www.detnews.com Saturday, February 15, 2003 By Fabiola Sanchez / Associated Press

CARACAS, Venezuela -- A general strike and lingering recession have taken a heavy toll on the Venezuelan economy, which shrank nearly 17 percent in the final quarter of last year, according to figures released by the central bank on Friday. The nation's oil sector, which accounts for about a third of gross domestic product, contracted by nearly 26 percent in the fourth quarter as thousands of workers walked off their jobs while the government of President Hugo Chavez worked to restore production. Overall, the economy fell 16.7 percent in the fourth quarter and 8.9 percent for the entire year, according to a statement from the central bank. Most of the contraction in the economy was due to reduced oil production, a combination of Venezuela's adherence to lower production quotas established by the Organization of Petroleum Exporting Countries, followed by the general strike, which began Dec. 2. Venezuela is the world's fifth-leading oil exporter and is a leading supplier to the United States. The reduced production was one factor in higher U.S. gasoline and heating oil prices this winter. The general strike ended Feb. 4 in all areas except the oil industry. Chavez's opponents -- a mix of unions, business interests and conservative and leftist political parties -- called for the nationwide work stoppage to press for early elections. The government has restored oil output up to about half of pre-strike levels of 3.2 million barrels per day. Production fell as low as 200,000 barrels per day in December. Meanwhile, Central Bank director Domingo Maza said the government would lift a ban on dollar sales at the end of the month. The freeze was imposed during the strike to protect Venezuela's foreign reserves, which were reduced by panic dollar buying. Maza cited continued delays in establishing regulations for a new currency control system. Under the new rules, requests for foreign currencies could take three to four days to process, said Edgar Hernandez, the president of Venezuela's new currency exchange controls committee. Government officials had previously indicated that requests to buy or sell U.S. dollars and other currencies would take roughly 45 days. Chavez has said businesses that participated in the work stoppage will be denied dollars under the new policy. Business chambers, importers and hospitals warn the suspension of currency sales and bureaucracy in the new system will soon lead to shortages because they need efficient access to dollars to import goods. Venezuela imports more than 60 percent of its food, medicines and finished goods. On the Net: Government economic statistics, www.foronacional.gov.ve

www.channelnewsasia.com First created : 15 February 2003 1043 hrs (SST) 0243 hrs (GMT) Last modified : 15 February 2003 1043 hrs (SST) 0243 hrs (GMT)

A security scare shut part of Heathrow for 90 minutes and four men were arrested nearby as airports stay on a heightened state of alert on Friday.

Heathrow Airport's Terminal Two was closed for an hour an a half after a "suspect package" - later declared safe - was found.

Two people arrested in Hounslow, near Heathrow, on Thursday have been released without charge.

Anti-terrorist police have handed four others over to the immigration authorities, after separate arrests on Thursday in Langley, Berkshire, near Heathrow.

Meanwhile a 37-year-old Venezuelan man is still being questioned by police, after being caught trying to smuggle a live grenade through customs at Gatwick.

British Airways staff are travelling to Venezuela to investigate how the man managed to board a plane without the weapon being detected.

www.nytimes.com By EDWARD WONG Three leading airlines increased nearly all their fares by $10 each way yesterday.

The move, the most significant attempt at a fare increase since last summer, was an effort to re-establish pricing power as fares have hit record lows. But several industry experts raised doubts that the airlines would be able to keep the higher fares. With the possibility of a war, travel has continued to slump, they say, and the situation will only worsen if the United States attacks Iraq. Advertisement

The three carriers — Continental Airlines, American Airlines and US Airways — will also have to see whether their top rivals decide to match the increase. If those carriers — Delta Air Lines, Northwest Airlines and United Airlines — do not raise their fares, then the three will probably have to back down.

People in the industry are watching Northwest in particular, because it did not go along with several fare increases last year, forcing its rivals to return to lower fares.

Continental, the country's fifth-largest carrier, was the first to put the fare increase into effect yesterday morning .

"Although the airline industry is suffering from overcapacity and weak demand, this fare increase is necessary to get Continental back on the path to financial recovery," the company said.

Continental said the increase was necessary to help offset "dramatically higher fuel expenses."

American soon matched the increase, and US Airways acted by late afternoon, according to Terry Trippler, an air fare expert who works for CheapSeats.com.

Fuel is the second-highest expense for airlines, behind labor costs. In the last year, fuel prices have spiked because of the labor strife in Venezuela and tensions with Iraq, said John Heimlich, an economist for the Air Transport Association, the industry's main trade group. All the big airlines have a certain amount of their fuel hedged in case the price of oil goes up, but they have not been able to avoid paying higher prices on average.

