cbs.marketwatch.com By Thom Calandra, CBS.MarketWatch.com Last Update: 12:04 PM ET Feb. 26, 2003

SAN FRANCISCO (CBS.MW) - A veteran intelligence analyst says Washington almost surely will choose a full-out war against Iraq, as soon as this weekend over the moonless Arab desert. CBS MARKETWATCH COMMENTARY

THOM CALANDRA (WEEKDAYS) Intelligence analyst: Weekend invasion, rally, likely TOMI KILGORE (MONDAYS) A lack of volume is negating some positive signals BAMBI FRANCISCO (TUESDAYS) Why Ma Bell should buy Covad MIKE TARSALA (WEDNESDAYS) The tech guidebooks are all wrong DAVID CALLAWAY (THURSDAYS) Osama and the great duct tape conspiracy JON FRIEDMAN (FRIDAYS) What am I offered for CNN?

With that first strike, says Strategic Forecasting founder George Friedman, President Bush will have lodged the centerpiece of his administration's foreign policy: a global effort to oust Saddam Hussein and root out international terrorists. The president also will have sparked greater technology spending, a significant stock-market rally and a collapse in energy prices.

"He really has no choice," says Friedman, who explains how the president has a bleak political future if America capitulates to Iraq, or the United Nations. "His biggest problem is that right after Sept. 11 (2001) he was decisive, and now he has dragged this out so long."

Friedman, as chairman of 7-year-old Strategic Forecasting, or Stratfor.com, is something of a pioneer in the field of private intelligence. The former director of the center for geopolitical studies at Louisiana State University publishes regularly on national security, warfare and computer security. His books include "The Future of War" (Crown, 1997), "The Intelligence Edge" (Crown, 1997) and "The Coming War with Japan" (St. Martin's Press, 1991).

In Friedman's view, Bush has hemmed himself in politically and strategically. On the political front, "no attack on Iraq" leaves America, and the world, with a lame-duck president, abandoned by his right-wing allies and scorned by those to his left.

"Imagine, Bush throws up his hands and says, 'No international coalition, so I am not going to invade.' The left wingers say they stopped the lunatic. The right wing bolts. We have now a two-year lame duck. Can you say President (John) McCain? Bush will be crippled," Friedman tells me from his office in Austin, Texas.

Many investors fail to interpret correctly the fast-moving events leading up to war, he says. The financial media are under the impression peace will bring with it lower oil prices and a relief rally in the stock market. Not so, says this analyst.

"If the scenario the market regards as bullish comes to pass, which is the U.S. makes the decision not to attack, the consequences will be intense. Saddam Hussein becomes a hero of the Arab world. The United States appear weak, and the foundations underneath Bush will crumble," Friedman tells me. "The financial markets, as they always do, will react badly when the Republican leadership dissolves."

In the Middle East, a stalemate "leaves Kuwait hung out to dry. Israel will become much more aggressive in its own defense. And strategically, the United States does not have the Iraq base of operations to pursue its war against terrorism," he says.

Friedman, in a long career of mixing geo-political and economic forecasts, says he is always amazed at how markets - energy, currency, stocks and bonds -- react irrationally at the perceived threat of war.

"The short-term market has an IQ of 60. The long-term market is a genius," says Friedman, who offers his opinion on where the smart money is headed later in this article. "Yet we all talk about the market as if it is one entity."

Of note is the fact that speculators in the past three months have bid up prices of crude oil, natural gas and other energy products. At one point in frenzied trading this week, natural gas futures contracts were trading at double their price of mid-November, and at least one energy executive was proclaiming a "new era" of higher prices for natural gas, a crude-oil alternative. See: Energy market set to tumble.

"Iraq exports 1.7 million barrels of oil a day," Friedman explains. "In the event of a total catastrophic war, the world markets will lose just 1.7 million barrels at a time when Venezuela oil is coming back online and many producers, like Saudi Arabia, want to fill that capacity. The rising oil market is acting how it always does in the short term, irrationally."

Friedman says Saudi Arabia and other members of the Organization of Petroleum Exporting Countries are eager to boost production in a bid to replenish their dwindling financial coffers. "Every major producer has some surplus capacity and is eager to fill it because they have cash-flow problems," Friedman says. "In the '73 oil crisis, the debt structure of these countries was absolutely different. In '73, the Saudis could sit on their oil. Now they can't."

Friedman fully expects that if, or indeed, when, America goes to war, and the war is rapidly successful, "the war premium gets squeezed out of energy markets. The prospect of cheaper oil now and in a year or two is very bullish for most financial markets."

