www.voanews.com Dan Robinson Washington 28 Feb 2003, 02:03 UTC

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The Bush administration is reporting some success in efforts to eradicate coca in Colombia. However, the administration's top narcotics control official was pressed by skeptical lawmakers in a congressional hearing Thursday about the effectiveness of U.S. policy in Colombia and other countries.

The United States helps the Colombian government in spraying the coca crop as part of efforts to reduce the flow of cocaine to the United States.

Ninety percent of the cocaine flowing into the United States originates in, or passes through Colombia. Heroin, too, originates in Colombia which still has some 6,500 hectares under opium cultivation.

The director of the White House Office of National Drug Control Policy, John Walters, says the coca crop declined by 15 percent last year, to about 144,000 hectares.

Mr. Walters says this shows U.S. anti-drug efforts in Colombia are paying off, and credits Colombian authorities and President Alvaro Uribe for a more aggressive approach to eradication.

However, he says a difficult task lies ahead as President Uribe continues to fight terrorist organizations and paramilitary groups relying on narco-trafficking.

"[He has pledged] to make rule of law a fact in all of Colombia for all Colombians," he said. "To make security, education, health reform and economic development a long-term goal. I think he, and we, understand that we have to first reduce the extent to which Colombia is a war zone."

But with three Americans still held captive by rebels in Colombia, and the recent violence in Bolivia, some lawmakers are criticizing the administration for, in their view, failing to pay enough attention to Latin America.

In the words of the Republican chairman of the House Subcommittee on the Western Hemisphere, Cass Ballenger, "We're distracted, and we're not paying enough attention to what's happening in our own front yard."

Congressman Ballenger lists a range of problems: narcotics-related violence and terrorist activity in Colombia, Peru and Bolivia, economic difficulties in Argentina, political upheaval in Venezuela, high-level corruption in Guatemala and Haiti.

But the sharpest criticism came from New Jersey Democrat Robert Menendez, "The reality is that the administration's policy towards the Western Hemisphere in my mind is in disarray," he said. "The reality is that the results do not even begin to approach the rhetoric. The reality is that serious foreign policy mis-steps have done lasting damage to our relationships in this hemisphere."

Another Democrat, Massachusetts Congressman William Delahunt, says U.S. policy toward the Western hemisphere has been too focused on narcotics, and not enough on social development.

Nobody in the White House seems to be paying much attention. And given the president's pledge to elevate the hemisphere as a paramount concern of American foreign policy, to me and to many, is profoundly disappointing.

In testimony submitted to the committee, the acting Assistant Secretary of State for Western Hemisphere affairs, J. Curtis Struble, says the administration recognizes there has been "backsliding" with growing democracies facing threats from all sides. But he says the problems are not intractable.

news.ft.com By Carola Hoyos, Energy Correspondent Published: February 28 2003 3:11 | Last Updated: February 28 2003 3:11

Crude oil prices on Thursday surged to almost $40 a barrel, a high not seen since just after Iraq invaded Kuwait in 1990. The $2 jump was fuelled by concerns over a lack of US oil supplies ahead of an increasingly inevitable war with Iraq.

The jump affected the US benchmark crude far more than its London counterpart and proved short-lived, however, with the Nymex contract closing at $37.20. One trader described the morning session as one of the "wildest rides" the energy futures market had seen in years.

Commercial stockpiles of US crude oil are smaller than they have been since 1976 and in the past week fell to the minimum 270m barrels needed to keep the US's vast system of refineries, pipelines and storage tanks running smoothly.

Meanwhile, a cold winter gripping the US north-east has cut stored heating oil to dangerously low levels, more than 30 per cent below last year's inventories.

Washington has tried in vain to calm the recent market jitters by announcing that it would consider in the event of a war with Iraq releasing some of the 600m barrels of crude oil it stores for emergencies. The Opec oil cartel has also tried to reassure markets, raising its output quota in January and promising to use its spare output capacity to fill the void of the expected 2m barrels a day in Iraqi exports that will almost certainly be lost if war occurs.