The spot price for a gallon of jet fuel is now $1.20, more than double the 57 cents it was a year ago, according to the trade group. The price for West Texas intermediate crude oil is expected to be $34.25 a barrel this month, compared with $20.65 a year ago.

In December, airlines paid an average of 77.4 cents a gallon for fuel, up from 60.1 cents in December 2001.

The cost of crude oil, and thus jet fuel, will almost certainly go up if there is a war in Iraq.

Even so, there is no guarantee the fare increase will stick, experts said. That will depend on the market conditions for air travel, which are dismal right now. Furthermore, they said, carriers with relatively good cash reserves — Northwest, for instance — can better afford to keep fares lower than some of their competitors.

"The airline industry needs it," Michael Boyd, an airline consultant based in Evergreen, Colo., said of the price increase. "Whether it'll stick is another issue. With war jitters out there and other things, I don't know whether it'll stick."

Just after Christmas, US Airways tried adding a fuel surcharge of $10 each way on round-trip fares. American soon matched the increase, but the two carriers retracted their moves before the end of the year. Frontier Airlines, the low-cost carrier, tried adding a $5 surcharge each way around the same time, but eliminated the increase before the end of January.

TRAVEL ADVISORY; Some Airlines Revise Standby Rules

www.khilafah.com uploaded 15 Feb 2003

Oil prices have topped new 28-month highs in London as fears of war with Iraq rise and the US admitts its fuel reserves have fallen to their lowest levels since the 1970s Arab oil embargo. The price of benchmark Brent crude oil shot up 63 cents a barrel to $33.08 in early trade to levels not seen since November 2000.

In New York, US light sweet crude peaked at £36.01 a barrel, the highest level since September 2000.

Demand has been triggered by Arctic temperatures in part of the US as well as a two-month anti-government strike in Venezuela, a key fuel exporter to the US.

"Even without the threat of war in Iraq, there is still upside for crude prices," said Gordon Kwan, oil and gas analyst at HSBC in Hong Kong.

"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," he added.

Emergency measures?

The low level of stocks has prompted speculation that the US will release some of its emergency stockpile.

But there is likely to be reluctance to eat into reserves ahead of a possible war against Iraq.

Oil prices are also being governed by international politics and the perceived proximity of such a war.

Traders fear that a war could disrupt supplies from both Iraq, which exports under a special oil-for-food programme, and neighbouring countries.

Nervous investors

Despite the war fears, gold prices have been falling this week.

Gold is often seen as a safe haven investment for nervous investors in times of international tension, and the recent falls have taken some traders by surprise.

War jitters had helped gold to six-week-highs a week ago, trading at more than $390 an ounce.

But bullion dropped to $354.00 an ounce in London at 1200 GMT.

"People are very, very nervous indeed... day traders are bailing out as well," said Peter Tse, senior dealer at Scotia Mocatta in Hong Kong.

