www.globeandmail.com By JOHN SAUNDERS and STEVEN CHASE Thursday, February 20, 2003 - Page B9

WASHINGTON and OTTAWA -- There are as many as 180,000 Canadian tax dollars at work in today's issue of The New York Times, where you will find a full-page ad from something called the U.S.-Canada Partnership for Growth, which gets most of its money indirectly from Ottawa but says it is not a Canadian government front.

The $125,000 (U.S.) ad, one of a series in U.S. newspapers and on U.S. television, seems at first glance to be about oil, but aims to persuade Americans to give Canada a break on trade in lumber. "Reliable energy. Right next door," it says, stressing that Canada and the United States are "steady allies" and that the United States gets more oil and natural gas from Canada than from Saudi Arabia, Venezuela, Mexico, Kuwait or any other country.

The main sponsors, not named in the ad, are the Canadian government and the Forest Products Association of Canada, which got a $17-million (Canadian) federal grant last year to run a two-year lumber information blitz. FPAC confirms that it is the "primary funder" of the ads, and Canada's Department of Foreign Affairs and International Trade says it is given a chance to check and revise them before they run.

James Blanchard, formerly a Michigan governor and a U.S. ambassador to Canada, is one of the old Washington hands hired to serve as co-chairmen of the partnership.

"The idea very simply is that Americans generally have no idea of the magnitude of the trade with Canada and the jobs produced, and most people have very little idea of the incredible energy relationship with Canada," Mr. Blanchard said in an interview yesterday.

If people understood the situation, he said, they would see that there is no excuse for special U.S. import duties of 27 per cent on Canadian softwood lumber, which Washington alleges is unfairly subsidized through cheap provincial wood sales and dumped on the U.S. market.

"They've been seeing our TV ads and I have people come up to me and say, 'Do you know that we get more energy from Canada than anywhere? Do you know that?' They don't even know that I'm affiliated with the our Canada-U.S. Partnership for Growth."

The original ad in the series, run late last year, was a soft sell illustrated by a snapshot of two freckled-faced youngsters. "We grew up together," it said.

Another ad, scheduled for certain editions of USA Today tomorrow, is headed "Canada buys American." It points out that Canada is the United States's biggest trading partner and a major buyer of goods from Arizona or Pennsylvania or wherever.

Mr. Blanchard comes to the campaign as a consultant to Burson-Masteller, the giant New York public relations firm orchestrating the partnership's ad and lobby efforts. He said that his law firm receives a fee for his services as co-chairman but would not disclose the amount.

Mr. Blanchard said that some of the money going into the campaign is from the partnership's U.S. members, notably house builders, lumber retailers and others who stand to gain from lower lumber prices, but he declined to name the donors or to give a figure.

Communications director in the office of Trade Minister Pierre Pettigrew, Sébastien Théberge, said: "It is true that there is a competition for attention in the United States media to reach the American public and we believe we have a role to play in ensuring that the average American, as well as media and politicians in Washington and New York have a clear understanding of the importance of this two-way relationship."

