Adamant: Hardest metal
Thursday, February 13, 2003

TOKYO FOOD FILE - DECADENCE IN A CUP

www.japantimes.co.jp Take your lover to Hevin and back By ROBBIE SWINNERTON

What is it about Japan and chocolate and Feb. 14? For the past two weeks and climaxing today, the entire nation -- or at least the female half of it -- has been engulfed in the annual chocomania. And, if anything, this year the Valentine's Day frenzy has reached new heights.

Treats from Decadence du Chocolat (above and below) will leave you hungry for more this Valentine's Day.

Department-store food floors are awash with pralines and truffles and ganaches. Lines are stretching down the block outside exclusive Ginza confectioners. Even the humblest rural convenience stores have bought into the idea that, on this day of days, Japanese women must buy chocolate, not just for their beaus but for all menfolk, related or not.

It's all a marketing ploy, the cynics cry. And undoubtedly it is -- but there's more to it than that. All the evidence suggests that Japan is just now, under the guise of ritual gift-giving, discovering a deep, unbridled passion for real chocolate.

We are not talking about common-or-garden 100 yen bars of Ghana or Meiji, of course, but the soft, melting textures of the gourmet product. As any chocoholic will aver, that deep, dark flavor is the taste of romance -- sensuous and stimulating, languorous but elevating, short-lasting but memorable.

For many people, the ultimate way to appreciate this supreme confection is in liquid form. It is our good fortune that, finally, the civilized practice of sipping hot chocolate is now being introduced to connoisseurs in Tokyo. Here are three places that have opened in the past year, where you can indulge.

Decadence du Chocolat

First stop, the wonderful and aptly-named Decadence du Chocolat, which opened in June. Housed in a long, free-standing building in brick and elegant dark green, its primary role is as a workshop and retail store. But walk in beneath the bright red awning, and you will find half-a-dozen small, round tables where you can revive yourself from the exertions of your hike through the tranquil residential back streets of Daikanyama.

The look is refined and elegant, almost medieval in style, with Gothic wooden pillars and beams, and Andalucian tiles underfoot. The walls and ceiling are a rich hue of red, studded with gold heraldic motifs. It feels like sitting down inside a deluxe and rather expensive chocolate box.

It smells that way, too. A heady perfume, sweet but not sickly, wafts across from the other side of that counter, with its array of tantalizing cakes and candies. As you watch the bevy of white-clad pastry chefs laboring over their whisks and baking tins in the large, open kitchen, sit back and sip on the specialty of the house -- hot Creole chocolate drink (900 yen for a single-serving pot).

Made with prime cacao beans from Venezuela -- 65 percent of the total mixture -- it is thick in texture, sweet (of course) but with a fine balance of bitter counter-notes, leaving your palate buzzing with lingering hints of vanilla and cinnamon. You will find it comforting and warming, but also richly elevating. This is not the kind of hot, milky cocoa you prepare as a nightcap. You will find your eyes are opened and your senses heightened.

The menu also offers a selection of teas and coffees, and the best argument for ordering these is that they make a better contrast with the various chocolate treats that you will be tempted to order and nibble on as you relax.

You will find it hard to leave without a purchase of pralines or bonbons under your arm (try resisting the wicked Hennessy brandy-flavored ones or, at the very least, the candied, half-dipped Valencia orange slices). Simplest of all, treat yourself to a chunk of solid nut chocolate (almond, macadamia or hazelnut) broken with a hammer into large, irregular blocks. Now, that's what we call chocolate.

Decadence du Chocolat is part of the Global Dining group, which includes not only La Boheme, Zest and Gonpachi, but also the upmarket Tableaux and Stellato restaurants. That means inevitably, as you arrive and leave, the whole kitchen acknowledges you with a loud sushi-shop chorus.

Decadence du Chocolat, 10-13 Hachiyama-cho, Shibuya-ku; tel: (03) 5489-0170; open daily 10 a.m.-10 p.m. Chocolates can be ordered through their Web site ( www.globaldining.co.jp) for delivery throughout Japan.

Theobroma Another noteworthy arrival that is equally devoted to spreading the gospel of genuine chocolate is Theobroma, in Tomigaya, not far from Yoyogi-Koen Station. Although it styles itself as a "Musee du Chocolat," that doesn't mean you can't sample and buy all the delicacies in this elegant retail shop-cum-salon de the.

