straitstimes.asia1.com.sg

Chavez hails arrest of strike leader Carlos Fernandez as the opposition warns of a political witch-hunt

CARACAS - Venezuelan police on Thursday arrested a top industrialist for civil rebellion after he led a strike against President Hugo Chavez.

Carlos Fernandez's arrest has been condemned by the opposition as illegal. -- AP

The President's opponents feared the arrest was the start of a political witch-hunt.

Shots rang out as protesters and private bodyguards faced off with the state security officers who grabbed Mr Carlos Fernandez outside a Caracas steakhouse about midnight on Wednesday.

The white-haired executive was bundled into a waiting car, officials and witnesses said.

A judge ordered Mr Fernandez and union boss Carlos Ortega, who led a crippling two-month shutdown to oust Mr Chavez, detained for rebellion against the state, sabotage and other charges.

Mr Ortega told reporters by telephone that he had gone into hiding.

Opposition leaders, who accuse Mr Chavez of wielding power like a dictator, said they would step up their demonstrations to protest against an arrest they condemned as illegal. Their complaints were dismissed by the Attorney-General.

'This is not just aggression against these two people. It's aggression against Venezuela's freedoms,'' union leader Manual Cova said.

Mr Chavez hailed the arrest of Mr Fernandez, a prominent private sector leader, as belated justice for 'terrorists'.

The President, who was briefly ousted in a coup in April, has taken a tough stance against opponents since strike leaders called off their nationwide shutdown early this month.

He has declared 2003 as the 'year of the offensive'.

'These people should have been jailed a long time ago,'' he said, grinning widely as he recounted hearing about the arrest.

A few thousand frustrated demonstrators, some screaming 'Free Fernandez', blocked a major Caracas highway as motorists jammed other parts of the capital with their vehicles, honking horns and flashing headlights in a show of support.

The arrest rattled the opposition, already reeling from the killings of three dissident soldiers and an anti-Chavez protester.

Police say the deaths probably involved a personal grudge, but grieving relatives blamed political persecution.

'We've tried flags, we've tried with whistles,' said Mr Luis Alberto, as he took part in an opposition rally.

'The world has seen our frustration but nothing has changed.'

The government crackdown triggered concern from the international community.

The US State Department called the arrest a 'worrisome development' that could undermine talks between the government and opposition over elections.

Mr Chavez, elected in 1998, has vowed to crack down on foes he says are trying to topple him by sabotaging the oil industry of the world's No 5 petroleum exporter. He has clamoured for judges to jail strikers he calls coup-mongers. --Reuters

ogj.pennnet.com By OGJ editors

HOUSTON, Feb. 21 -- Futures prices for oil and petroleum products fell Thursday as traders grappled with conflicting reports on US oil inventories by the US Department of Energy and the American Petroleum Institute.

DOE officials said Thursday that US oil stocks rose by 3.1 million bbl to 272.9 million bbl last week, while API reported those inventories fell by 3.34 million bbl. But since both indicated a significant increase in US imports, analysts said, traders apparently assumed there were errors in the API figures that would be corrected later.

DOE estimated that weekly crude imports surged to 8.8 million b/d, the highest level in 8 weeks.

Increased supplies of heavy crude from the Persian Gulf producers and Venezuela, coupled with extensive turnaround activity among US Gulf Coast refineries, are widening price differentials between light and heavy, sweet and sour oils.

"This will improve coking margins for several major refiners," said analysts Thursday at UBS Warburg LLC, New York.

Other observers said the oil market also gave up some of its war premium as reports leaked out that military action against Iraq might be delayed by some weeks as the US tries to secure more international support for such action.

Market prices The March contract for benchmark US light, sweet crudes dropped 37¢ to $36.79/bbl Thursday on the New York Mercantile Exchange, while the April position fell 92¢ to $34.74/bbl. Heating oil for March delivery plunged 4.06¢ to $1.06/gal. Unleaded gasoline for the same period lost 3.64¢ to 96.58¢/gal on NYMEX.