On timing, Friedman says an attack is probably imminent. This weekend offers a moonless night over Iraq's desert sands. U.S. Gen. Tommy Franks, who will have responsibility for an invasion of Iraq, arrived at Camp As Sayliyah in Qatar earlier in the week.

"This is the best weekend militarily to do it," Friedman says. "There is no moon, and if you ever have been on the desert in special operations, you know you don't want a moon when you need to take bridges and other strategic posts."

The war in Iraq, Friedman is telling his clients, is simply a campaign in a "much longer and much more complex war, and the forces that invade Iraq will remain there, for future potential operations (against terrorists)."

Friedman dismisses talk that the court of public opinion will lead to a peaceful solution in Iraq. Opinion polls still show a majority of Americans who support an invasion of Iraq. "Public opinion around the world does not matter that much," says Friedman, who says "elitist" European opinions about America's motives actually benefit the Bush administration's domestic approval ratings. "The U.S. is never going to be loved."

What's more, France's Jacques Chirac and Germany's Gerhard Schroeder are in their own political deep water. "Schroeder is sitting there with a 25 percent popularity rating. Chirac and Schroeder are committed to the European Union but the EU is badly split on several issues, not just the war. The French want the EU to be a vehicle for French foreign policy, but the Spanish and the Italians don't," he says.

Friedman says an invasion, whether it is immediately successful or a one-year affair, will boost technology spending. "Historically, wars have been stimulative," says the analyst and author, who scoffs at the notion the war will rack up costs of $1.3 trillion, as some have forecast. "Deficit spending is stimulative. The antidote of a deflation scenario is a deficit. Wars also drive technology. Oracle (ORCL: news, chart, profile) was created to give the Navy a database."

I asked Stratfor.com's Friedman where he thought the long-term money, the smart money, was headed. "In general, I don't believe in smart money," he says. "Everyone I knew who was smart bought dot.coms. The definition of smart is to be unstable. The official smart money that I talk to is incredibly confused. Some believe in deflation, others are buying commodities--some believe in deflation and are buying commodities."

He sees profits in stocks, especially those tied to security issues.

"We believe that with the yield curve positive and net free reserves positive - in other words, a healthy, liquid financial market -- equity markets are the place to be over the long run," Friedman says. "We are particularly interested in technologies that will become important in homeland defense and the extended war-fighting we will be seeing in the eastern hemisphere. The smartest people I know are positioning themselves to take advantage of technologies that feed into federal purchasing for the war."

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www.e4engineering.com From E4 : Engineering, 26 February 2003, in Home

BP announced today that it has agreed to transfer to Perenco its interests in two Venezuelan production assets for $160 million in a cash transaction. The interests are a 60 per cent stake in the Boqueron field in eastern Venezuela and 100 per cent in the DZO (Desarrollo Zulia Occidental) field in the west of the country. BP currently operates both fields. BP's share of production from these fields is said to have averaged 26,100 barrels of oil a day in 2002. The transaction follows a number of recent asset sales made by BP in other parts of the world, including the sale of several UK Southern North Sea gas production assets to Perenco, which is based in London and Paris. On completion of this transaction and the UK Southern North Sea gas acquisition, Perenco's operated oil and gas production is expected to rise to 275,000 barrels of oil equivalent a day (boed) and its net production to 185,000 boed.

cbs.marketwatch.com By Myra P. Saefong, CBS.MarketWatch.com Last Updte: 4:24 PM ET Feb. 26, 2003

NEW YORK (CBS.MW) -- Crude futures prices rose Wednesday to their highest level since the Persian Gulf War, reflecting a tight U.S. inventory picture at a time of looming prospects of war with Iraq.

Crude for April delivery traded as high as $38 a barrel -- a level the futures market hasn't seen since the all-time high of $41.15 in October 1990.

The April crude contract closed at $37.70 a barrel, up $1.64, on the New York Mercantile Exchange.

"If inventories can't build now, they certainly won't build in the first two to three weeks of a military strike on Iraq," said John Person, head financial analyst at Infinity Brokerage Services.

In a wartime environment, oil shipments will be delayed due to security checks, he said, adding: "This is the real concern to address."

Heating-oil and gasoline futures also moved higher on Nymex, on the back of supply declines detailed in the latest industry data released earlier Wednesday.

Heating oil for March delivery closed at $1.155 a gallon, up 3.23 cents. Futures prices for the commodity briefly reached an all-time high -- $1.18 a gallon -- on Tuesday.

Meanwhile, March unleaded gasoline rose 1.05 cents to $1.0183 a gallon.

"We're seeing better-than-expected demand in gasoline, heating-oil demand that's gone off the map and crude inventories that stand at their minimum operating levels," said Phil Flynn, senior analyst at Alaron.com.