Chef Koji Tsuchiya spent six years in Paris, finessing his art alongside some of the world's top chocolatiers. He produces an excellent gateau (from 2,500 yen) that lives up to its Classique Chocolat name. And his rich chocolate bars are remarkable -- especially the lip-tingling Ocumare 66 (800 yen for 75 grams), made from the finest Venezuelan cacao beans.

Besides his huge range of confections based on the fruit of the cacao tree, he also sells croissants and authentic French brioches, which are all available in the small cafe area, as are light snacks and drinks. Choose from four kinds of hot chocolate -- bitter, milk, herbal (with lemongrass and mint) and spicy, with an intriguing, prickly chili afterburn. Each is 700 yen, served in a special silver chocolate pot; or 500 yen per take-out pack.

Despite a rococo exterior and the flowers and frilly ornaments inside, Theobroma has a solid jazz soundtrack and the clientele is far from being all female. In fact, the seats are as likely to be occupied by men as by women, many of them from the nearby NHK center.

In ancient Greek, Theobroma means "food of the gods." In modern science, theobromide is an alkaloid isolated from cacao (and also found in tea) used for treating headaches and circulatory problems. Whichever excuse you need, this is a place worth knowing about.

Musee du Chocolat Theobroma; 1-14-9 Tomigaya, Shibuya-ku; tel: (03) 5798-2946; www.theo broma.co.jp; open 9.30 a.m.-8 p.m. (cafe last order 7 p.m.). Theobroma also has a substantial shop-cum-cafe in Hiroo, just opposite Enoteca: 5-16-13 Minami-Azabu, Minato-ku; tel: (03) 5798-2947.

Hevin But the high temple to the cult of gourmet chocolate in the city has to be Jean-Paul Hevin's small shop in Shinjuku Isetan. Currently one of the most brilliant stars in the firmament of chocolate artisans in France, Hevin is now attracting a growing number of acolytes here in Tokyo.

It feels like a cross between an exclusive jewelry boutique, a wine cellar and a walk-in humidor. The number of customers in the shop at any one time is restricted. The temperature of the chocolate is kept at 15-18 degrees, and light and humidity are controlled rigorously. With its darkened glass and solemn atmosphere, this is one of the growing number of foreign food outlets that have put the "chic" back in depachika food basements.

Besides the retail counters, with their perfect display cases of exquisite creations, there are chairs for a dozen or so at dark marble tables, where you can sit and savor the finest molten chocolate in the city. So powerful but subtle is the flavor, so complex the interplay of bitter and sweet, so lingering the reverberations on your palate, this will make anyone a true believer.

Demand for Hevin's chocolates has been massive over the past week. People have been lining up for more than two hours for the chance to acquire some of his spicy ganaches -- the Brasilia (coffee flavor), Criollos (cinnamon) or Gemme (lapsang souchong smoked Chinese tea) are all wonders of creation -- or gift packs of 250 grams of mixed chocolates for 6,500 yen.

Is this true love, or mere infatuation? Sometimes, the line between the two is hard to discern. Once all the Valentine Day's brouhaha has died down, go along and decide for yourself.

Jean-Paul Hevin, Shinjuku Isetan B1F, 3-14-1 Shinjuku, Shinjuku-ku; tel: 3351-7882. Open daily 10 a.m.-8 p.m.; closed occasional Wednesdays. Hevin also has an outlet in Hiroshima: Hiroo Andersen 1F, 7-1 Hon-dori, Naka-ku, Hiroshima-shi; tel: (082) 247-2403

The Japan Times: Feb. 14, 2003

Stability and Democracy, Not Oil, Are at Risk in Venezuela

www.heritage.org by Stephen Johnson Backgrounder #1623 February 12, 2003 |  |

Venezuela is the world's fifth largest oil producer and normally provides 13 percent of U.S. petroleum imports, but the United States should not be so eager to open the spigot that it acquiesces to the consolidation of an emerging dictatorship or to prolonged turmoil there. Neither outcome will enhance stability in volatile South America or assure a steady supply of petroleum at a time when the United States is likely to engage in military action in Iraq.