www.khilafah.com uploaded 15 Feb 2003 By JEFF GERTH

RIYADH, Saudi Arabia — The government of Saudi Arabia has increased security around its oil fields and processing centers after the discovery that employees of the state-owned oil company sympathetic to Al Qaeda were discussing sabotage plans late last summer, American and Saudi officials say. American intelligence officials discovered the conversations and alerted the Saudi authorities, who quickly arrested and interrogated the suspects, the officials added. The quiet thwarting of the potentially disastrous sabotage, disclosed in October by ABC News, is seen by officials here and in Washington as a model of cooperation for a relationship that has been under strain since the disclosure of the role of Saudis in the terrorist attacks of Sept. 11, 2001. Still, the sabotage case and the response to it underscore the deep anxieties about the security of Saudi oil when a war with Iraq could make it more valuable, but also more vulnerable, than ever. Intelligence officials say the discovery of Qaeda sympathizers inside Saudi Aramco is part of a worrisome trend: Al Qaeda's leadership appears to be increasingly focused on economic targets, especially the oil industry. A few weeks after the sabotage suspects were detained, a French supertanker carrying oil from Saudi Arabia was attacked off the coast of Yemen, in a plot that American and Arab officials say was orchestrated by Al Qaeda. About the same time, a Qaeda videotape surfaced showing Osama bin Laden's deputy, Ayman al-Zawahiri, calling for attacks on economic targets. The tanker attack had little impact on oil markets, but oil experts say any disruption of Saudi Arabia's oil production could be an economic disaster. Not only are the Saudis the world's largest oil suppliers, but they are the only ones with enough spare capacity to make up for large shortages from producers like Iraq or strike-plagued Venezuela. That is a role they have filled repeatedly in the last two decades. "To inflict economic damage, Al Qaeda doesn't have to hit the twin towers," said one senior intelligence official. "They can do it in their own backyard, where all the oil is." "Saudi Arabia's oil facilities are a target-rich environment," said one American intelligence official. He and other officials said the terror tactics that most worried them were computer-aided sabotage and the use of airplanes as missiles. During the Persian Gulf war 12 years ago, Iraq launched more than three dozen missiles into the oil-rich Eastern Province of Saudi Arabia. Some Saudis thought that was part of an unsuccessful effort to damage the Ras Tanura shipping and refining complex near the Persian Gulf, the gateway for most of the eight million barrels of oil that Saudi Arabia produces each day. "If you blew up Ras Tanura, you can't imagine the damage that would do to the United States," said an American oil executive active in the Middle East. Now, though, the concern has shifted somewhat. "The Saudis are more concerned about the threat from inside the country than from Iraq," said one Saudi oil executive who has been briefed on security measures. The ABC News report briefly noted that dozens of Saudi citizens had been arrested, but did not say how the discussions had been uncovered. Nor did it mention any of the suspects' connections to Saudi Aramco or Al Qaeda — information that has been closely held within the Saudi and American governments. Officials said the saboteurs' discussions had been more preliminary planning than a firm plot. They said some of the suspects had been released, though others remained in detention. Some are not Saudis, they said, while a small number worked for Saudi Aramco. American officials say they believe that Qaeda sympathizers are sprinkled throughout the Saudi government. The nexus of terrorism, oil and Saudi Arabia dates back three decades. In 1973 terrorists attacked oil tanks in Lebanon owned by Aramco, the joint venture between American oil companies and Saudi Arabia. The Saudis took control of the company in the 1980's and renamed it Saudi Aramco. Today it is the world's largest oil company, with 55,000 workers, most of them Saudis. During the 1980's, according to a former American intelligence official, the United States government did a secret study of the vulnerability of Aramco's installation at Abqaiq, the world's largest oil and gas processing center. Investigators found that the chemical reactions from a well-placed explosion could cripple Abqaiq's gas-oil separation plant for months, the former official said. Today Saudi Aramco has 58 separation plants, which are crucial to the transportation of oil. Saudi Aramco officials said they were unaware of the American study but had further tightened safeguards at their sites, which are guarded by a vast industrial security force. "Our people are well prepared security-wise," said Abdullah al-Saif, a senior vice president of Saudi Aramco. A senior Bush administration official agreed. "The Saudis deserve credit for having a very robust surveillance and detection system on their oil assets," the official said. Ali al-Naimi, the company chairman and Saudi Arabia's minister of petroleum and natural resources, said separation plants could be secured quickly and shut down in an emergency. But he added that "terminals and power systems could be a problem." One indication of the heightened security is an Interior Ministry directive, issued several weeks after the sabotage case came to light, instructing Saudi Aramco's security force to post "no photos allowed" signs at oil installations. During a recent visit to the country's newest and most sophisticated oil installation, at Shaybah in the red-duned desert known as the Empty Quarter, security was tight, especially at the main separation plant. Workers are flown in and out on company planes. Despite the remoteness of the site, buildings are surrounded by fences, their entrances watched by several guards. A control room was manned by only a handful of technical employees. Increasingly, Saudi Aramco's oil installations, including its separation plants, are run by computers. With a new war looming, American officials say Qaeda sympathizers do not represent the only potential threat to the Saudi oil supply. They also worry about the large Shiite Muslim population in the Eastern Province. Shiites make up 10 percent of Saudi Arabia's population and are generally treated as second-class citizens by the country's Sunni Muslim establishment. In 1996, Shiite terrorists planted the truck bomb that killed 19 American Air Force personnel at the Khobar Towers housing complex near Dhahran, home of Saudi Aramco. Mr. Saif, the Saudi Aramco executive, said the treatment of Shiites at the company was "not an issue." But American oil executives and government officials said the Saudi oil company tried to keep Shiites out of sensitive jobs like computer operations. Thomas Stauffer, a Washington lawyer who has worked for Saudi Aramco, said a United States-led war against Iraq could provoke anti-American and anti-Israeli feelings among Saudi Aramco workers, making it harder to produce extra oil. "A strike or a shutdown is a very real risk if the U.S. goes to war in Iraq," Mr. Stauffer said, adding that "Aramco's staff is well aware of the risk." American officials say their security concerns have been heightened by a spontaneous and rowdy demonstration by 6,000 to 10,000 people last spring outside the American Consulate in Dhahran, near the oil fields. Ibrahim al-Mugaiteeb, a Saudi dissident who says he went on Al Jazeera television to report on the demonstration, said, "Shiite oppression and discrimination is not as bad as it used to be, because the 1979 revolution in Iran gave a lot of hope." But he said he was announcing the formation of an activist group, Human Rights First, because the Saudi authorities continued to block free expression.

Source:  New York Times