"It's not just Iraq," he said by way of explanation. "It's tight supplies."

Early Wednesday, the Energy Department reported a decline of 1 million barrels in crude inventories, while the American Petroleum Institute said stocks rose by 3 million barrels.

Flynn said the discrepancy was likely a correction from last week, with the API effectively catching up with the Energy Department's figures.

But total crude inventories of around 271 million barrels are quite near the 270 million barrels that the government set as the minimum stock level at which refineries can continue to operate normally. The stocks are 16.3 percent below where they stood a year ago.

Higher prices on tap

The low inventories have prompted many analysts to forecast higher oil prices in the run-up to a potential war on Iraq.

Based on the state of inventories among other factors, crude "remains susceptible for price increases," said Infinity Brokerage's Person.

Other factors include what seems an impending war in the Middle East, export reductions from Venezuela, refinery problems and severe weather conditions, he said.

John Vail, senior strategist at Mizuho Securities USA in Chicago, also sees higher oil prices in the short term.

"The inventory data is so worrisome that it may prevent a decline in oil prices in the short term until the Iraq situation is clearer," he said.

On the other hand, analysts believe that in the event of a quick U.S. victory against Iraq, oil prices will likely drop significantly. See Thom Calandra's StockWatch.

"Crude-oil prices will ease once markets are satisfied that there is sufficient progress in the military campaign against Saddam and that oil fields in Iraq and -- more importantly -- in neighboring countries are secured," said Economy.com oil economist Thorsten Fischer.

Near a three-year low

A closer examination of the latest supply reports showed that distillate inventories fell for a sixth-straight week -- to a level not seen in nearly three years.

The Energy Department reported a whopping 4.5 million-barrel decline in distillate inventories, which include heating oil. Total supplies of 99.1 million barrels are below 100 million for the first time since May 2000, the agency said.

Separately, the API pegged the drawdown at 3.2 million barrels, to 103.8 million. Research firm IFR Pegasus had expected distillates to fall by as much as 4 million barrels on the week.

Distillate inventories have dropped more than 20 million barrels since the week ended Jan. 17, according to Energy Department data. They're now 25 percent below their year-ago level.

Gasoline inventories also declined last week, falling by 3.1 million to 208.1 million barrels or by 792,000 barrels to 209.9 million barrels, according to the respective readings by the API and the Energy Department.

IFR Pegasus had expected gasoline supplies to be down by as much as 3 million barrels. Total stocks of gasoline are 5.1 million barrels below the year-ago level, according to the government data.

Gasoline demand fell last week, but only by 480,000 barrels to a level of 8.36 million barrels per day, said Tom Kloza, chief oil analyst at The Oil Price Information Service.

The two-week average demand figure of 8.6 million barrels per day "is a level which appears more logical for May than February," he added.

Natural gas in retracement

Natural gas for March delivery closed sharply lower following a jump to an all-time high on Tuesday.

The heating fuel has been driven higher by lingering concerns that cold weather throughout much of the U.S. will result in shortages.

March natural gas closed at $9.133 per million British thermal units, down 44.4 cents on the session. On Tuesday, it rose as high as $10.50, moving well past the previous record of $10.10 dating from December 2000.

Natural gas for April delivery, which became the lead-month Nymex contract at the session's close, rose by 80.6 cents to $7.39 per million British thermal units.

The Energy Department will issue its weekly update on supplies of natural gas Thursday. Inventories stood at 1.168 trillion cubic feet as of Feb. 14 -- 868 billion cubic feet below the year-ago level.

Analysts at Fimat USA expect a hefty drawdown in natural-gas supplies -- on the order of 138 billion cubic feet, although other market estimates are higher. A year earlier, supplies fell by 73 billion cubic feet.

Geopolitical backdrop

In war-related news, Turkey reportedly halted the movement of oil tankers through its border crossing with Iraq and told any tanker drivers already in Iraq to return to Turkey, said Person.

Meanwhile, Iraqi leader Saddam Hussein said he would rather die than go into exile, as some have suggested as an alternative to war. He made the comments during an interview earlier this week with CBS News. See Special Report: Countdown to War.

And chief U.N. weapons inspector Hans Blix indicated that Iraq is showing signs of better cooperation by reporting the discovery of two bombs, one of which could have a biological agent.

President Bush continued to urge the U.N. to support military action against Iraq, but British Prime Minister Tony Blair said that Saddam has "one further final chance" to disarm in compliance with U.N. demands.