However, the March natural gas contract inched up 2.8¢ to $6.16/Mcf. "The market opened steady but soon jumped higher after the storage report was released, hitting a daily high of $6.22(/Mcf)," analysts reported Friday at Enerfax Daily. But the price then backed off as a result of profit taking to end near its opening level.

The US Energy Information Administration said 203 bcf of gas was pulled out of storage last week (OGJ Online, Feb. 20, 2003).

"The record levels of regional draws reported by the EIA since the start of 2003 have taken a whopping 1.2 tcf from storage and left capacity at an extremely bullish 36% by mid-February, compared with 59% (during the same period) in 2002 and a 42% 3-year average," said analysts Energy Security Analysis Inc.

They said, "By the end of the winter heating season, US natural gas storage levels could drop as low as 19%, the same bullish levels seen in the spring of 2001."

In London, the April contract for North Sea Brent oil fell 77¢ to $31.56/bbl on the International Petroleum Exchange. The March natural gas contract gained 5.2¢ to the equivalent of $2.81/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 47¢ to $31.48/bbl Thursday.

www.msnbc.com By Martin Wolk MSNBC

Feb. 21 — Anyone who feared rising inflation after this week’s startling report on producer prices can breathe a sigh of relief knowing that consumer prices barely budged last month outside the energy sector. But don’t celebrate just yet: Rising energy prices are pinching consumers this colder-than-normal winter, putting yet another damper on an already sluggish economy.          RETAIL ENERGY PRICES ROSE 4 percent in January alone and are 14 percent above year-ago levels, according to Friday’s Consumer Price Index. A strike in Venezuela, unusually cold weather in much of the country and the looming prospect of military action in Iraq all are playing a role in driving up the price of oil and natural gas, analysts say.        Volatile energy prices routinely are filtered out of monthly price reports to get a measure of “core” consumer inflation, which was a nominal 0.1 percent last month. But persistently higher fuel prices have the effect of a not-so-hidden tax increase, robbing consumers of otherwise discretionary income and denting confidence every time motorists drive by the corner gas station, said Ethan Harris, chief economist for Lehman Bros.        “It’s creating a new source of drag on the economy,” said Harris, estimating the increase in energy prices will trim about 0.5 percent from first-quarter growth, which is expected to be about 2 percent.        “It’s been very broad-based, so it’s a pretty significant hit,” Harris said. “There is also a psychological effect that goes along with it. No other price is so widely visible.”         PAYING UP AT THE PUMP        Gasoline pump prices are up about 23 cents a gallon since December, leading Merrill Lynch economists to estimate the nation’s $10 trillion economy is growing at a rate about 0.3 percent slower than it otherwise would have. (Economists generally figure that every penny-a-gallon increase in the price of gasoline drains a little more than $1 billion in consumer spending power over the course of a year.)        And it could get worse before it gets better, with oil prices likely to rise above their 1990 peak of $41 a barrel from the current $35 even in a “quick war,” according to the Merrill analysis.        None of this is to suggest that rising oil prices will knock the struggling economy back into recession, which is still seen as unlikely. Oil prices would have to rise above $60 a barrel to begin to approach the energy price shocks of the 1970s and 1980s, according to the analysis.        But Bill Dudley, chief economist at Goldman Sachs, warns that inflation, driven by energy prices, could be “sticky” in coming months, posing a long-term challenge to the Federal Reserve and other economic policy-makers.         LONG-TERM RISKS        Given the relatively high unemployment rate, limited wage pressure and slow economic growth, there is little risk of a lasting increase in inflation over the near term, Dudley and other said. Last month’s 0.9 percent increase in core producer prices and 0.1 percent increase in core consumer prices suggest that businesses face a substantial “margin squeeze” and are unable to pass along their price increases, said Gerald Cohen, senior economist for Merrill Lynch.        But over the longer term, “there are some more serious inflation risks,” Dudley said in a report.        For one thing, the Fed apparently has been spooked by the prospect of Japanese-style deflation and may be willing to tolerate a higher sustained inflation rate to ensure steady economic growth, Dudley said. Second, last year’s record trade deficit makes it clear the dollar, which has fallen about 5 percent over the past year, “will need to fall considerably further to restore U.S. trade competitiveness,” leading to higher import prices, he said. Finally productivity growth could slow as the pace of deregulation and trade liberalization slows from the 1990s.

