervention in Colombia, sending a contingent of 70 Special Forces troops to the province of Arauca, one of the country’s most violent regions, to train a newly formed Colombian army brigade.

The mission of this new unit will be fighting the FARC and ELN and protecting the Cano-Limon oil pipeline from attack. The pipeline carries oil pumped out of the fields operated by the California-based Occidental Petroleum. This marks the first time that US soldiers have been sent with the stated assignment of training Colombian forces to combat the guerrillas. Previously, they operated under the official pretext that the military was being assisted in cocaine eradication efforts. It was claimed that the conflict with the guerrillas was a concern only to the extent that the FARC and the ELN hampered the battle to wipe out illicit drug crops.

One US official said last month that the Green Berets are training the Colombian troops not only to guard the 490-mile-long pipeline against attacks, but to “sniff out” the guerrillas. In other words, they will be teaching the same kind of counterinsurgency “search-and-destroy” tactics that were employed in Vietnam, El Salvador and elsewhere with catastrophic results for the civilian population.

While US officials have insisted that the Green Berets are assigned to training duties only and are strictly prohibited from engaging in combat, Colombian newspapers have already published photographs of heavily armed US troops operating together with Colombian forces.

The connection between the impending war in Iraq and the growing US intervention in Colombia is not just in Uribe’s head. Colombia is the seventh-largest exporter of crude oil to the US market, and it is believed to have some of the greatest untapped reserves in the world. Given the threat of war disrupting oil supplies from the Persian Gulf, together with the continuing effects of the employers’ strike in Venezuela, oil coming out of Colombia could provide a crucial margin in an attempt to hold down prices.

The expanded US military presence in Arauca has contributed to a steady escalation of violence in the oil-rich northeastern province. Uribe declared the province a “rehabilitation and consolidation zone” last September, giving the military extraordinary powers to arrest and hold people without charges, search homes and restrict internal movement.

Just this week, Uribe announced proposals to reinforce the Colombian military presence in the province and the appointment of a new governor. The last one, a retired army colonel, resigned saying that the situation was uncontrollable.

Colombia’s Minister of Defense Marta Lucia Ramirez, meanwhile, has unveiled plans for a dramatic increase in the size of Colombia’s armed forces. The proposed buildup includes the creation of 11 new mobile brigades, the strengthening of the military intelligence apparatus and the addition of 10,000 new members to the National Police. Some 35,000 additional soldiers would swell the army’s ranks.

Meanwhile, the Uribe regime has proposed the recruitment of a vast network of informants that is supposed to include some 1.5 million Colombians. The military has reportedly attempted to initiate this program in the zones of conflict by pressuring school children with threats and bribes to inform on their neighbors. The government has also proposed the recruitment of at least 15,000 “peasant soldiers” to carry out vigilante activities in the rural areas.

The recently initiated “negotiations” between the government and the right-wing paramilitary outfit known as the United Self-Defense Forces of Colombia (AUC) are widely seen as a bid to legalize and reorganize these elements as part of the government’s new official vigilante force.

The AUC functions as an auxiliary force of repression, operating in close collaboration with the military while receiving ample financial support from both drug traffickers and the Colombian oligarchy. Human rights groups have estimated that it is responsible for over 80 percent of civilian deaths in Colombia’s protracted civil war. Its death squads target not only suspected guerrilla supporters, but union activists, human rights advocates and leaders of peasant and social action groups. Last year, more than 8,000 such killings were recorded in Colombia.

The AUC leadership proclaimed a “truce” as a precondition for the talks with the government, but it has continued the killings, including the recent massacre of 11 farmworkers in the province of Antioquia.

While the US State Department declared the AUC a “foreign terrorist” organization and officially requested the extradition of two of its principal leaders, Washington has in practice turned a blind eye to the close collaboration between the army and the death squads. It has also flaunted US laws requiring a severing of such ties as a condition for military aid to Colombia. There is substantial evidence that the CIA and Pentagon themselves played a major role in forging the intimate connections between the military and AUC under a US-supervised reorganization of Colombia’s military intelligence apparatus over a decade ago.