The only way to rescue Venezuela's viability as an energy producer and trade partner is to help restore democracy by bringing sustained pressure on President Hugo Chávez to allow a peaceful, constitutional vote on his mandate and then supervise the resulting campaign and vote to safeguard political and civil liberties until the Venezuelan government is able to do so itself. So far, the Bush Administration has pursued this course.

More Than a Petrol Problem

For more than a year, this South American nation of 23 million has experienced increasing upheaval provoked by the dictatorial ways of its fiery, demagogic president Hugo Chávez. On December 2, 2002, business and labor leaders called a national work stoppage, hoping to pressure him into resigning. Some 35,000 workers walked out of the state oil monopoly PDVSA (Petróleos de Venezuela Sociedad Anónima), temporarily slowing production to a trickle.

The loss of 1.5 million barrels of imported heavy crude per day from December 2002 to January 2003 made headlines and helped push U.S. gasoline prices up 10 cents at the pump, but that is within the range of normal market fluctuations. Furthermore, the Organization of Petroleum Exporting Countries (OPEC), of which Venezuela is a member, promised to increase output by about 1.5 million barrels per day. And after reportedly firing 5,000 striking oil workers and replacing some of them with loyalists, the government has managed to boost production to one-third of previous levels.

The real issue is what would happen if Venezuela's increasingly unpopular president tried to impose a dictatorship in order to stay in office. This would exacerbate the conflict, possibly even provoking a civil war. Possible scenarios include:

  • Financial collapse affecting trade partners Venezuela once had the highest per capita income in South America and was the United States' 25th largest trading partner. Now its economy is beginning to look like Haiti's, having contracted 18 percent since Chávez took office in 1998 and threatening to implode as Argentina's did in 2001. This would harm trade partners already battered by a regional economic downturn and internal problems.1

Historically, the state has intervened in Venezuela's economy to a high degree, but in November 2001, Chávez introduced a package of 49 decrees to tighten control of various local industries and enable the government to confiscate "unused property." Meanwhile, anticipating the creation of a Cuban-style command economy, local and foreign investors began taking their money elsewhere. Since the December 2002 strike, shuttered Venezuelan businesses and industries have become vulnerable to nationalization. In 2002, Colombian exports to Venezuela totaled some $1.2 billion. For the moment, many exports cannot get past the border, and if they do, they may find fewer buyers.2

  • Increased terrorist foothold in South America Disorder and dysfunctional government provide a welcome haven for criminals and terrorists. Last March, the Venezuelan army reported that more than 700 combatants of the Marxist Revolutionary Armed Forces of Colombia (FARC) had established camps in the western border states.3 If Chávez establishes a dictatorship, the FARC and other groups such as Basque Fatherland and Liberty (ETA), with whom he is reportedly friendly, might find Venezuela an even more hospitable environment.4
  • Refugee exodus Refugee outflows would impose hardships on neighboring countries and the United States. Colombia already has an internally displaced population of about 3 million, and Ecuadorans are leaving their country at a rate of about 250,000 per year to find work and escape invading Colombians. Anarchy or government crackdowns on civil liberties could provoke a Venezuelan exodus.
  • Lagging recovery of oil production Without a satisfactory outcome to Venezuela's political troubles, experienced managers and skilled technicians at PDVSA may not return to work. And without their business expertise and engineering know-how, production and distribution may never return to previous levels. Although the government claims that operations are returning to normal, reports of spills, accidents, and lost capacity in older oil fields suggest disarray.5 For Venezuela to service its foreign debt, production needs to approach pre-strike levels.6

A Ruptured Consensus

Venezuela's crumbling state cannot be patched together overnight. For decades, Venezuelan leaders neglected citizen participation in government and shunned economic liberalization. Instead, they nationalized the country's oil industry to fund extravagant social spending while shielding the established business community behind convoluted regulations and weak rule of law. As the government piled up debt, the poverty rate increased from 27 percent in the 1980s to 60 percent in the 1990s.7

With Venezuela's political parties in disrepute, Chávez--a former coup plotter and cashiered army officer--was elected president in 1998 with a broad mandate to clean house. But instead of weeding out corruption or empowering the poor, he had the constitution rewritten to expand his powers, extend his term in office, and complicate any attempt to remove him from office. He diverted government funds to military cronies to buy loyalty and to organize armed, partisan militias called "Bolivarian Circles"--similar to Cuba's Revolutionary Defense Committees.

