seattlepi.nwsource.com Tuesday, March 11, 2003 · Last updated 1:49 p.m. PT THE ASSOCIATED PRESS     Venezuelan doctor Maria Preciado holds a poster which reads "Chavez leaves now" during a march to protest a shortage of supplies in Caracas' hospitals on a highway in Caracas, Venezuela, Monday, March 10, 2003. For decades, Venezuela's public hospitals have suffered from severe supply shortages, forcing many patients to buy their own syringes, antibiotics, painkillers and gauze bandages.(AP Photo/Leslie Mazoch)

CARACAS, Venezuela -- Venezuela's government will not grant U.S. dollars for the importation of electronic equipment, clothing, footwear and some fruits, according to a list posted by the nation's exchange control commission on Tuesday.

The list of 6,000 items deemed essential by the exchange control commission, or Cadivi, includes various food products, medicines, personal hygiene items and industrial raw materials. The list was posted on Cadivi's Web site.

Most of the items on the list are not produced in Venezuela, which imports more than half of the goods it consumes. Almost all the medicine used by Venezuelans is imported. U.S. dollars must pay for those imports.

Restrictions on imports form part of a new currency exchange control system that President Hugo Chavez's government is gradually implementing.

The controls are meant to protect the bolivar currency, which lost a quarter of its value during a two-month general strike seeking to force early elections. The strike, which cost Venezuela an estimated $6 billion, ended last month without achieving its objective.

Due to delays in implementing the new currency plan, the government hasn't sold any dollars for two months. The lack of dollars has led to scarcity of some goods, including medicine and some raw materials.

This month the government plans to sell $645 million, which will go toward expenses like supporting students abroad and paying for business travel.

Cadivi decides on an individual basis how much and how often foreign currency will be sold to importers.

Opponents of Chavez fear he could use the controls to punish his adversaries, including opposition-led newspapers that must import newsprint. But newsprint appeared on the list of essential goods.

Imports averaged a bit more than $1 billion a month last year and are expected to fall by roughly half that amount as a result of the new foreign exchange controls system.

The economy contracted almost 9 percent in 2002. Unemployment stands at 17 percent according to official government statistics, but economic analysts argue close to one out of five Venezuelans is actually jobless.

The bolivar currency lost a quarter of its value this year before currency sales were halted on Jan. 21.

Under the new exchange controls program, the bolivar is set at a fixed rate of 1,598 to one U.S. dollar. The bolivar trades as high as 2,800 to the dollar on the black market.

On the Net: www.cadivi.gov.ve

www.voanews.com Melanie Sully Vienna 11 Mar 2003, 20:45 UTC 

OPEC building in ViennaThe Organization of Petroleum Exporting Countries (OPEC) has decided to maintain its current production quotas, saying there will be no oil shortage even if there is a war in Iraq.

OPEC ministers said there is no need to change production quotas, now officially at 24.5 million barrels per day. Members said any shortage in the event of a war against Iraq could be covered.

No official contingency plan was announced, but the cartel said it can produce an extra three million barrels per day if necessary.

OPEC president, Qatar oil minister Abdullah Al-AttiyahOPEC does not want to give the impression it supports a U.S. attack on Iraq, a member country.

Analysts say all OPEC countries are producing nearly to their limit and that supplies from Venezuela are only slowly getting back to normal after a crippling strike. But Saudi Arabia says it could produce more oil if necessary.

The uncertainty surrounding the possible war has pushed oil prices up to their highest levels since the last Gulf War. OPEC fears prices could drop quickly if any war is short-lived.

But the president of International Energy Associates in Washington, Hermann Franssen, says if a war drags on, prices will stay high.

"The market will be impacted by an outage of Iraqi production for three months or longer, and that means that other OPEC producers have to increase production and you will get a situation where the market will remain rather tight for some time to come," he said.

