www.voanews.com VOA News 25 Feb 2003, 17:30 UTC

Authorities in Venezuela say two separate explosions have damaged the Spanish embassy and the Colombian consulate in Caracas.

Officials say at least four people were injured when powerful plastic explosives rocked the buildings and surrounding areas early this Tuesday morning.

Police say the first blast destroyed the Spanish embassy's gate and shattered windows in adjacent buildings. Minutes later another explosion shook the Colombian consulate, not far away. That blast also broke windows and damaged nearby structures.

Police say no one has claimed responsibility for the attacks. But they recovered pamphlets signed by the pro-government Bolivarian Liberation Force at the scenes of both incidents.

The attacks come less than two days after President Hugo Chavez warned both Spain and Colombia not to interfere in Venezuela's internal affairs. The two countries, along with other nations, had expressed concern last week about the government's arrest of one of the country's opposition strike leaders, Carlos Fernandez.

The business leader is now under house arrest and accused of treason and other crimes for his involvement in a two-month long strike aimed at toppling President Hugo Chavez. Another strike leader, Carlos Ortega, went into hiding after a judge issued a warrant for his arrest.

Venezuela's Deputy Foreign Minister, Arevalo Mendez, has condemned Tuesday's bombings.

www.businessweek.com FEBRUARY 25, 2003 INSIDE WALL STREET ONLINE By Gene Marcial

Money manager Stephen Leeb says the time is now -- and the price is right -- to get into a select few defense and energy stocks   Gene Marcial is BusinessWeek's Inside Wall Street columnist

With war rhetoric heating up to its highest levels yet, the stock market continues to erode. Rocked by an impending conflict with Iraq, investors are rushing for the exists. Where do you hide or park your money in these days of doom and gloom? For some courageous few, the place to be is defense and energy stocks. To such professional value players, these groups have never been more attractive -- or cheap.

"Now is the time to buy stocks that won't get hurt -- or will even benefit -- if the Iraq situation worsens," says investment veteran Stephen Leeb, president of Leeb Capital Management. Defense and energy companies are the two clearest beneficiaries of any hostilities in the Persian Gulf, he contends. Leeb thinks the big guns in defense are the surest bets: Northrop Grumman (NOC ) and General Dynamics (GD ) top his list. In energy, Leeb favors Anadarko Petroleum (APC ) and ConocoPhillips (COP ). EARLIER LIFT.  Defense stocks look like a no-brainer in the current situation, since they should harvest gains from increased military spending. Yet at this point, they haven't been the big winners that people would expect. In mid-2002, their share prices anticipated the conflict with Iraq and rocketed to high levels, only to come down in November. Consequently, defense stocks have underperformed in the past several months. This big drop, however, is in fact a great buying opportunity, argues Leeb. General Dynamics, now trading at $61 a share, is way down from its 52-week high of $111.18. And Northrop, now $88, is also well below its 52-week high of $135. From here on, says Leeb, the U.S. will obviously need a very strong military apparatus to protect its interests -- particularly oil -- in the Middle East, especially if Iraqi dictator Saddam Hussein has been ousted. Moreover, the U.S. will, more than ever, need a strong homeland defense infrastructure after its invasion of Iraq -- which appears to be a foregone conclusion to many. The U.S. has to expect increased terrorist activity at home. DRAMATIC POTENTIAL.  In Leeb's view, Northrop and GD fit the bill in such a scenario. Northrop is now a "complete defense company with unassailable stakes in every major defense-related area, including electronics and network-centric warfare," notes Leeb (see BW Online, 1/7/03, "The Network Is the Battlefield"). "We expect profits and cash flow to grow at double-digit rates for the foreseeable future," he says. Northrop trades at a discount to the S&P 500-stock index and comparable defense contractor Lockheed Martin (LMT ). This points to a dramatic upside potential for Northrop during the next 12 to 18 months, Leeb adds. Its free cash flow of an estimated $7 a share, figures Leeb, will likely rise to well over $11 a share by 2005. He expects Northrop to earn $5 a share in 2003, vs. diluted earnings of 34 cents in 2002. His stock price target: $100. GD gets marks nearly as high as Northrop, says Leeb. What has been weighing down GD shares is its ailing Gulfstream aircraft unit, which generates some 25% of total revenues. Gulfstream will limit GD's price-earnings expansion even when the company turns the corner, warns Leeb. But GD is "a prime defense contactor with a high level of free cash flow and strong growth prospects in the forseeable future," says Leeb. He thinks the stock, now trading at a p-e of 11, is a bargain up to $70 a share. He sees GD earning $5.50 a share in 2003, vs. $4.52 in 2002. "HUGE DISCONNECT."  In energy, oil-company share prices have lagged behind the jump in crude prices. Tina Vital, oil analyst at Standard & Poor's, thinks worries about the sustainability of oil's current prices and the fate of the U.S. economy, given the prospect of war in the Persian Gulf, have contributed to the oil stocks' weakness. But she sees the price of oil remaining high in the forseeable future. And Vital says S&P economists still believe that the U.S. economy will pick up in the second half, which would bode well for oil demand. One of Leeb's oil picks, Anadarko, trading at $46 a share -- off its 52-week high of $58 -- is an independent oil-and-gas explorer with operations in the U.S. and Canada, as well as Tunisia, Algeria, West Africa, Venezuela, Oman, and Qatar. Anadarko is a prime example, says Leeb, of how the prices of crude oil and gas and the stock prices of oil companies are out of sync. Anadarko's share price has yet to catch up with the spike in natural gas -- its most important commodity. Gas has nearly tripled in price, and oil -- which accounts for more than 40% of production -- has also moved up sharly. "This huge disconnect means Anadarko trades at a substantial discount to its underlying value," says Leeb. Its earnings in 2004 could easily exceed $6 a share, he figures, up from an estimated $3.90 in 2003. His stock-price target: $70. CLASS LAGGARD.  ConocoPhillips, an integrated energy company that explores for, produces, and refines oil, is trading at $49 a share, down from its 52-week high of $64. Leeb singles it out among other integrated oil companies because of the synergies from the 2002 merger of Phillips and Conoco, which created the ConocoPhillips giant. Cost savings plus modest production increases should translate into double-digit profit growth for at least the next three years, he estimates. ConocoPhillips' current PEG (price-to-earnings ratio divided by its growth rate) is the lowest in its class, notes Leeb. Like many other major oils, ConocoPhillips is also attractive for its 3% dividend yield, says Leeb, whose price target is $50. With the major stock indexes trading around their recent lows, these oil and defense shares could provide at least some shelter from the storm spiraling out from the widely feared -- and expected -- conflict with Iraq.