On April 11, 2002, spurred by his decrees curbing property rights and hobbling private enterprise, a group of dissident military officers and business leaders rebelled and temporarily removed Chávez from power. Since then, the breech between Chávez and his growing number of opponents has widened. Calling them "fascists" in public appearances, he has polarized society and made it clear that his presidency serves only himself and a declining number of supporters.

Struggle for Control

Since April 2002, Chávez has pursued a two-track strategy to maintain his hold on power. On the domestic front, he discarded initial promises of reconciliation in favor of bullying opponents and manipulating national institutions. In June, he began warning media owners of unspecified consequences if their outlets broadcast stories disrespectful of his government. In October, he appointed Lenín Ramírez Sánchez, brother of convicted terrorist Illich Ramírez Sánchez (Carlos the Jackal), as energy minister.

In November, Chávez ordered the military to seize control of the Caracas police force from Mayor Alfredo Peña, an outspoken opponent. The same month, he asked the National Assembly to modify the election law to remove the existing National Electoral Council, which seemed inclined to approve a petition signed by 2 million Venezuelans calling for a non-binding "consultative" referendum on his rule.8

In January 2003, troops led by National Guard General Luis Felipe Acosta Carles confiscated soft drinks and beer at bottling plants closed by striking workers outside Caracas. Although such beverages are not considered public necessities under Venezuela's "hoarding" law, General Acosta said he was acting on presidential orders to distribute them "because collective rights come above individual rights."9 Finally, having tired of negative publicity in the commercial media, Chávez introduced a new media law on January 23 that would permit the government to close independent TV and radio stations for broadcasting material that promotes "disrespect" for government authorities.10

On the international front, Chávez has tried to complicate outside efforts to promote reconciliation. In April 2002, the Organization of American States (OAS) Inter-American Commission on Human Rights asked the government to create a truth commission to look into killings during the uprising that ousted Chávez. To date, no such group exists. In June, Vice President José Vicente Rangel invited former U.S. President Jimmy Carter to chair talks between the administration and opponents, perhaps thinking that Carter--perceived as an international "boy scout"--would be easy to manipulate. Instead, Carter invited the OAS to join the dialogue and, to his credit, observed that Chávez showed little respect for Venezuela's existing institutions.11

By September, a tripartite negotiating mission had formed consisting of the OAS, the Carter Center, and the United Nations Development Program. In November, OAS Secretary General César Gaviria opened negotiations in Caracas, admonishing both sides to avoid recriminations. But in the collective mind of the opposition, reconciliation competed with the desire to force Chávez from office, no doubt inspired by the president's continued verbal attacks.

On January 21, 2003, Carter laid two options on the table: a constitutional amendment truncating the presidential and legislative terms to four years, which would necessitate new elections in the immediate future, and a binding recall vote in August according to the current charter. In the background, however, the Supreme Justice Tribunal unseated the members of the National Electoral Council, placing decisions on referenda and any constitutional changes in limbo.12

What Washington Should Do

As Venezuela's internal conflict draws on, U.S. policymakers might feel tempted to back a deal with Chávez that pays lip service to democracy in order to make peace--particularly in the interest of boosting oil exports. If that happened, Chávez could either consolidate his regime or lead the country further into anarchy--either way complicating energy and trade problems.13 By the same token, strong measures such as sanctions would focus the rage of both sides on the United States and be equally unproductive.

Instead, the United States and its democratic allies in the hemisphere should bring sustained pressure on Venezuela's president to agree on a peaceful, constitutional, democratic, and electoral solution and then help supervise the resulting campaign and vote through international observers to safeguard political and civil liberties in the absence of official will to do so. A stable, democratic Venezuela would be a more prosperous trade partner, a more reliable energy supplier, and a peaceful, responsible neighbor.

For now, the Bush Administration is on the right track. After a public relations misstep last April in commenting prematurely on Chávez's ouster, the Administration has quietly supported the tripartite mission to bring the Venezuelan government and the country's democratic community to a common understanding. In January 2003, U.S. and Brazilian diplomacy helped organize a "group of friends of Venezuela" that includes foreign ministers from Mexico, Chile, Spain, and Portugal as interested observers in ongoing talks.14 These observers will help to hold Chávez accountable for his promises and give hope to Venezuela's beleaguered democrats.