Mizuho Securities' Vail believes that if Saddam blows up his own oil wells as some speculate, oil prices won't rise to the $80 level some analysts talk about because his supply is "not a major world factor now."

If Saddam doesn't destroy his own fields, "the initial reaction to a U.S. strike will likely force the oil price quickly lower," he said.

All-in-all, the progress of the war will determine whether oil prices and global economies recover or not," he said.

Comments from Energy Secretary Spencer Abraham pressured energy futures off their intraday highs on Tuesday. He indicated that the Bush administration would tap into the Strategic Petroleum Reserve in the event of a war-inspired disruption in Iraqi oil exports.

Vail suggest that the U.S. start releasing oil from its oil reserve because 600 million barrels of oil "should not just be sitting there."

"Combined inventories are too low and shortages are likely unless it is done," he said.

In the equities arena, most oil-service shares closed higher, with the Philadelphia Oil Service Index ($OSX: news, chart, profile) up 1.5 percent. See full story.

Also on Nymex, gold futures prices also closed higher amid a resumption of weakness in the broader stock market. See Metals Stocks.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, closed at 245.2, up 1.1 percent, on strength in gold and petroleum futures. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

www.vheadline.com Posted: Wednesday, February 26, 2003 By: Roy S. Carson

VHeadline.com editor & publisher Roy S. Carson writes: There are occasions when I simply want to emulate the little boy in the Hans Christian Andersen story and yell out an anti-thesis to "The Emperor has no clothes!"

Put quite simply in the topsy-turvy scenario of a Venezuela gone 'loco' it's not the emperor who's naked but, instead, the bare-faced gall of an opposition that is about as far removed from constitutional and participative democracy as Vega is from Mars.

• They're quite literally so spaced out that it is difficult to determine if they will ever get their feet back on the ground or if they'll simply self-destruct like a New Year's firework display or fail to do anything more than splutter-out as they realize their own impotency.

The Emperors of Venezuela's opposition, having been faced with reality, are now either in hiding, have already fled the country or have been helicoptered to their luxury abode pending charges of willful and wanton destruction of the country we all love.  Okay, the beautiful land of Venezuela will still be there long after we all have shuffled off this mortal coil, but millions of children will be left with the dreadful legacy of four years of dishonesty bickering compounding more than 40 years of corrupt abuse of basic rights and democracy.

We're not talking here of the privileged 5% who hold up the bars in the Caracas Country Club, La Lagunita or Valle Arriba.

We're talking about the more than 18 million Venezuelans who have been driven into the depths of despair and poverty by a succession of evil and manipulative governments whose only thought was to line the feather-bedding of their Boston bank accounts and to retire to Florida when the goose that laid the golden eggs was all but slaughtered.

Our esteemed commentarist Gustavo Coronel writes fondly of a bygone age in which he was able to enjoy a 15-year-old whisky aboard a car ferry from Margarita en route to his family home in Carabobo State.  His version of reality is valid as the version that Venezuela's privileged classes prefer to view reality, but like the original Hans Christian Andersen story's Emperor what did that have to do with the real reality lived by millions of other Venezuelans.

Has Venezuelan incurred its massive foreign debts exclusively during the four years that Chavez Frias has been President?

Was "freedom" proclaimed from the battlements during Lusinchi's, CAP's, RJV's or Caldera's Presidencies?

Was Chavez the originator of the 1989 food riots?

Was Chavez the planner for Carlos Andres Perez' blatant corruption?

Was Chavez responsible for $11 billion going up in smoke when 18 banks were closed during the 1994 financial crash?

Plainly, the answer is NO!

Nor was Chavez responsible for the way in which Caldera's financial genius Luis Matos Azocar manipulated the movement of massive $ millions into forward-looking loans, foisted on the next-following regime to pay willy-nilly!

Forget the fact that Matos Azocar's sister was imprisoned for money-laundering in the United States.  Forget the fact that any journalist who dared to write about his nefarious practices was "sat upon" by Caldera hoodlums, or worse.

• I am reminded of the fact that pages had to be torn from Pan-Am's inflight magazine after Carlos Andres Perez took umbrage over an article which spelled out just some of his acts of corruption ... he even threatened to rescind Pan-Am's landing rights at Maiquetia, he got so mad!

Impeached, imprisoned and clearly unfit to ever hold political office again, CAP is nevertheless beatified by Venezuela's opposition as a salient memory of the lavishly corrupt privileges they enjoyed a decade ago ... corruption that brought Venezuela to the brink of the economic disaster that the opposition has perpetuated in a failed 2-month stoppage which saw Christmas repealed and Venezuela's international standing as one of the world's foremost oil exporters dragged through the mud.

And to what end?