Marcial is BusinessWeek's Inside Wall Street columnist

abcnews.go.com The Associated Press CARACAS, Venezuela Feb. 25 —

Two powerful explosions damaged the Spanish embassy and the Colombian consulate minutes apart in the Venezuelan capital early Tuesday, injuring four people and raising tensions in a city still recovering from an anti-government strike.

The blasts twisted the steel gates of the buildings and blew out windows in residences almost a block away. Leaflets supporting President Hugo Chavez were found outside the Spanish Embassy.

"We believe these were very potent bombs judging by the damage done," said the mayor of Caracas' Chacao district, Leopoldo Lopez.

The first blast was outside the Spanish embassy in eastern Caracas at about 2 a.m. The second explosion, 15 minutes later, rocked the Colombian consulate. The blasts slightly injured four people, including a night watchman, Lopez said.

Chacao police chief Leonardo Diaz said there was a "direct relation" between the blasts, which came two days after Chavez warned Colombia and Spain not to meddle in Venezuela's domestic affairs.

Both nations had expressed concern over the arrest of opposition leader Carlos Fernandez, who was arrested last week for his role in leading a two-month general strike against Chavez.

The strike, which ended Feb. 4 in all but the oil industry, brought Venezuela's economy to a virtual standstill and crippled oil production. Opposition leaders staged the protests in a bid to force Chavez to step down or hold early elections.

Federal agents are hunting for another opposition leader, labor boss Carlos Ortega, who is also wanted for alleged crimes linked to the work stoppage.

Venezuelan Deputy Foreign Minister Arevalo Mendez said the government would investigate the attacks and bring those responsible to justice. No arrests had been made.

Ruling party lawmaker Tarek Saab denied Chavez's government was involved calling the attacks "reprehensible." "We would never encourage any actions like this," Saab said.

A statement issued by the Colombian Embassy said the government "rejects any manifestation of violence or terrorism."

Manuel Viturro de La Torre, Spain's ambassador to Venezuela, said relations between Spain and Venezuela remain "excellent."

Chavez responded angrily Sunday to foreign critics of the charges against the two strike leaders. He directed warnings at some members of a "Group of Friends" initiative created to bolster the negotiating process.

"Don't mess with our affairs!" Chavez said, singling out Cesar Gaviria, secretary general of the Organization of American States, the United States, Spain and Colombia.

On Monday, opposition representatives sent a letter to Brazilian Foreign Minister Celso Amorim, coordinator of the "Friends" group, calling for an urgent meeting to discuss "the worsening of the Venezuelan situation."

The opposition says Chavez has ruined the economy and is amassing power in his own hands. Chavez accuses his critics of trying to spark a coup.

Negotiations between the government and the opposition were suspended last week because Gaviria had commitments abroad but are to resume Wednesday.

www.thebatt.com BY SARA FOLEY February 25, 2003

The recently climbing gas prices may only be foreshadowing the extreme stress a possible war with Iraq could put on the economy, and, in particular, oil prices. Right now the rise in gas prices is attributed to war panic, and a strike by oil producers in Venezuela, the world's fifth leading exporter of oil. However, should conflict become intense in Iraq and the surrounding region, it would most likely restrain oil shipments, a problem since almost a fourth of oil imported to the United States in 2001 originated from the Middle East, according to the Energy Information Administration's Web site.