But more needs to be done. To help restore democratic governance and a viable economy in Venezuela, Washington should:

  • Continue to declare the obvious Venezuela's democracy is broken according to the standards of the OAS Inter-American Democratic Charter. Opponents charge that Chávez has violated 91 articles of the Bolivarian Constitution and the Democratic Charter 39 times. Although it has been stated in OAS reports and declarations, the United States and the OAS should restate this fact to keep ongoing negotiations in perspective.
  • Increase pressure for a lawful, democratic solution President Carter's two proposals were among many considered by Chávez's opponents. Putting them on the table galvanized negotiating parties to act on them. Both proposals have distinct advantages and risks, but once an agreement is reached, facilitators and outside observers should encourage all parties to follow the agreement. The Venezuelan government should not block public choice by trying to stack the National Electoral Council or through other anti-democratic means; nor should opponents sidetrack it with mob action to force the president's resignation.
  • Protect civil liberties and democratic processes Negotiators must continue to urge all parties to respect civil liberties and fair campaign practices and allow international observation of the resulting campaign and vote. Specifically, the OAS and the Group of Friends should insist that all government-supported partisan groups such as the Bolivarian Circles be disarmed and dismantled. The Inter-American Commission on Human Rights should continue to push for the creation of a truth commission and, along with other observers, monitor the critical phases of any developing solution to help safeguard civil liberties.
  • Urge the democratic opposition to develop a national reform plan Venezuela must solve its root problems of weak political institutions, inadequate separation of powers, an over-regulated economy, and dependence on state oil. While Chávez delivers a toxic form of the welfare-state policies Venezuelan leaders have implemented in the past, his democratic opponents have yet to formulate a blueprint to address the problems that led to the current crisis. Even without Chávez, Venezuela will remain unstable unless it makes its political system more representative and accountable and restructures the economy to promote private enterprise and investment.
  • Increase intelligence collection The Bush Administration should boost efforts to gather information about Cuban agents working in Chávez's government, the training and strength of all armed bands, and the activities of outside groups such as the FARC that could further destabilize Venezuela or pose a regional terrorist threat.
  • Stay engaged The U.S. should work through the Group of Friends and support the OAS facilitators. The U.S. Congress should increase visits with its counterparts in the National Assembly, encouraging them to curb executive branch excesses through proper oversight. International organizations supported by the U.S. National Endowment for Democracy (NED) should continue to advise the full spectrum of Venezuela's political parties, civic groups, and unions.

Conclusion

Compared to Iraq's Saddam Hussein or North Korea's Kim Jong-il, Hugo Chávez may seem like a minor nuisance, but he admires those men and could become more like them as time goes by. Decrying capitalism and freedom of choice as "fascist neoliberalism," his demagogic speeches resonate with growing numbers of poor in Latin America who have lost hope in the slow evolution of democracy and market economies. The chaos he has inspired in Venezuela could further depress commerce in the hemisphere and destabilize neighbors. Because of him, one of the world's most important petroleum producers faces prolonged turmoil and mismanagement under a budding dictator.

To avoid dependence on unstable regimes for critical resources, the U.S. should facilitate exploration elsewhere in the Caribbean Basin and in Alaska and welcome market-developed technologies that are less dependent on finite resources. Meanwhile, by increasing international pressure on Venezuela's president to agree to a constitutional, democratic decision on the future of his country with outside scrutiny to safeguard the process, the United States can help restore stability to this important energy producer and ally. Moreover, it can help the people of Venezuela retake their government, open up their economy, and work for the kind of prosperity that has so far eluded them.

Stephen Johnson is Senior Policy Analyst for Latin America in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.

  1. Andy Webb-Vidal, "Venezuela Economy `Faces Greatest Collapse,'" Financial Times, January 14, 2003.

  2. "Colombia's Usual Exports to Venezuela Still Shut Out," Dow Jones Business News, January 20, 2003.

  3. Javier Ignacio Mayorca, "740 de las FARC en Venezuela," Venezuela Ana lít ica, March 11, 2002, at www.analitica.com/va/vpi/5521076.asp (April 1, 2002).