They say Chavez Frias is a dictator!  With what cause?  Elected several times by a majority vote of the people, he is entitled to govern Venezuela for the next constitutionally convened period of years.

Uniquely among nations, there's Constitutional provision for a mid-term referendum on his Presidency.  But the opposition quarrels with the idea of the Constitution, decided-upon by a majority in a democratically-elected Constituent Assembly which reformed, among other things, a corrupt judiciary and set Venezuela on the route to the participative democracy it now enjoys.

But there's the rub.

The disloyal opposition doesn't like the fact that Venezuela's 80% poor should have any voice in their little clique of running a country, and so they stomp their little feet and demand that everyone does it their way, or nobody does it at all.

To hell with Constitutionality, to hell with democracy ... if Venezuela's opposition says it's the way to go, hey, it's the only way to go!

To hell with the courts, to hell with law enforcement and legal responsibility ... it's get away with what you can, as much as you can and for as long as you can that holds sway and current events are proving it.

Where else on this glorious earth would an anti-constitutional saboteur who has shown patent disregard for law & order and the country's constitution, be able to calmly sit himself down in a luxurious city restaurant to celebrate yet another day of haranguing the lawful government and plan the next day's sabotage itinerary?

Oh Dear!  And who are those nasty men who come in to the restaurant to take him downtown for questioning.  Forget the fact that his face is already well-known and the evidence against him piled higher than the twin towers at Parque Central ... the cops must first establish their documentary credentials to his satisfaction (no simple "Cops Freeze!" here) when dealing with such an Emperor.  No slamming the suspect up against a brick wall, frisking and handcuffing him.  No!

Venezuela's leading saboteur was conducted, perhaps rudely considering his Emperor status, to HQ for questioning.  And then ... to top it all ... he's given house arrest pending trial on such supremely serious charges and actually flown back home in a helicopter.

Can you just imagine Bush or Blair conceding such privileges to a common criminal who threatens to overthrow Washington or London?  Scarcely!

This Venezuelan Emperor, though, is not naked as the day he was born ... he's wearing Armani suits and other items from a wardrobe replenished during a New Year holiday on the island of Aruba ... a getaway vacation far from the mayhem he and his co-conspirators left behind for ordinary decent Venezuelan folk to cope with in the run-up to a non-celebration of Christmas and only more poverty to look forward to in 2003.

What would you do?  If it were down to me, I'd have Fernandez and Ortega transferred immediately to the La Planta prison in El Paraiso ... El Paraiso, Paradise ... a fitting destination for two common opposition thugs.

iafrica.com Posted Wed, 26 Feb 2003

Cuban President Fidel Castro met Chinese counterpart Jiang Zemin in Beijing on Wednesday, as the two countries inked trade accords and aid agreements on the opening leg of a four-day trip.

Dressed in signature green military fatigues and cap, Castro (76) arrived at the Capital Airport aboard a Russian-made Ilyushin plane and was warmly greeted by a group of Chinese officials.

Later on Wednesday, the veteran Cuban leader held talks with Jiang after a formal welcoming ceremony in Beijing's Great Hall of the People.

Castro told reporters he had enjoyed cordial talks with Jiang, who had asked him about the situation in Cuba.

"A minute ago, Comrade Jiang Zemin asked me about the situation in Cuba," Castro said.

"When I heard the question, I felt a little like chuckling, since when so many people ask me how things are in Cuba, the usual Cuban comrade would normally say 'very good.'

"Very few Cubans would say our system is only so-so or even bad. I had some reservations when I heard comrade Jiang Zemin raise the question, because China's situation is so good.

"But don't worry. I'll be frank. I really do feel our country's situation is excellent."

Jiang described the talks as "excellent" after an hour-long meeting which was followed by China signing an accord offering economic and technical assistance to Cuba.

China is Cuba's third most important trading partner after Venezuela, which provides the island with cheap oil, and Spain, which has hotel chains deeply invested in the tourism industry.

China took over as Cuba's main political and financial partner in the early 1990s after the fall of the Soviet Union.

The trade balance, however, clearly favours China. According to official figures here, in 2001 Cuba exported $70-million worth of goods to China, while it imported $547-million's worth.

Castro arrived from the Malaysian capital of Kuala Lumpur, where he attended a summit of the Non-Aligned Movement. He began his Asian trip with a three-day visit to Vietnam.

The visit to China is his first since late 1995.

He has developed close personal ties with Jiang, who visited Cuba in November 1993 and April 2001.

Talks between the two could be one of the last bilateral presidential meetings for Jiang, also 76, who is expected to step down as China's president in March after his second term is completed.