With the “dialogue” between AUC and the Uribe regime—brokered by the Catholic Church hierarchy—the conditions are being created to legitimize the death squads and provide them with direct state funding.

During a brief visit to Bogota in December, Secretary of State Colin Powell gave Washington’s blessing to the negotiations with a group that the US government has described as terrorist, while repeating for the record the State Department’s extradition request. “The US will stand behind President Uribe as he moves down this road,” he said.

For its part, the Colombian government has indicated that it is prepared to shelve arrest orders issued against the AUC leaders supposedly wanted by Washington.

Retired US Army Lt. Gen. Gordon Summer, who served as the Reagan administration’s special envoy to Latin America, provided a somewhat more candid assessment in an interview with the Washington Times. “The battle is never too crowded to have friends,” he said. “First have them answer the law, cut out the drugs, and embrace human rights. Try to bring them under the tent, to fight against the guerrillas, who are the biggest threat.”

The Bush administration successfully pressured for an end to peace talks with the main guerrilla movement over a year ago. Unlike the FARC—which the US also branded as a terrorist organization—the AUC is a vocal proponent of the economic policies prescribed by Washington and the International Monetary Fund. “We are defenders of business freedom and of the national and international industrial sectors,” declared the right-wing paramilitaries’ principal leader, Carlos Castaño, one of those whose extradition the State Department has requested.

With the government’s protection, these paramilitary elements are already being used with numbing regularity against opponents of Uribe’s social and economic policies. According to human rights groups, three out of every four murders of trade union leaders and activists worldwide take place in Colombia. More than 150 unionists were assassinated last year, while scores more were reported disappeared.

Last month, security forces raided the headquarters of the CUT union federation in Cali, while prosecutors have sought the arrest of other union leaders on “terrorism” charges for organizing protests against death squad murders of their members.

The Uribe government is implementing policies that can only intensify the class struggle. It recently reached an agreement with the IMF on a $2.1 billion standby loan conditioned on the implementation of far-reaching privatization and austerity measures.

To cut deficit spending, it is firing 40,000 public employees while drastically reducing social services. Among the agencies that are to be eliminated outright is Colombia’s National Geological Service, which conducts surveys of the country’s mineral resources. This task is now to be left entirely in the hands of Occidental and other foreign oil monopolies.

Following the Bush administration’s instructions that it proceed with “free market” policies, the Uribe regime has carried out a “tax reform” that provides a windfall for the country’s wealthy while raising the sales tax as well as fuel and transportation costs. It has advanced a restructuring of the country’s pension system, cutting benefits and raising the retirement age. A “labor reform” raises the maximum working day to 16 hours, freezes salaries and attacks other workers rights.

The government’s policies, aimed at fulfilling debt payment requirements that consume nearly 40 percent of the national budget, are deepening the pervasive social misery in a country where at least 20 percent of the economically active population is unemployed and 70 percent of the people live in poverty.

Behind Uribe’s call for a massive US military intervention lies the growing fear within Colombian ruling circles that these conditions will give rise to a social explosion that will prove a far greater threat to their wealth and privilege than the conflict with the guerrillas.

See Also: As US intervention grows Colombian army lays siege to Medellín neighborhood [19 October 2002] As workers launch general strike Colombia’s President Uribe intensifies repression [19 September 2002] Colombian government steps up civil war preparations [31 August 2002]

europe.cnn.com Friday, January 31, 2003 Posted: 1553 GMT

BRUSSELS (Reuters) - European Central Bank council member Ernst Welteke said on Thursday the euro's fast rise was due to international political concerns and could hurt the economy if it continued.

"The quick rise of the euro, which has nothing to do with a shift in fundamentals, but with the geopolitical situation, could have negative consequences for economic developments if it were to continue like this," Welteke said after making a speech at a political conference.