  4. Other groups could be welcome as well. Chávez was the first democratically elected leader to visit Saddam Hussein since Iraq invaded Kuwait. Moreover, Chávez's former personal pilot, Major Juan Díaz, charges that after September 11, 2001, Chávez sent funds to Afghanistan's Taliban government and to the terrorist Al-Qaeda group under the guise of aid to Afghan refugees. See Casto Ocando, "Organismo demanda a Chávez en Miami," El Nuevo Herald, January 30, 2003, at www.miami.com/mld/elnuevo/news/world/americas/5060974.htm (January 31, 2003).

  5. Francis Robles, "Oil Accidents Mount in Venezuela: Novice Stand-Ins Blamed for Chaos," The Miami Herald, January 21, 2003, at www.miami.com/mld/miamiherald/4993381.htm (January 28, 2003).

  6. Some Venezuelan business leaders believe that Chávez might consider the "unthinkable," selling off oil company assets, including a major stake in PDVSA, to foreign investors to isolate PDVSA from local politics. Royalties would still go to the government, workers might be less inclined to strike, and oil-consuming nations like the United States might be less concerned with whether Chávez stays or goes.

  7. "Venezuela tuvo el mayor aumento de la pobreza en la región," Agence France-Presse, in El Nacional, June 20, 2001, at www.el-nacional.com/eln20062001/pe8sl.htm (June 20, 2001).

  8. The Electoral Court in the Supreme Justice Tribunal, dominated by Chávez sympathizers, later ruled that the referendum could not take place because the existing Electoral Council was not named by the current National Assembly. A magistrate in the Constitutional Court in the same Tribunal now says the Electoral Court exceeded its authority. See Irma Alvarez and Juan Francisco Alonso, "Sala Constitucional debe poner orden," El Universal, January 29, 2003, at www.eluniversal.com/2003/01/29/29104AA.shtml (January 29, 2003).

  9. Patrick Markey, "Venezuelan Troops Seize Coca-Cola Affiliate Plant," Reuters, January 17, 2003.

  10. Penalties include a two-day shutdown of outlets disseminating disrespectful content and an indefinite suspension of the operator's license if more than two infractions occur within a three-year period. See "Proyecto de Ley Sobre La Responsabilidad Social en Radio y Televisión," introduced in the National Assembly, January 23, 2003, Gaceta Oficial, at www.eluniversal.com/especiales/leytvradio/pagina.shtml (January 28, 2003).

  11. Everett Bauman, "Nunca vi un país tan dividido," El Universal, July 22, 2002, at www.eluniversal.com/2002/07/22/22108CC.shtml (July 22, 2002).

  12. The tripartite negotiating mission maintains that an independent judiciary and a credible elections council are crucial to a democratic solution to Venezuela's political crisis. See Christopher Toothaker, "Delegation Wraps Up Mediation Mission," Associated Press, September 19, 2002.

  13. Attending the World Social Forum in Porto Alegre, Brazil, on January 26, President Chávez declared, "I've saved my rifle, and I don't want to take it out. But I've kept it and if the oligarchies don't accept changes peacefully, like Che Guevara said, sounds of combat and bursts of machinegun fire will thunder." Alberto Garrido, "Tiempo Real," El Universal, January 28, 2003.

  14. Chávez wanted to add other countries to the group, including China, Russia, France, and Cuba. On January 15, Brazilian President Luis Inacio Lula da Silva told him he would not support expansion. On January 28, the French government declared its support for the tripartite mission and freedom of the press. See "Venezuela: Lula no quiere más `amigos,'" BBC Mundo.com, January 18, 2003, at news.bbc.co.uk/hi/spanish/latin_america/newsid_2672000/2672281.stm (January 30, 2003), and "Francia ofrece respaldo a propuestas de Carter," El Universal, January 28, 2003, at www.eluniversal.com/2003/01/28/28107OO.shtml (January 28, 2003).

Oil hovers just below $36 as US fuel stocks shrink

www.stuff.co.nz 14 February 2003

SINGAPORE: Oil prices were poised to scale to new 28-month highs yesterday as US fuel stocks fell to the lowest level since the 1970s Arab oil embargo, while Washington kept up efforts to build support for a war against Iraq.

US light crude touched an early peak at $US35.95 a barrel, the highest since October 2000, but eased back to $US35.82, a gain of five cents from Wednesday's settlement in New York.

"Balancing bullish fundamentals with political factors, we'll probably see a trading range between $US30 and $US40 a barrel over the next month," said Gordon Kwan, oil and gas analyst at HSBC in Hong Kong.