Playing now: • Stocks notch another weekly gain • CPI rises on energy costs • Sotheby’s not for sale       Last month’s 1.6 percent increase in producer prices — the biggest monthly jump in 13 years — stole most of the economic headlines this week but the number was widely seen as an anomaly. Wholesale fuel prices rose about 15 percent last month, and prices for passenger cars and light trucks were up by about 3 percent, according to government figures. But the Labor Department analysis fails to take account of the low-interest loans that keep the effective price of passenger vehicles relatively unchanged, said Harris of Lehman Bros.        Other recent indicators hint at persistent strength in the economy, including a report that housing starts surged in January to their strongest pace since the late 1980s. But as the nation’s focus increasingly turned to the prospect of war in Iraq in late January and early February, the economy appears to have slowed, said Harris. Regional manufacturing indicators in the mid-Atlantic and New York regions turned down in early February, and a President’s Day blizzard brought retail activity to a grinding halt for several big shopping days in much of the nation.        “Generally the data for December and January look OK, but we’re already getting hints that February is going to be a lot weaker,” Harris said. “You can kind of feel the economy slowing down. ... I think we’ll get softer data in February and March, then hopefully some positive resolution around Iraq and we’ll begin picking up again.”        But he cautions that a “bad war” or even no war at all could leave the economy hanging fire, stuck in slow-growth mode for much of the year.        “It’s hard to see how the economy gets back onto its feet with Iraq hanging in the background,” he said.

www.upi.com By Gregory Fossedal Special to UPI From the Business & Economics Desk

WASHINGTON, Feb. 21 (UPI) -- As regular readers know, "The Bottom Line" has advised investors to hold a significant position in Russian stocks for some time, and funds we manage and advise have been invested accordingly over the last several years. It's been a great ride, with the Moscow Times Index nearly tripling since January of 2000 and rising more than ten-fold since 1999.

It may also be a sign that the Russian market as a whole is about to take a breather, settling into a slower growth track of 10-20 percent per year, with some sectors actually heading south.

It's not time to go short, but may well be time to lighten up, take profits, and find countries that are in the position today that Russia was in several years ago. (Some leading candidates, to be discussed in future articles, include Argentina, Israel, Southern Africa -- ex South Africa itself --, India, Iraq, and the Philippines.)

Even after this long surge, Russia today has several factors in its favor. Over most of the last few years, each has been generally moving in the right direction for Russia. These positive factors account for true political and economic synergy, which is generally what's needed for markets to double and triple in a matter of a couple years.

Factor one is the price of oil, Russia's largest export and the source of more than 40 percent of its federal government revenues last year. This has put Russia in a strong fiscal position, enabled it to pay off some (but not all) of a large number of short-term debt obligations, and put the budget in surplus. The surplus has relieved pressure on the tax code, particularly pension liabilities, which had been driving much of the Russian economy underground. In Russia, as in Sweden, 80 percent tax rates make for an economy of barter and bribes.

Oil at $35-plus a barrel, however, is unlikely to last. Oil prices are nearing their peak, with uncertainty over both Iraq and Venezuela driving oil close to $40 -- not coincidentally the price at which it peaked during the last Gulf War.

To be sure, there are ways to hedge against declining oil prices, both for the Russian government and investors in Russia. But many important effects of a declining oil price may have to do with feedback impacts that spread throughout the political economy. If you don't believe this, consider what happened to prices for houses, commercial real estate, savings and loans, financial services, and other sectors in Houston, Texas during the 1980s and 1990s oil price busts. Political careers ended and webs of corruption were uncovered.

We may be seeing the beginnings of such troubles in the scandals over Lukoil today in Russia. With a parliamentary election less than a year away, it wouldn't be surprising if Vladimir Putin's supporters, authors of the current prosperity, were to lose seats in the traditional manner of incumbent parties -- even successful ones -- and move into a more defensive posture.