U.S. Energy Secretary Spencer Abraham has said the United States would tap its national reserves as a last resort, in the event of a severe shortage, something OPEC is hoping to avoid.

boston.com By Associated Press, 3/11/2003 16:39

CARACAS, Venezuela (AP) Venezuela's government will not grant U.S. dollars for the importation of electronic equipment, clothing, footwear and some fruits, according to a list posted by the nation's exchange control commission on Tuesday.

The list of 6,000 items deemed essential by the exchange control commission, or Cadivi, includes various food products, medicines, personal hygiene items and industrial raw materials. The list was posted on Cadivi's Web site.

Most of the items on the list are not produced in Venezuela, which imports more than half of the goods it consumes. Almost all the medicine used by Venezuelans is imported. U.S. dollars must pay for those imports.

Restrictions on imports form part of a new currency exchange control system that President Hugo Chavez's government is gradually implementing.

The controls are meant to protect the bolivar currency, which lost a quarter of its value during a two-month general strike seeking to force early elections. The strike, which cost Venezuela an estimated $6 billion, ended last month without achieving itsobjective.

Due to delays in implementing the new currency plan, the government hasn't sold any dollars for two months. The lack of dollars has led to scarcity of some goods, including medicine and some raw materials.

This month the government plans to sell $645 million, which will go toward expenses like supporting students abroad and paying for business travel.

Cadivi decides on an individual basis how much and how often foreign currency will be sold to importers.

Opponents of Chavez fear he could use the controls to punish his adversaries, including opposition-led newspapers that must import newsprint. But newsprint appeared on the list of essential goods.

Imports averaged a bit more than $1 billion a month last year and are expected to fall by roughly half that amount as a result of the new foreign exchange controls system.

The economy contracted almost 9 percent in 2002. Unemployment stands at 17 percent according to official government statistics, but economic analysts argue close to one out of five Venezuelans is actually jobless.

The bolivar currency lost a quarter of its value this year before currency sales were halted on Jan. 21.

Under the new exchange controls program, the bolivar is set at a fixed rate of 1,598 to one U.S. dollar. The bolivar trades as high as 2,800 to the dollar on the black market.

On the Net: www.cadivi.gov.ve

www.rferl.org By Mark Baker

OPEC oil ministers, meeting yesterday in Vienna, decided for the time being not to increase output quotas -- even as prices have risen to their highest levels since the 1991 Gulf War amid concern over another war in Iraq. But the cartel signaled it would step up output in the event of a crisis to prevent an oil shortage. The question remains, however: With many OPEC members already producing at capacity, how much can the cartel do? RFE/RL correspondent Mark Baker has the story.

Prague, 12 March 2003 (RFE/RL) -- OPEC oil ministers have decided to maintain current oil output quotas -- even as the threat of war in Iraq has pushed oil prices to 12-year highs.

The cartel, which met yesterday in Vienna, announced it will hold output steady at the current 24.5 million barrels a day. OPEC's 11 members account for around one-third of world oil production.

However, in a bid to ease concern over the higher prices, Saudi Oil Minister Ali al-Naimi said his country -- OPEC's largest producer -- is prepared to increase supplies should war come, saying, "There will be no shortage of oil."

He told reporters yesterday in Vienna, "The objectives of the organization (OPEC) are to have a stable market, a fair price and a fair return on investment."

Al-Naimi's words were reinforced by Qatar's oil minister, Abdullah al-Attiyah, the current OPEC president.

"We are always, OPEC is always trying to stabilize the market, sending a strong message to our consumers," he said. "We are working very closely to the market and if there is any shortage in the market, we will interfere at the right time to balance the demand and the supply."

OPEC has come under increasing pressure to suspend its output quotas as oil prices have risen in recent days to nearly $40 a barrel. This compares to $25 a barrel one year ago.

The price rise reflects concern that a war in Iraq would badly disrupt oil supplies. Iraq's own output of around 2 million barrels a day would be expected to stop once war starts. The effect of that shortfall would be worsened if oil fields in neighboring Kuwait or other Gulf states were damaged.