www.ctnow.com February 20, 2003 By MICHAEL DOBBS, Washington Post Enough oil is stored in the deep, cone-shaped salt caverns along the Gulf of Mexico - most of them large enough to accommodate the towers of the World Trade Center - to replace a year of imports from Saudi Arabia. Originally conceived as a response to the oil crises of the 1970s, the Strategic Petroleum Reserve has become as much a part of the United States' strategic arsenal as the aircraft carriers, airborne divisions and spy planes converging on the Persian Gulf region. According to the Department of Energy, the 599-million barrel reserve constitutes the nation's "first line of defense" against disruptions in energy supplies. As President Bush prepares for war with Iraq, he has been pressured to use the reserve to calm an increasingly jittery market. In addition to the uncertainty caused by the Iraqi crisis, a general strike in Venezuela has helped push oil prices to new highs and slashed inventories in many parts of the world to critically low levels. Members of Congress from the Northeast - including Sen. Christopher Dodd of Connecticut - have urged Bush to release some of the reserves to ease heating oil prices, which have soared to an average $1.77 a gallon in Connecticut. If the past is a guide, and Bush follows the precedent set by his father in the Persian Gulf War in 1991, he probably will resist the temptation to tap the underground storage sites in Texas and Louisiana until the onset of any hostilities. If the attack on Iraq begins, he will order the release of some of the oil in the reserve, a move designed to signal the United States' ability to ride out any temporary panic over the oil market. If the war goes badly, and Iraqi President Saddam Hussein succeeds in torching Iraqi oil fields or hitting oil facilities in Kuwait or Saudi Arabia, the reserves would assume huge strategic importance. The 50 or so caverns in Louisiana and Texas contain enough oil to replace 53 days of lost imports. In practice, officials say, supplies should last considerably longer, as the United States buys much of its oil from such countries as Canada and Mexico, which would probably not be interrupted by a crisis in the Middle East. The Strategic Petroleum Reserve is "a powerful instrument," said John Shages, one of the Energy Department officials responsible for managing the network of storage sites, pipelines and loading facilities strung out along the Gulf of Mexico coast. "It gives the president a tremendous tool to use in the event of a severe disruption to the market, from an act of God to a political-military event." Because of the tightness of the international oil market, said Edward Porter, an economist at the American Petroleum Institute, the Strategic Petroleum Reserve could play "a much more central role" in a new Gulf war than it did in 1991. A decade ago, there was plenty of excess capacity in the oil market. After the war began in January 1991, prices dropped from more than $30 a barrel to about $20. Today, by contrast, it would be much more difficult to offset a likely loss of Middle Eastern oil, if the region became embroiled in war. Iraq alone sells 2 ½ million barrels a day to foreign countries, including the United States, through smuggling and "oil for food" arrangements approved by the United Nations. Although Venezuelan oil is slowly coming back on stream, as a general strike against populist President Hugo Chavez winds down, exports are no more than half those of pre-strike levels. According to oil analysts, the only country in the world that can significantly increase production levels practically overnight is Saudi Arabia, which has about 1 million barrels a day of excess capacity. In recent weeks, the Saudi government has boosted production to offset losses from Venezuela. But the Bush administration does not want to be held hostage to a potentially unstable Arab country rife with anti-Americanism that has previously used oil as a weapon against the United States. "We shouldn't allow U.S. national security to be dependent on decisions in Riyadh, when the president has the ability to take those decisions," said Edward L. Morse, who was responsible for international energy policy at the State Department during the Reagan administration. "The Strategic Petroleum Reserve allows the U.S. government to put much more oil onto the market (in the short term) than we can get from the Saudis." How much oil should be released from the reserve, and under what circumstances, is the subject of great debate among energy specialists. President George H.W. Bush was criticized for not acting after the Iraqi invasion of Kuwait in August 1990, when oil prices rose as high as $40 a barrel. He finally ordered a limited drawdown of 33.75 million barrels on Jan. 16, 1991, the same day he announced that U.S. warplanes had begun attacking Baghdad. By the time the oil reached the market, prices had fallen sharply, and the crisis was largely over. Last week, as the price of light sweet crude on the New York Mercantile Exchange rose to more than $36 - a 26-month high - calls for the release of oil from the reserves came from airlines hit by soaring fuel costs, refineries suffering from a lack of Venezuelan oil and senators worried about the rising price of both heating oil and gasoline for their constituents. Oil industry executives oppose the release of oil from the reserve, except in a national emergency. The Bush administration is keeping its options open. Energy Secretary Spencer Abraham said last week that the reserve should be used only in the event of severe supply disruptions, and not to bring down prices.

europe.cnn.com Thursday, February 20, 2003 Posted: 0809 GMT

PARIS, France (Reuters) -- French oil group TotalFinaElf posted a 13 percent rise in underlying fourth quarter profit on Thursday, fuelled by higher crude oil prices.

But Chief Executive Thierry Desmarest said oil prices would ease from their highs around $37 a barrel after a possible war in Iraq and that would give breathing space to a fragile world economy as supplies catch up with global demand.

"I think unfortunately there is going to be a war, but after that things should ease up because there is enough supply to meet demand globally,'' he said in an interview with television channel France 2.

