By Leslie Fong

STOPPING the exodus of capital from America to Europe is the real reason why the United States started the war against Iraq despite worldwide objection, according to a Chinese think-tank chief with access to the leadership in Beijing.

In an analysis said to have been read by President Hu Jintao and other top leaders, Mr Wang Jian argues that the steady flow of money away from the US and into Europe over the past six months has raised the spectre of a financial meltdown in America.

With a financial system sustained largely by incoming funds invested in government bonds and other instruments, the US simply cannot afford to let the exodus continue.

It has to thrash the euro, which has been appreciating against the US dollar, and make Europe a risky place in which to park excess money, he says.

Mr Wang, who heads the government-linked Macroeconomics Society of China, asserts that the US has decided that a war in the Middle East, from which most major European economies except Britain import almost all their oil, would be the most effective way to rattle fund managers.

Iraq, with the second largest oil reserves in the world after Saudi Arabia but few friends even in the Arab world, as good as offered itself as the target.

No doubt higher oil prices will hurt the American economy too, but the impact will be much less severe as the US depends on the Middle East for only 26 per cent of its needs.

Further, he says, it has its own oil fields and holds in reserve enough to meet its needs for 150 days compared with just 90 days for Europe.

In any case, victory in Iraq will mean American control over the country's oil fields, however much the Bush administration may deny that it wants to do that. The US can then tighten the screws on Europe.

Mr Wang's paper has created a stir among the community of researchers and analysts in Beijing, many of whom advise the Chinese government on foreign policy and strategic issues.

It has sparked off deep discussions in such circles, which is hardly surprising as no one believes the reasons given by the US government for going to war.

In contrast, only a few accept that the US is really out to set up a kind of model government in Iraq to show that Islam is not incompatible with modernity as the West defines it - the essence of regime change.

Opinion is divided among those who have read and debated Mr Wang's paper.

Most agree with his argument that war in Iraq, especially a prolonged one that will push oil prices up and up, will hurt Europe and the euro more than the US.

But they see the likely collapse of the euro as a by-product of the war, not the reason for launching it in the first place.

'I think Wang Jian is being deliberately provocative. It was probably his way of drawing attention to some of the economic repercussions of the war,' says Dr Yuan Gangming, Senior Fellow at the Chinese Academy of Social Sciences' Institute of Economics.

Dr Tao Wengcao, deputy director of the academy's Institute of American Studies, thinks the economist is way off the mark.

However, a military analyst, whose writings are tracked by his American counterparts, thinks Mr Wang is closer to the truth than many would give him credit for. 'History will vindicate him,' he says.

At the heart of the economist's argument is the assertion that the US will do everything to defend its 'dollar hegemony' because it is now living off the paper on which it prints its greenback.

With a withering manufacturing sector, whose share of the GDP is down to 18 per cent last year from 24 per cent in the early 1990s, it has been relying on financial transactions for growth.

Weighed down by a trade deficit nearing US$500 billion (S$885 billion) a year, the US needs an inflow of US$1.3 billion a day in foreign funds to help pay the bills for the shoes, clothes and other goods it imports.

To put it bluntly, Mr Wang says, the US is paying for merchandise from China and elsewhere with pieces of paper not backed by gold or anything more solid than faith in the greenback.

These dollars are then re-invested in US Treasury bills, bonds and other 'virtual' assets which are no better than promissory notes or digital signals in a computer.

Given this fragility, once international capital moves out of the US in large enough quantities, America will be staring at a huge financial crisis in the face.

And the money is on the move.

Mr Wang says that between 1996 and 2000, US$2.3 trillion worth of international capital flowed into the US, 70 per cent from a Europe lacking faith in its own euro and mesmerised by the false dawn of the 'new economy' in America.

But with the collapse of the dot.com bubble, the discovery of massive corporate fraud, the Sept 11 disaster and an appreciating euro, the tables are being turned on the US.

Since the fourth quarter of last year, the net inflow of international capital into Europe has been exceeding 15 billion euros each month.

What worries the US even more is that the money stays there, in European long-term bonds and other securities.

Mr Wang says that it has not escaped the Americans that the war in Kosovo spooked fund managers.

Within 10 days of the euro's launch in 1999, it rose 19 per cent against the dollar. But once fighting in Kosovo started two months later, the exchange rate fell to as low as 0.8, a 40 per cent drop from peak to trough.

Noting that Iraq's peace-time oil production amounts to just two million barrels a day and Saudi Arabia alone can put three million a day more onto the market, he says the US can only keep up the pressure on the euro if it also moves against other producers.

He thinks Iran and Libya, known to have been supporting terrorist groups, will be next. But European countries like France and Germany, once alerted to what the US is doing, are bound to respond.

And so may begin a 21st century replay of what the imperialist powers did from the 18th century; only this time, instead of fighting for territory, natural resources and markets, the tussle will be for oil and investible funds.

'I hope my analysis is wrong because if it is not, then the consequences are horrendous,' he says at the end of his paper.

The military analyst has this to say: 'Yes, he is wrong, but only because Iran and Libya are not next - well, not yet.

'Watch Venezuela. Its oil exports were disrupted recently because of strikes and disturbances. Can one be sure there was no American hand behind these?'

• The writer is Editor-at-Large of The Straits Times.

<a href=www.wishtv.com>Reference March 28, 2003 - 5:02 pm

It's been almost two months since the launch of WIIH, Indy's first Spanish speaking TV station. Its nightly newscast, which is broadcast right down the hall from our WISH-TV studio, debuted more than three weeks ago. Now, one of its co-anchors is featured on the cover of April's Indianapolis Woman magazine.