But the world faces supply interruptions not only from the Middle East. George Beranek, analyst at PFC Energy, a consulting company in Washington, said: "Inventories are low enough that the market really is working without a safety net, particularly in the US.

"If you have renewed problems in Venezuela or problems in Nigeria in the run-up to their April presidential elections, then you are going to have a serious problem very quickly."

The effect high oil prices will have on the world economy will largely depend on the length of time they maintain their lofty heights. For many countries, a big mitigating factor has been the recent drop in the value of the dollar, the currency in which oil is traded.

"The real problem comes if these problems last a long time. One month should not be a problem, three months will have an impact in developing economies and six-12 months could be serious," Mr Beranek said.

But alternatively, releasing extra Opec crude and stockpiles held in storage in Europe, Japan and the US could swamp the market. Prices could drop to well below $20 a barrel if a short war in Iraq causes little damage to the country's oil fields and the worries about oil supply interruptions in countries such as Venezuela prove unfounded.

www.businessweek.com FEBRUARY 28, 2003 NEWS ANALYSIS

Philip Flynn is staring at his computer screen in disbelief these days. The energy analyst at Chicago-based Alaron Trading Corp. watched the price of natural gas nearly double in three business days, hitting $9.70 per million Btus at the New York Mercantile Exchange on Feb. 25. That's four times what natural gas cost at this time last year. That's not the worst: Spot prices for gas deliveries to Texas and New York hit about $25 per million Btus on the same day. "There have been entire years when prices haven't risen this much," Flynn says. Between fear of war in the Middle East, an oil strike in Venezuela, and cold weather across the country, energy prices are surging across the board. But no commodity has risen faster than natural gas. While the price of oil is tied as much to foreign policy as it is to the number of drilling rigs in operation, the natural gas price spike is almost entirely a homegrown phenomenon. "SEMI-CRISIS BREWING."  The problem: Even without the recent cold snap, the energy industry isn't producing enough gas. "The gas-supply picture is just barely keeping up with demand," says Lee Gooch, chairman of the Process Gas Consumers Group, which represents large industrial consumers. "We've got a semi-crisis brewing, and it's going to take a while to turn that around." Consumers are feeling the pinch. Although the three-day jump won't affect most buyers if it proves temporary, gas prices had already soared, rising from about $2.20 per million Btus in early 2002 to roughly $6 by early February. Half of all U.S. homes are heated by natural gas. The U.S. Energy Information Administration predicts that a typical residential customer in the Midwest will spend about $762 on gas this winter, a 28% increase from last year. Big companies are also getting hit. U.S. Steel Corp. (X ) Chairman Thomas J. Usher told investors recently that higher gas prices would cost it more than $50 million a year, a big part of why he has been seeking price hikes from carmakers. PASSING UP OPPORTUNITIES.  Still, the natural-gas industry and its customers aren't in quite the bind that soaring prices seem to suggest. A large reason for the price runup stems from a good old-fashioned Wall Street mini-panic. Traders who bet that the price would decline have had to buy gas to cover their short positions, putting sharp upward pressure on prices. Since most utilities and industrial consumers buy natural gas under long-term contracts, few will actually pay the recent astronomically high prices. Nor is access to promising drilling rights the real problem. On the same day prices soared to record levels, energy executives testifying before the Senate Energy & Natural Resources Committee called for the federal government to ease restrictions on drilling, particularly on Alaska's North Slope, in the Rockies, and offshore on the East and West Coasts. However, drilling restrictions hardly seem to have crimped the industry. Indeed, many companies have spent the past several years passing on new drilling opportunities. The reason: After a big price spurt in 2000 and 2001, most energy companies correctly predicted that gas prices would fall, in step with the weakening U.S. economy. Many cut back on developing new wells. The result: by some estimates, a 5% dip in U.S. natural gas production last year, the largest such decline in 16 years. FLOWING TOGETHER.  Gas producers didn't expect that prices would recover so quickly in 2002. Despite economic weakness, demand stayed strong as new power plants fired by natural gas came on line. Such plants now account for a quarter of gas consumption, nearly twice their level a decade ago. That sent prices heading back up again, setting the stage for a big price surge when the weather turned unexpectedly frigid in the Northeast and Midwest. The squeeze on supplies isn't likely to ease this year. Although the number of rigs drilling for natural gas in the U.S. has been creeping up, at 767 it's still 30% below the all-time high in July, 2001. Natural-gas prices are expected to average well above $4 per million Btus this year, below current prices but still twice historical averages. "Normally, when you have prices this high, you see a big increase in drilling activity," notes Bruce Henning, a consultant with Energy & Environmental Analysis Inc. in Arlington, Va. "We haven't seen it." What's holding up new drilling? Industry consolidation, for one. Recently merged entities such as ChevronTexaco Corp. (CVX ) and ConocoPhillips (COP ) have lower drilling budgets than the individual companies did pre-merger. Large producers such as ExxonMobil (XOM ) and BP PLC (BP ) are more inclined to merge and cut costs than invest the time and money to bring new fields on line. Says Paul Ziff, an energy consultant with Ziff Energy Group: "Those big fields take a long time to develop." UNDER PRESSURE.  The collapse of the energy-trading industry has also hurt. Enron Corp. and others helped small energy companies raise capital by selling their future production under long-term contracts. Financial institutions such as Bank of America (BAC ) and UBS Warburg have entered the energy-trading business, but they tend to be more cautious, says Gary Ackerman, executive director of the Western Power Trading Forum, an industry trade group. "Few deals are being done, even though the timing is perfect," Ackerman says. Banks, investors, and credit-rating agencies, meanwhile, are putting pressure on energy companies to reduce their debt and boost their returns on investment. "You've got a combination of people telling you: 'Don't go borrowing money to drill,'" says John D. Schiller Jr., executive vice-president of exploration and production at Ocean Energy Inc., a Houston producer that recently agreed to sell itself to Devon Energy Corp. (DVN ), in part to take advantage of today's high commodity prices. Those cautious voices aren't likely to quiet down anytime soon.