"Even without the threat of war in Iraq, there's still upside for crude prices. Despite talk of Venezuela increasing production and more Middle East barrels, it's not feeding into the United States yet and we're still in the depths of winter," Kwan said.

Figures from the government department Energy Information Administration (EIA) showed US crude inventories falling 4.5 million barrels to 269.8 million barrels in the week to February 7, the lowest level since October 1975.

Stocks are now below what US authorities recommend as the minimum of 270 million barrels - roughly 14 days of domestic consumption - to keep up with the nation's energy needs.

The EIA said inventories of heating oil, gasoline and jet fuel were also running at a deficit to year-ago levels.

Crude prices are less than $2 under a September 2000 peak at $37.80 when the Clinton administration ordered the release of reserves from strategic stocks. The Bush administration has so far shied away from using emergency oil.

"We are continuing to monitor the situation," US Energy Secretary Spencer Abraham said on Wednesday.

Along with healthy demand for winter heating fuels as parts of the United States have been blasted with Arctic temperatures, US fuel stocks have been severely dented by a two-month anti-government strike in Venezuela.

Venezuela, the fifth-biggest oil exporter, normally supplies 13 percent of US oil imports. Output in Latin America's biggest producer is making a slow recovery but is running at less than half of pre-strike levels at three million barrels per day.

MORE AIR STRIKE, EYES ON BLIX

Crude prices have shot up more than 30 percent since December on the Venezuelan outage and as the United States has pressed on with its campaign to disarm Iraq of banned weapons.

Iraq is the eighth-largest oil exporter, sending some two million bpd overseas.

Traders fear that with inventories already tight, war could trigger wider disruptions to crude supplies from other Middle East producers, which account for 40 percent of globally traded crude oil.

US-British aircraft attacked a ballistic missile system in southern Iraq for the second day in a row as top UN weapons inspectors prepared to report on Friday on their efforts to assess Iraq's weapons programmes.

Allied aircraft have been increasingly attacking Iraqi air defence missiles, radar and communications in the north and south, but strikes against surface tactical missiles are rare.

UN diplomats said on Wednesday that missile experts called in by arms inspectors believed that the range of Iraq's Al Samoud missile might exceed UN limits, a claim that could boost the US campaign against Baghdad.

Russia, which with France, Germany and China is opposed to imminent military action, called for more study on the missile.

The United States has called Friday's report by chief weapons inspectors Hans Blix and Mohamed ElBaradei "pivotal" in deciding whether to go to war.

Oil May Be Spike in Economy's Heart

www.thestreet.com By Rebecca Byrne Staff Reporter 02/13/2003 11:40 AM EST

Not long ago, all but the most fanatical bears on Wall Street scoffed at the idea of a double-dip recession. But after a recent surge in oil prices, no one is laughing any more.

Over the last three months, crude oil has risen 44% to its highest level in more than two years amid concern about a war with Iraq, and as a strike in Venezuela reduced supplies from the world's fifth-biggest exporter. Meanwhile, retail gasoline has jumped to $1.60 a gallon -- the highest level since June 2001.

Because energy costs essentially act as a tax on consumers, economists worry that this recent increase could force consumers to tighten their purse strings. That could be devastating to the economy because consumer spending accounts for two-thirds of gross domestic product.

"It seems pretty clear to us that we are experiencing an old-fashioned oil shock," said Merrill Lynch chief U.S. strategist Richard Bernstein. "Nothing destroys consumer purchasing power as effectively."

Bernstein said that every significant oil shock in the last 30 years has caused, or at least contributed to, a recession, and he believes the odds of the same thing happening this time round are "starting to increase significantly."

Already, higher energy prices have had a significant effect on real wage growth, and hence, spending. Although real wages have been steadily increasing for almost 10 years, the rate of increase has slowed sharply since January 2002. Wages grew at a sluggish 0.5% in December, according to Bernstein, and economists say the weakness continued into 2003. In fact, the month-to-month increase in average hourly earnings grew in January at the slowest pace in 10 years.

Real wages are defined as average hourly earnings minus inflation. If inflation goes up because workers have to pay more for energy, then their salaries are effectively being reduced. And lower wages usually lead to lower spending. On Thursday, the Commerce Department said retail sales fell more than expected in January, although sales excluding autos were up a respectable 1.3%.