One worst-case war scenario, published earlier this year by a British businessmen's group, sees oil rising to $80 a barrel.

The threat of war is not the only factor pushing prices higher. Strikes this year in Venezuela -- a major OPEC producer -- halted oil output there. The country has since renewed oil exports but at levels below its OPEC quota of 2.5 million barrels a day.

Analysts say OPEC's decision not to suspend quotas reflects deep differences among cartel members over a possible war in Iraq. Iran, for one, is opposed to any measure -- such as lowering prices -- that would lessen the economic impact of any U.S.-led attack.

Iranian Oil Minister Bijan Namdar Zanganeh said yesterday that "Iran will not back politically motivated decisions."

Analysts say leaving production quotas in place may also make sense economically. OPEC is obviously betting that any war in Iraq will be short and successful. Analysts say an OPEC decision now to increase oil production would risk seeing prices plummet after hostilities are over and war fears ease.

Demand traditionally slackens in the spring as temperatures in the Northern Hemisphere rise and the need for heating oil in Europe and North America falls. Some analysts say prices could soon drop below OPEC's informal target of between $22 and $28 a barrel.

Bill Farren-Price, the Mediterranean editor of the Cyprus-based "Middle East Economic Survey," says there's sufficient supply in the market right now.

"There's plenty of oil in the market at the moment. The oil prices are, some of the oil prices are a result of what people are calling a 'war premium' -- an expectation of shortages."

But analysts say the strategy holds risks, as well. Many OPEC members -- aside from Saudi Arabia -- are already producing at maximum capacity and do not have the ability to expand oil output if it becomes necessary.

Any significant price rise could damage fledgling economic recoveries in the United States and Europe, and in turn lessen demand for oil. Economists say even the most recent rise in the past few months has hurt energy-dependent businesses, such as airlines.

Prolonged high oil prices would also spur conservation measures in the West and catalyze development of non-oil energy sources, much as they did in the 1980s following the OPEC price hikes of the 1970s and early '80s. This is an outcome OPEC hopes to avoid.

Farren-Price says if an Iraq war carries on longer and causes more damage than expected, the International Energy Agency (IEA) could step in to authorize members to release national oil stocks. The agency did this in the first Gulf war in 1991, as price rose to more than $40 a barrel. IEA member governments are committed to taking joint measures to meet oil supply emergencies.

Farren-Price says, "If there is a conflict, and it shuts down a lot of production that OPEC is not able to deal with, then we will probably see the IEA -- the International Energy Agency -- swing into action, as they did in the first Gulf war in 1991, to authorize a release of members' stock to cope with the shortfall."

U.S. Energy Secretary Spencer Abrahams was also in Vienna to meet with some OPEC ministers. He was expected to lobby quietly for output hikes to ease price pressure.

The U.S. has said it could release some of its 600-million-barrel emergency oil reserve to dampen prices. But observers say this would only be a last resort measure, that the administration of U.S. President George W. Bush would rather any shortfall be made up by oil suppliers.

www.agriculture.com By Ohio State University News Service

COLUMBUS, Ohio — Although America's minds are on Iraq and the potential impacts of war, the agriculture industry should be keeping a close eye on the developments with North Korea, says an Ohio State University agricultural economist.

Matt Roberts, with the Department of Agricultural, Environmental, and Development Economics, said a war with Iraq may cause little, if any, economic impacts, but a conflict with North Korea could cause a dramatic disruption in agricultural trade and market prices.

"A potential war with Iraq is simply creating short-term financial uncertainty, which may result in higher interest rates if tensions continue," said Roberts."Any long-term ramifications may result in the slow-down of imports and exports due to heightened security, and in what we call reputation effects — America’s standing in the international community when it comes time for other countries to make American purchases."

North Korean involvement could hamper ag trade

Such impacts would be minor and diminish as time moved on, but a war with North Korea could have a longer-lasting effect, said Roberts.