Diplomatically, Putin appears well-positioned. This matters, especially for emerging countries. A strong and respected Russia has a stronger case for joining the World Trade Organization, and resolving trade disputes with protectionists both in Europe and the United States. Putin has built a friendship with George W. Bush that few European or Asian leaders save Tony Blair enjoy, but at the same time maintained his independence.

Still, it's hard to see how Putin has been able to use, say, his support for the war on terror, or acquiescence in America's strategic defense deployment plans, as leverage for relief from U.S. or European trade curbs. My own guess is that in the months after Iraq, Colin Powell will lead a rigorous effort to rebuild America's relationship with Germany, France, Russia, Korea, and others -- and these countries will benefit from dropped trade curbs, new free trade agreements, or both. Even if that's right, however, it's months away, and you can buy it when there are early signs of a détente.

The strongest bull case for Russia rests on domestic economic policy. This is, to be sure, the most important element of any international investment strategy, but particularly one that is buy-and-hold, focused on the long run, rather than trying to time buys and sells and make gains from trading. (The fund managers and advisors that work with me tend to do some of each, having a base position that is still "long Russia," but moving in and out on the margin based on events.)

The Russian tax code, thanks to Putin's reform, is one of the most labor-friendly in the world, with a 13 percent flat rate on income rivaled only by Hong Kong, Bolivia, and Botswana. The real estate market has been deregulated and is opening up to foreign ownership -- another Hong-Kong style measure that should not only be a boon for all Russians, but will make the whole country more attractive as a place to locate top-level managers and high-value-added production.

There are many little flies in this ointment, however. Russia's information technology sector, for example, has enjoyed much of its surge through piracy. Where piracy is concerned, China, with more clout with U.S. companies who feel they dare not alienate a nation of more than a billion consumers, is better positioned to steal and get away with it. Where honest, low-wage software and IT work is concerned, India seems to have an advantage.

Russia's stock market is loaded with companies with price-earnings ratios as low as 1-1, and averaging less than 3-1 overall. Still, one must question those earnings statements, and beware of the risk for catastrophic declines in individual companies likely to be involved in intellectual property suits, domestic or international corruption scandals, or sheer continued economic weakness in such major Russian trading partners as Germany and France.

Given this mixed picture, we're still invested in Russia, particularly the telecom, aerospace, real estate, and mining sectors. But we are selling off some of our holdings, and establishing a growing short position on oil as a hedge -- not just against Russian oil company declines per se, but the kind of political spillover that seems to happen in commodity economies (Texas, Mexico, Venezuela) when things turn sour. Emerging markets portfolios that have had Russia at 10 to 12 percent of assets should probably be moving that down to 6 to 8 percent, particularly when oil prices drop.

Are the bears gathering in Russia? Hardly. But the bulls look to be slowing from a stampede to a gallop, maybe even a trot. In a world where very few markets have been up, one can give some advice on Russia that's rare but refreshing: Take some profits.

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(Gregory Fossedal is chief investment officer of the Democratic Century Fund, managed by the Emerging Markets Group, dcfund.net. His firm may hold some of the securities mentioned in "The Bottom Line." Individual investors should contact their own professional adviser before making any decisions to buy or sell these or any related securities.)

allafrica.com Vanguard (Lagos) February 21, 2003 Posted to the web February 21, 2003 Victor Ahiuma-Young

LONG queues at filing stations, reminiscent of the Abacha era, returned to Lagos metropolis and other parts of the country, yesterday as the current fuel scarcity worsened. The re-emergence of the queues occurred on a day workers of the Department of Petroleum Resources (DPR) suspended their seven-day old strike, while US crude oil prices broke above 37 dollars a barrel for the first time in 29 months with prospect of a war in Iraq influencing fear in world market.

The queues spilled onto highways, causing traffic jams in many parts of the Lagos metropolis. Private car owners and commercial drivers in their hundreds abandoned their businesses to join in the queues with a view to buying fuel. The fuel black market which had practically disappeared is also back, with the operators hawking fuel along highways.