Oil prices are near 29-month highs as the United States and Britain seek support for a possible attack on Iraq.

Desmarest was speaking after TotalFinaElf predicted a five percent rise in the company's own output each year through 2007.

It is shortening its name to Total and is seen as France's top contender for Iraqi deals if and when sanctions are lifted.

But he denied the name change was motivated by a wish to distance itself from a scandal surrounding former top managers at Elf Aquitaine, which it took over in the late 1990s.

The world's fifth largest oil company's unwieldy name had come to symbolise the merger boom of the 1990s as it bought Elf and another medium-sized oil company, Belgium's Petrofina.

TotalFinaElf, France's largest company, said its net income before exceptional items rose to 1.609 billion euros ($1.73 billion) in the fourth quarter from 1.424 billion a year ago.

Continuing share buybacks boosted pre-exceptional earnings per share to 2.44 euros from 2.11 previously, and Total said it would propose a net dividend of 4.10 euros for 2002, up eight percent from 2001 .

The results were slightly below analysts' expectations of net income before one-time items of 1.65 billion euros for the quarter, but analysts called the figures solid and said investors would be pleased its production targets.

"At first glance Total's net profit was slightly light but this was partly due to write-downs on Argentinian assets. Its EBIT was in line with our expectations, its share buy-back continues and it gave encouraging production targets,'' said one London-based energy analyst.

The company's oil and gas production rose eight percent in 2002's last quarter to 2.532 million barrels of oil equivalent per day, despite lengthy strikes in Venezuela.

This was in stark contrast with some of the oil majors like BP who failed to deliver on production targets last year.

Paris equity traders said Total could however suffer a double hit from lower oil prices and the weakening the U.S. dollar, the currency on which oil transactions are based.

"What worries people is the dollar exchange rate. Lower oil prices would be one thing for Total, but lower crude prices and a simultaneous further weakening of the dollar would be disastrous for the company,'' said one trader.

reuters.com Thu February 20, 2003 01:52 AM ET By Tanya Pang

SINGAPORE (Reuters) - Oil prices were little changed near a 29-month peak Thursday, ahead of new data that may show further shrinkage in wafer-thin U.S. fuel stockpiles as the United States gears up for a possible invasion of oil-rich Iraq.

U.S. light crude CLc1 slipped 10 cents to $37.06 a barrel, just below a high at $37.45 struck Wednesday, which marked the highest level since September 2000 when soaring oil markets prompted the U.S. government to release emergency reserves.

Crude is just $4 below an all-time peak at $41.15 posted in the build up to the Gulf War in 1990.

Continued disruptions to strike-bound Venezuelan oil exports and possible interruptions to crude flows from Nigeria as oil workers down tools in a dispute over pay and conditions have stoked prices higher as well as the threat of an attack on Iraq.

Venezuela is fifth in world oil exporter rankings, while Nigeria is seventh and Iraq eighth.

"The market's still preoccupied with potential war, but it's not only that. Inventories are running very low and there's a real lack of any meaningful spare capacity," said Mario Traviati, head of energy at Merrill Lynch in Asia-Pacific.

"Anymore disruption to production would leave the world short of oil," he said.

The Energy Information Administration (EIA) is due to release its weekly U.S. fuel supply assessment Thursday, a day later than usual due to the public holiday earlier this week.

The EIA figures are used as a barometer for the demand and supply balance in the world's biggest oil consumer.

Figures last week showed U.S. crude stocks running at the lowest levels since the mid-1970s at just below 270 million barrels, the minimum needed to keep U.S. refineries operating.

A blast of Arctic weather has pumped up demand for heating fuel in the United States, where fuel supplies were already running down due to the anti-government strike in Venezuela, which crippled the domestic oil industry and all but cut off some 13 percent of U.S. oil imports.

Analysts forecast this week's EIA report would show further declines, with crude seen off by one million barrels and distillates, which include key heating oil, falling by three million barrels.

OPEC PLEDGES OIL

Striking state oil workers said Wednesday that Venezuelan crude production was at 1.4 million barrels per day, although the government pegged output closer to two million bpd.