Despite the obvious pressure on Iraq and the surrounding Persian Gulf region due to a possible war, the United States continues to import the majority of its oil from such sources. What is needed is not peaceful relations with neighboring countries, cooperation with Iraqi oil companies, or a decrease in United States oil consumption, although that wouldn't hurt. The United States needs to dramatically decrease its invested interest in Middle Eastern nations' oil supplies and focus on alternative oil sources. Russia, which is the world's second largest oil producer, only delivers a small fraction of its oil to the United States. The reason behind this is certainly not a lack of demand, but complications transporting oil to the United States from Russia, according to the Energy Information Administration's Web site.

By supporting the Russian oil effort, Americans will not only be lowering the prices they are paying for gas, but they will be refusing to support the economies of countries who are our enemies.

As of now, Russia utilizes a number of long distance pipes to transport oil from Russia to various countries in Western Europe. The problem is that Russia has no straightforward way to ship oil to the United States. However, a deepwater oil terminal at Murmansk has been suggested that would enable Russian oil to reach the United States. The mere suggestion, however, will not get oil to the United States or lower our prices, and in reality a strong effort is needed to encourage this act to actually occur. If businesses do invest in the Russian oil market, tensions due to Middle Eastern conflicts will ease.

Furthermore, if the United States did engage in a closer business relationship with Russia, it would not only benefit Americans, but Russia as well. Russia's oil industry, which has been struggling to catch up to technological advances that occurred before the fall of the Soviet Union, has made recent strides in producing and refining oil, but there are still more advancements to be made, according to Peter Valko, associate professor of petroleum engineering.

"Russia exports more than it used to because of capital investment, and since the fall of the Soviet Union, exports have been steadily increasing. Before trade can increase with the United States, you need political stability in Russia," Valko said.

To build this political stability, financial investments must be made in Russia, as well as other countries that are secondary oil sources for the United States. Nigeria, South America, and Mexico all have multitudes of oil reserves not being pumped to their capacity because the United State's oil needs are already being met by the Middle East. By making plans now to invest in Russian oil as well as other global sources, the United States will protect itself from possible problems that could arise due to conflict with Iraq.

reuters.com Tue February 25, 2003 01:05 PM ET By Tom Doggett

WASHINGTON (Reuters) - U.S. Energy Secretary Spencer Abraham said on Tuesday the United States was ready to act quickly to release emergency oil reserves if necessary to offset any disruption to Middle East supplies in the event of war with Iraq.

"We will and can act quickly to use the Strategic Petroleum Reserve to fortify efforts by producers to offset any severe disruption if it is needed," Abraham told lawmakers at an Senate Energy Committee hearing.

Crude prices have in recent weeks risen to two-year highs on fears a war in Iraq, the world's eighth largest oil exporter, could slow supplies from the Middle East, which pumps a third of the world's oil.

The United States has said it will disarm Iraq by force if necessary, despite widespread international opposition to war and concern that rising energy costs could smother a weak world economy.

The U.S. emergency oil stockpile was created in 1975 and currently has about 600 million barrels of crude oil stored in deep underground salt caverns in Texas and Louisiana.

It can be drawn at a rate of 4.3 million barrels a day for 90 days, before the rate drops as storage caverns are emptied.

The U.S. government sold 17 million barrels of oil from the reserve in January 1991 at the start of the U.S. offensive in the Gulf War.

The 1991 release helped pull oil prices down to near $20 a barrel, but analysts warn that oil inventories are so low that prices would not fall as far this time in the event of a release.

U.S. crude stocks have fallen to their lowest level since 1975 as a decline in imports from strike-bound Venezuela has drained supplies while sustained cold weather has stoked demand.

Heating oil and natural gas prices have recently hit all-time highs, and analysts are warning of big jumps in gasoline prices as summer vacation driving demand heats up.

New York oil prices shed early gains, dropping after Abraham's comments, and were 3 cents lower at $36.45 a barrel at 1:00 p.m. EST.

INDEPENDENT OF THE IEA

Abraham said the United States could release emergency reserves independently of its partners in the International Energy Agency, adviser on energy for 26 industrialized countries.

When asked if the United States had ruled out the possibility of releasing emergency oil on its own, Abraham said, "No of course not."

Abraham also said Washington would at least consult with the IEA before taking any decision to release reserves.

The head of the IEA said earlier Tuesday that strategic reserves in major oil-consuming nations will only be used should producers fail to make up any supply shortfall.

"I believe the producers should act first. Reliance on strategic reserves should be a last resort," said Claude Mandil, Executive Director of the Paris-based IEA.

Producers in the Organization of the Petroleum Exporting Countries oil cartel have told the IEA they have enough spare capacity to meet any stoppage of Iraqi exports if there is a war.

Iraq oil exports remained steady at 1.7 million barrels per day (bpd) in the week ended to Feb 21, U.N. officials said on Tuesday.

The IEA's Mandil said its members will expect a commitment from OPEC to cover any shortage very quickly, but could wait for "weeks" for firm evidence of the extra output.

Members of the IEA, formed after the Arab oil embargo in the 1970s to protect consumer nations' interests, include the United States, Germany and Japan and it holds four billion barrels of reserves, equivalent to about 115 days of net imports.