By Christopher Palmeri in Los Angeles, with Stephanie Anderson Forest in Dallas, Michael Arndt in Chicago, Alexandra Starr in Washington, and Peter Coy in New York

www.heraldtribune.com The Associated Press

Crude oil futures ended lower Thursday after soaring to a 12-year high, as early panic buying sparked by concerns over tight supplies and a looming war with Iraq gave way to panic selling. "A lot of it was profit taking," said Bill O'Grady, an energy analyst at A.G. Edwards in St. Louis. "It highlights the extreme uncertainty in the market." At the New York Mercantile Exchange, front-month April crude oil futures climbed as much as $2 to $39.99 a barrel, the highest level since October 1990, when prices set a record high of $41.15 after Iraq's invasion of Kuwait. The contract settled at $37.20 a barrel, down 50 cents. March heating oil futures ended down 0.06 cent at $1.1543 a gallon, while March gasoline settled at $1.0188 a gallon, down 0.03 cent. March heating oil and gasoline futures expire Friday, the last trading day of the month. On London's International Petroleum Exchange, the volatility was less extreme. April Brent ended down three cents at $33.04 a barrel. Natural gas for March delivery rose 9.5 cents to settle at $7.485 per 1,000 cubic feet. O'Grady said that crude is likely to recover Friday as traders cover short positions ahead of the weekend. "I cannot imagine anyone carrying shorts over the weekend," he said. "We'll probably see the market do better going into tomorrow's close." The early gains came amid concerns over tight U.S. crude inventories - now at their lowest level since 1975 thanks to cold weather and a strike in Venezuela - and growing jitters over a possible U.S.-led attack on Iraq, traders said. President Bush's tough speech on Iraq Wednesday night, along with indications that the United States might win U.N. approval for a second resolution on Iraq, heightened fears that a war on Iraq may be inevitable. But while worries about an Iraq war continue to support prices, bears found some support in a report that indicated Iraq may consider destroying its Al Samoud missiles to try to avert an attack. Iraqi officials had no comment on the issue, but Egypt's Middle East News Agency quoted unidentified sources in Baghdad as saying the step was intended to deprive Washington of an excuse to attack. Chief weapons inspector Hans Blix sent his top deputy to Baghdad, saying the envoy would be discussing with the Iraqis "the pace of the destruction " of the Al Samoud 2. There was also concern that prices have reached an unsustainably high level, which could prompt the White House to tap the nation's Strategic Petroleum Reserve. The Bush administration has so far resisted calls for a release of oil from the SPR, saying the reserve, which holds 600 million barrels of crude oil in salt along the Gulf Coast, is designed to be used in case of war or severe supply disruptions. Analysts say the White House is likely to order a release when a war begins. Secretary of Energy Spencer Abraham said earlier this week the U.S. would act quickly to offset any supply disruption caused by a war. Traders worry that an attack on Iraq would disrupt the country's oil exports and could potentially spill over to halt oil exports from other Persian Gulf countries. Analysts say that the release of oil from the emergency reserve coupled with a smooth victory in Iraq could lead to a sharp decline in oil prices, much as during the last Persian Gulf War.