Before the strike began on December 2, production was a little over three million bpd.

Exports from Nigeria, Africa's biggest producer, appeared not to have been affected so far by a strike by senior oil workers, who began their dispute Saturday.

Talks to resolve the dispute were due Thursday, postponed from a day earlier to allow union leaders to travel to Abuja.

Nigeria and Iraq export roughly two million bpd and, along with Venezuela, are members of the Organization of the Petroleum Exporting Countries.

OPEC has pledge to maintain stable supplies to the global market of 76 million bpd even in the event of war.

A Gulf source said Wednesday that Saudi Arabia, the world's biggest exporter, would support a temporary suspension of the cartel's official output limits if an attack halted overseas sales from Iraq.

The senior OPEC delegate said that even if OPEC did not formally suspend production limits, members with spare capacity would pump at will.

OPEC's current production ceiling stands at 24.5 million bpd with most members near to or at full capacity. The cartel is due to hold a policy meeting on March 11, which may be about the timing of a strike on Iraq.

The United States and Britain said Wednesday they were working on a new resolution seeking United Nations' authorization to use force to disarm Iraq of banned weapons they claim it has stocked. The new resolution is expected to be submitted to the Security Council within a week.

Diplomats said Washington was not likely to push for a vote on the resolution until well into the first week of March after another report by U.N. weapons inspectors, an indication that any attack against Iraq will not take place until the second week of the month at the earliest.

Iraq denies U.S. allegations that it has stocked any biological, chemical or nuclear weapons.

www.quicken.com Thursday, Febuary 20, 2003 01:26 AM ET  Printer-friendly version Associated Press

PUTRAJAYA, Malaysia -- Malaysian Prime Minister Mahathir Mohamad warned that any war with Iraq could push the price of oil up to US$50 a barrel and spark a surge in terrorism by angry Muslims.

Mr. Mahathir, who assumes chairmanship of the Non-Aligned Movement next week, also said that a new U.N. resolution on Iraq shouldn't merely rubber-stamp efforts by the U.S. and U.K. to justify an attack.

"It must be meaningful, not just a change of words with the intention that whatever happens, war must be declared on Iraq," Mr. Mahathir said in an exclusive interview with the Associated Press.

Washington and London are preparing to introduce a new security council resolution that could pave the way for military action against Baghdad if it fails to prove it has eliminated all weapons of mass destruction.

Mr. Mahathir said this was unacceptable to the Non-Aligned Movement - which groups 114 mostly developing nations and is one of the world's largest political organizations.

In a wide-ranging interview, Mr. Mahathir, who has been in office since 1981, warned that Iraq might destroy its oil fields if attacked and that world prices would rise quickly.

"Looking at what Iraq did in Kuwait, where it burned its oil fields, for a long time its oil will not be available and we still have dependence on Saudi oil and oil from Venezuela ... which of course will cause a rise in the price of oil maybe to US$50 a barrel," Mr. Mahathir said.

Nymex crude-oil futures rose Wednesday to a fresh 29-month high, with the March contract up 20 cents to $37.16 a barrel, as traders continued to fret about military action against Iraq.

The Malaysian leader also predicted that an attack on Iraq could set back efforts against international terrorism.

"I don't think overthrowing Saddam and trying to install a new democratic government is a solution that can actually happen," he said. "At the same time, it will cause a great deal of anger among Muslims worldwide and will contribute toward increasing the possibility of terrorism."

Malaysia has been an active ally in the U.S.-led war on terrorism, arresting scores of suspected terrorists and assisting Indonesia in its hunt for militants suspected in nightclub bombings in October on the Indonesian island of Bali where more than 200 people died.

But Mr. Mahathir criticized Washington's conduct of the war on terrorism, saying its focus had shifted to the confrontation with Iraq.

Mr. Mahathir complained that the West ignored a key cause of religious extremism, namely "the expropriation of Palestinian land to create the state of Israel."

"We insist that you should look into the causes. People don't just blow themselves up without reason," Mr. Mahathir said.

Dow Jones Newswires 02-20-03 0126ET