The euro hit a three-year high against the dollar at above $1.09 earlier this week, but has since fallen back.

Welteke's words echoed those of EU Economic and Monetary Affairs Commissioner Pedro Solbes earlier on Thursday, who said the Commission's concern over the recent rise in the euro was not the level it had reached but the speed at which it had happened.

A growing chorus of European companies also voiced worries on Thursday that the euro's relentless rise against the war-worried dollar may damage profits and the economy.

Germany's second-largest listed drugmaker Schering, French aluminium and packaging firm Pechiney and French industrial gases group Air Liquide all said the strong euro was hitting business.

Oil a concern

Welteke said that concerns over a possible war in Iraq could boost oil prices, which in turn could hurt growth and the prospects of tame inflation. Venezuela had now dropped out as an oil-exporting country for several months, he added.

"One cannot rule out a temporary rise in oil prices, which could also be longer-lasting depending on the political scenario. This could hurt the outlook for growth and inflation."

But Welteke, who is also Bundesbank president, voiced optimism about a rebound in growth prospects if not blocked by international political concerns.

"The recovery could definitely happen this year, if external risks don't stand in the way," he said.

The ECB cut its benchmark interest rate by a half-point to 2.75 percent in early December but many economists say the ECB will trim borrowing costs again in the coming months in the face of falling inflation, a strong euro and ongoing economic weakness.

The ECB itself has said its interest rate level was appropriate and characterised its stance as "wait-and-see."

www.bismarcktribune.com By MARK HANSON, Bismarck Tribune

Filling a 12-gallon tank with regular unleaded gasoline will cost you $1.20 more today than if you had refueled earlier this week. The price for a gallon of gas in Bismarck jumped from $1.49 to $1.54 during the middle of the week, and then to $1.59 by the end of the week.

And if certain world situations remain the status quo, that price may just climb even higher.

We're paying more at the pump mainly because today Venezuelan oil workers are entering their 62nd day of a strike. Another factor is the uncertainty of what the United States will do about Iraq.

Ron Ness, executive director of the North Dakota Petroleum Council, said the Iraqi situation is just a minor factor in crude oil prices, and subsequently gasoline prices, increasing.

"Venezuela is much more serious than Iraq," he said.

A lot of refined oil is piped up from the Gulf. Venezuelan crude oil makes its way to refineries in Mexico before coming into the United States as gasoline.

"Venezuela doesn't get as much media attention as it deserves," Ness said. "It's much more volatile."

It's such a big deal because Venezuela is the world's No. 5 oil exporter and key supplier to the United States. The country normally ships more than 3 million barrels a day, but was down to about 200,000 barrels a day in December. It was reported Friday that output stood at just a little more than 1 million barrels.

Russ Hanson, president of the North Dakota Petroleum Marketers Association, said the increase in crude oil prices has boosted wholesale gasoline prices. Hanson said he thought prices at the pump would have climbed sooner because of the wholesale price increase.

Arch Simonson, owner of Simonson's Station Stores across the state, including Bismarck, said prices are up at the pump simply because wholesale prices are up.

According to a Washington Post story, the rule of thumb among oil economists is that for every $4 increase in the price of a 42-gallon barrel of crude oil, the price at the pump jumps 10 cents a gallon. Crude oil prices Friday were about $33.50 a barrel. It was $28 a barrel in November.

So, if the situation in Venezuela doesn't improve, and the United States goes to war against Iraq, we could see crude oil prices continue to rise and the price at the pump go higher.

As Hanson said, if we have an extended war, and if Iraq president Saddam Hussein decides to harm the oil infrastructure in Iraq, much like he did when he set oil fields on fire in Kuwait at the end of the 1991 Persian Gulf War, "then it could be painful for a while." (Reach reporter Mark Hanson at 250-8264 or mark@ndonline.com.)