Yesterday, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) directed their striking members in DPR to suspend their seven-day industrial action following a meeting in Abuja with government officials.

General Secretary of PENGASSAN, Mr. Kenneth Narebor, told Vanguard on telephone that the government had now agreed to work with the two unions in the oil industry as well as the National Assembly to ensure speedy passage of the DPR Autonomy Bill, the bone of contention. DPR management and the workers had, Wednesday, in Lagos reached some understanding concerning the welfare of the workers.

"We have concluded the meeting with government officials. The Special Adviser to president Obasanjo on petroleum matters, Dr. Rilwan Lukman, has promised to work with the workers and the National Assembly to ensure speedy passage of the DPR Autonomy Bill. So, DPR workers have agreed to suspend the action. The communique reached has been taken to Dr. Lukman and other government officials. There are other issues in the communique. We shall make it available soon."

Vanguard also gathered yesterday that contractors supplying petroleum products to the country have been putting pressure on government to review the terms of their contracts in line with the rising crude oil prices in the international market. Sources close to the Nigerian National Petroleum Corporation (NNPC) said the contractors had actually reduced the volume of petroleum products they supply to the country in an effort to force government to re-negotiate with them and the reduction in supply is believed to be the cause of the re-emergence of queues at the filling stations in the last few days. The source said, however, that NNPC had so far not yielded to the pressure as that would amount to hiking the pump prices of fuel.

"Since the Venezuela crisis and the Iraq/US face-off started, which has shot up the prices of crude in the international market, the contractors supplying petroleum products to the country have been putting pressure on NNPC to re-negotiate the terms of their contracts in line with the rising crude price in the international market. You know these contractors have a ready market where they can take their products to and make the profit they are after," the source said.

"Ordinarily, the NNPC should not have bothered because a contract is a contract. They have been benefitting from the contract before this time and NNPC did not call for a re-negotiation. But the problem facing NNPC is that most of these contractors were politically appointed, hence the corporation is in a fix. Not until this issue is resolved, this fuel scarcity will persist."

-US oil prices hit fresh 29-month high

However, US crude oil prices broke above 37 dollars a barrel for the first time in 29 months, Wednesday, as the prospect of a war in Iraq instilled fear in world markets. Concern over the possibility of short fuel supplies in the United States also kept prices higher a day before the release of government and private data on US oil stocks. New York's benchmark light sweet crude contract for delivery in March advanced 20 cents to 37.16 dollars a barrel, the highest close since September 2000.

Earlier, London oil prices moved in the opposite direction. Brent North Sea crude oil for April delivery slipped 23 cents to finish at 32.31 dollars per barrel. "We're waiting for tomorrow's data (on oil stocks), said A. G. Edwards analyst Bill O'Grady, forecasting a decline of 1.5 million barrels in crude stocks. Most analysts expected stocks to rise, he said. Trade was volatile, he said. "We chopped around all day."

Analysts in London said prices were propped up by the threat of war despite a British press report that Britain was pressing the United States to give UN weapons inspections more time. "People just don't want to be short of this market ahead of a possible war and tomorrow (Thursday)'s US stocks data," said Prudential Bache oil broker Tony Machacek. The Times newspaper said British Prime Minister Tony Blair was trying to buy weapons inspectors three more weeks before the United Nations was asked to trigger military action against Iraq.

In a front-page report, it said Blair and Jack Straw, the foreign secretary, were suggesting that a crunch meeting of the UN could take place on March 14. But GNI-Man Financial analyst Lawrence Eagles said comments Tuesday by US President George W. Bush indicated that a war was unlikely to be averted for long. "War is my last choice, but the risk of doing nothing is even a worse option," Bush said, adding that while UN backing for a US-led attack on Iraq would be useful it was not necessary. Meanwhile, analysts said, the market eyed developments in Nigeria where junior oil workers joined a three-day-old strike by government inspectors. The country's oil companies said the strike had so far had no impact.