UPI hears ... Insider notes from United Press International for Feb. 13, 2003

www.upi.com From the International Desk Published 2/13/2003 11:56 AM

High-level French politicians are claiming that U.S. diplomats are threatening Paris with an effort to strip France of its permanent membership of the U.N. Security Council as the row over Iraq escalates. One has even gone public. Pierre Lellouche, a senior deputy for President Jacques Chirac's UMP party in the National Assembly, and head of France's delegation to the NATO parliamentary assembly, tells Le Monde that the United States wants France's seat to be transferred to the European Union as a whole. (No such threats to the British seat on the Security Council, apparently). Lellouche, seen as one of the best-informed and most pro-NATO of French politicians, is also claiming that French officials have been warned "will be dealt right out of the reconstruction of Iraq and of the new geo-political system" once the war is over. U.S. officials tell UPI that Lellouche "must have been smoking something."

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The fact is that initial consultations between U.S. officials have led to the conclusion that there are few ways to punish France. Most economic sanctions would be illegal under World Trade Organization rules. Any move against France's U.N. seat would run into a French veto and put friendly Tony Blair into an impossible position as a partner of France in the European Union. The one area that could hurt Paris would be for the Pentagon to frown on French (and German) arms sales. Kuwait, long eying the purchase of German-built Fuchs armored vehicles, has already been told this would be frowned on. But the two big French defense groups, EADS and Thales, last year sold $500 million and $300 million in goods respectively to the United States. This is peanuts in defense terms, and U.S. officials do not want to punish Raytheon, maker of the Patriot missiles, which currently has a close partnership with Thales making Firefinder radars that just secured a $150 million sale to India. Besides, after the United States used political muscle and easy credit terms to persuade both South Korea and Poland to buy F-16s rather than French Mirage warplanes, there is little more damage to U.S.-French relations that blocking arms sales could do. Moreover, after buying the British defense firm's Racal Electronics, Pilkington Optronics, Shorts Missile Systems and Thomson Marconi Sonar, Thales now counts as nearly half-British, the last people the Bush administration wants to hurt.

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Maybe Defense Secretary Donald Rumsfeld was right to draw that distinction between Old Europe and the New. The European Union is convening an emergency summit in Brussels Monday night of its 15 heads of government to try and resolve splits over Iraq. Britain and Spain suggested that the 10 candidate members of the EU from Eastern Europe, who are scheduled to become full members next year, should be invited to attend. Absolutely not, insisted Germany, France and Belgium -- the core of Old Europe. Those new members, strongly pro-American after their grim years of enforced membership in the old Soviet-dominated Warsaw Pact, make up the "New Europe" that Rumsfeld admires. No wonder the Old Guard insisted on keeping them out. Hungary, Poland and the Czech Republic will have to settle for a "readout" of the decisions of the 15 on Tuesday, after what looks like being a contentious dinner in Brussels.

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After the dramas of economic collapse in Argentina and a bitter strike in Venezuela, Bolivia is turning into South America's new trouble spot. An extraordinary 5-hour street battle between armed police and the army has left 16 dead and 80 wounded on the streets of the capital, La Paz, after striking policemen took to the streets to demonstrate against a tax hike. Along with the country's 750,000 other civil servants, the Bolivian police have been hit with a new emergency tax that creams 12.5 percent off their paychecks. It may be a crisis for the new President Gonzalo Sanchez de Lozada, popularly known since his inauguration six months ago as "Goni," but it's another triumph for the political wizards of the International Monetary Fund, who backed the government's decision to cut the budget deficit from 8 percent to 5 percent of gross domestic product by imposing the new tax.

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No, they were not UFOs, as some pilots initially feared when 12 airliners had to abort landing and take avoiding action at Malaysia's Penang International Airport Saturday. It was just the celebrations for Chinese new year, traditionally marked by the release of flying lanterns. Known as "Kung Ming" lanterns, after an ancient Chinese general who used them to send messages across enemy lines, they are hot air balloons made of paper and bamboo, and candles or oil-soaked rags provide both the heat to make them rise and the light that dances in the sky. They are now banned for 5 miles around all of Malaysia's airports -- except for this Saturday night over Penang, when the airlines have been asked to suspend flights for 4 hours to mark Chap Goh Mei, the 15th and final day of the new year.