"South Korea is a very industrialized nation and is a close trading partner with the U.S. I think it's the fifth largest export market for our beef and pork," said Roberts. "Any attack would probably involve the near leveling of Seoul (the South Korean capital) from the north, so the economic disruptions would be immense. We would feel that in our agricultural community. The lesser demand for meat would reduce the demand for feed grains. In other words, a decrease in exports translates into a decrease in grain prices."

Although any conflict with Iraq or North Korea would produce some economic instability, the biggest impact a war would have on the U.S. agricultural community would be one of a social nature, said Roberts.

"The National Guard and (Army) Reserves draw heavily from rural areas: police forces, firefighters, farmers. If a war with Iraq is not a quic k and decisive one or if tensions continue to increase on the Korean peninsula, it's possible we'll start to see more people drawn out of our rural and farming communities," said Roberts. "Their absence would just compound the stresses that some of these families already face with drought and finances and a tough winter."

One impact Americans have felt with a looming war with Iraq has been an increase in gas prices, currently averaging $1.68 a gallon — a 54-cent increase from this time last year.

"Probably the biggest economic impact we would see with a war with Iraq would be sustained high gas prices," said Roberts.

With natural gas prices following suit, it could mean higher-priced fuel and fertilizers for farmers.

"We import more of our natural gas than we once did. It's the primary feedstock from which anhydrous is made, so that has some potential to impact farming profitability this year," said Roberts. "I don't think this is shaping up to be a year like 2001 where there was a gross anhydrous shortage, but those gas prices will stay higher. We may see a slight shift from corn planting to soybean planting because corn production requires higher input costs."

Venezuela also a piece of crude oil price puzzle

The other piece to the crude oil price puzzle is the political unrest in Venezuela that has substantially reduced the flow of petroleum products. Venezuela is the United States' third-largest oil exporter, behind Mexico and Saudi Arabia.

"Venezuela pretty much shot itself in the foot with this situation," said Roberts. "Venezuela has always been a reliable partner for us, until now. Many of our refineries were built to process Venezuelan oil, but they have had to alter their processes and it has made them less efficient."

Carl Zulauf, an Ohio State agricultural economist, said that another impact a war with Iraq could have would be a renewed emphasis on U.S. energy independence. This would result in the increased use of alternative fuel s like etha nol and biodiesel, crop byproducts.

"In the short run, this is probably good for U.S. agriculture, in particular corn producers because of increased demand for ethanol," said Zulauf. "In the long run, the impact could be more problematic if some other source of alternative fuel emerges that displaces the demand for ethanol."

Last year, the ethanol industry set an all-time production record and production in 2003 is likely to follow suit. According to data from the U.S. Energy Information Administration, American ethanol producers made 177,000 barrels of ethanol per day in January. Total production is projected to hit 2.5 billion gallons by the end of the year.

"In the past year, since harvest, ethanol has truly been a savior to the corn market. Our corn exports have been very weak. However, ethanol production has exploded over the last six months, to the point where ethanol is consuming around 8 percent of American corn production," said Roberts.

Biodiesel, another renewable fuel, is also making headlines in U.S. energy production. Last March, the Minnesota legislature passed a law mandating a 2 percent inclusion of biodiesel into the state’s petroleum diesel supply beginning in 2005. Minnesota is the first state to require the addition of biodiesel in commercial diesel supplies.

More recently, a bill was introduced to the U.S. Congress that would give biodiesel the same tax incentives that ethanol currently receives.

"Much of the tax incentive for ethanol is because it is exempt from the highway excise tax, but it has begun to impact the budget of the interstate highway system," said Roberts. "If biodiesel is exempt from those same taxes, concerns are being raised that as the production of alternative fuels increases, it will seriously impact that budget and the money is going to have to come from somewhere."

More emphasis on alternative fuels, however, would provide support for farm prices.

"Over the course of the year, my feeling is th at national p rices have been a dime higher because of increase in our ethanol production," said Roberts. 03/11/2003 12:22 p.m. CDT