Last modified: February 27. 2003 6:48PM

reuters.com Thu February 27, 2003 09:46 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez's negotiators failed to show up for talks with the opposition on Thursday, and foes accused the leftist leader of resisting efforts to discuss how to end a long-running political conflict.

Government negotiators cited security concerns in explaining why they stayed away from a second consecutive day of talks being brokered by Organization of American States Secretary General Cesar Gaviria.

Angry opposition representatives accused the government of deliberately stalling the talks to thrash out an agreement on elections to end the feud between Chavez and his foes in the world's No. 5 oil exporter.

"Once again we were left waiting for the government. ... You can see that there isn't much interest," negotiator and anti-Chavez union leader Manuel Cova told Reuters.

Chavez, a populist former paratrooper who was first elected in 1998 and survived a coup last year, has been resisting pressure to step down. His opponents accuse him of ruling like a dictator and of trying to install Cuban-style communism in oil-rich Venezuela.

The government delegation did not speak to reporters Thursday. But sources close to the talks said they had referred to anti-government student demonstrators outside the talks venue in Caracas as the reason for not turning up.

"They argued security problems," one source, who asked not to be identified, told Reuters. The talks were due to be held at the Caracas headquarters of the Latin American Economic System, a regional economic advisory body of 28 countries.

On Wednesday, the government used a similar argument to stay away after several thousand anti-Chavez protesters marched past the building where the negotiations, which have dragged on since late last year, were scheduled to take place.

Negotiations were scheduled for Friday, sources said.

The opposition wants the president to agree to elections before or on Aug. 19. The government has refused to set a firm day for elections. Chavez's term legally ends in 2007.

Tensions have been running high since the arrest last week of anti-Chavez business leader Carlos Fernandez, one of the organizers of a recent two-month strike that slashed oil output and pushed Venezuela deeper into recession. He is now under house arrest.

Chavez, who calls his foes "terrorists" and "coup mongers," has ordered the arrest of other alleged strike leaders.

SECURITY FEARS

Security was tightened around foreign embassies after bomb blasts early Tuesday badly damaged the Spanish embassy cooperation office and the Colombian consulate in Caracas.

Tuesday's bombings came after Chavez sharply criticized Colombia, Spain and the United States on Sunday, accusing them of meddling in his country's crisis.

His government denied any link between his remarks and the blasts. No one claimed responsibility for the bombings but leaflets signed by a radical pro-Chavez group were found at the scene. They expressed support for Chavez's "revolution."

The U.S. embassy was closed to the public on Thursday after officials said Wednesday they had received a threat. U.S. officials said the embassy would re-open Friday.

A telephone bomb threat Thursday forced the evacuation of the control tower and other parts of Maiquetia international airport that serves Caracas. Flights were delayed, airport officials said. No explosive device was found.