This is a story of achievement when it comes to living the American dream. Carolina Pimentel spoke no English when she came to the Indianapolis. Now, she's bilingual and one of the newest news anchors in the circle city.

Carolina Pimentel is one of the pioneers behind "Noticias A Las Once," the first Spanish language newscast in Indianapolis. "It's still a little different, a little weird; you know, seeing yourself, talk and being so serious,” said Pimentel.

Behind the scenes, Pimentel knows how to balance work and fun. Born and raised in Venezuela, she says her hometown is similar to Indianapolis. As a young girl, she wasn't shy. Pimentel comes from a family of lawyers. Her father, who passed away when she was 12, mother, her older brother and sister are all attorneys.

Pimentel got the idea of learning English when she was a college student in Venezuela. In 1997, she came here to take an English course at Butler and later graduated with a degree in business management from IU.

During that time, she met Miles Nelson. They married last year in an interfaith ceremony in Venezuela. "I can only imagine what it must be like trying to get through college where English is your second language,” said Nelson.

As the Hispanic-Latino population continues to grow in central Indiana, Univision, the number one Spanish TV network in the United States, has become a source for information. "It's a work that will allow me to be with my community and to feel related to them everyday,” said Pimentel, who reports on stories from home to national issues without missing a beat.

Pimentel will always have ties with Venezuela but Indianapolis is now home. "She definitely keeps her culture alive and strong, especially in this house,” said Nelson. "I have the American dream. I'm definitely taking advantage of it and I want to do it in such a way that I would thank America for the opportunity that they have given to me,” said Pimentel, who calls herself a Latina-Hoosier.

The April issue of Indianapolis woman is already on newsstands.

Granma

THE priorities of the Bolivarian Revolution in Venezuela continue to revolve around the battle against poverty in order to attain a decorous standard of living for the great majority of the population, something that is also being attained through the preservation of state assets. These two basic ideas were central in Venezuelan President Hugo Chávez’s 143rd radio and television address to the nation.

"For us, the social sector is sacred... and anything else can be sacrificed apart from support in that battle against poverty and death and for life," he affirmed on Sunday, March 16, speaking from the Miraflores Presidential Palace.

Fifteen days after having initiated the Food Security Program, directed at the country’s vulnerable sectors, Chávez explained developments and progress in the "peoples markets," which are guaranteed prime necessity goods to be sold at very moderate prices. Through this vehicle, more than 1,900 tons of produce has already been distributed to the poor.

According to the Prensa Latina news agency, it was an opportune moment to inform on government plans to reactivate the state’s role in the sale of foodstuffs, particularly those directed to the needy. According to Chávez, the idea is to "recuperate retail outlets in working-class barrios that have fallen into the terrible hands of exploiters."

In just 1,500 days, the current Venezuelan government has increased medical assistance to the population by 41%, plus its total extension to children suffering from cancer. Chávez also highlighted the reduction of the infant mortality rate from 21.6% to 17.3% per thousand live births last year.

Despite those strides, the Venezuelan president emphasized the urgent need for promoting capital investment in national industry in order to facilitate economic development.

"The difference between other governments that privatized their industries under the pretext of lacking funds and ours, is that the Bolivarian administration is undertaking new projects without handing over our national heritage," he highlighted.

According to EFE, Venezuelan Energy Minister Rafael Ramírez stated that the state oil industry, PDVSA, "is maintaining a productive capacity of 3.4 million barrels daily, and will continue to do so if the Organization of Petroleum Exporting Countries (OPEC) decides that we should put that volume on the world market."

He pointed out that national oil reserves are in excess of 320 billion barrels of crude, representing more than 30% of the total reserves of OPEC members. (MVR)

Reference 2:04 PM PST Friday 

Gasoline prices Friday in Sacramento and around California have ebbed slightly from their record highs set this month, according to the latest data from the state's affiliates of the American Automobile Association.

The breathing room in many cases could be measured in tenths of a penny. In Sacramento, the average price recorded by AAA for a gallon of self-serve unleaded was $2.163, down from the high mark of $2.169 set Wednesday. A month ago the average was $2.008, and it was $1.626 a year ago.

For the state as a whole, the average price per gallon was $2.17, AAA reported, barely down from the $2.177 high recorded March 22. Every one of the 25 markets tracked in California showed prices Friday that were down from the record highs set between March 15 and Wednesday.

Gas prices have shot up since December, driven by a variety of factors including fears about the war in Iraq, labor-related supply problems in Nigeria and Venezuela, the shift to summer fuel formulations and changeover in California to a new oxygenating compound used to reduce smog.

Crude oil prices spiked ahead of the start of fighting in the Mideast, but have since declined without a corresponding reduction in retail fuel prices. Officials, including U.S. Senator Barbara Boxer, have called for an investigation. Boxer introduced a bill this week to require a federal probe if certain price conditions occur.

San Francisco, as usual, had the highest average prices in the state; Friday's was $2.27, down from a March 19 high of $2.276. San Jose's average price Friday was $2.151, down 2.5 cents from the record of $2.176 set March 15. Oakland was at $2.165, down from the March 18 high of $2.177.

The Chico-Paradise market had the lowest average price among those tracked by AAA, at $2.07 per gallon, down from the record of $2.109 set March 22.

"The annual change-over from winter grade gasoline to summer grade is now complete in California, so the supply stream is once again moving smoothly," says Carol Thorp, a spokeswoman for the Automobile Club of Southern California. "We should see prices continue to edge lower over the next couple of weeks."

<a href=www.sfgate.com>From the National Desk Published 3/28/2003 4:03 PM

MIAMI, March 28 (UPI) -- Juan Fernández, a leader of the opposition in Venezuela, is meeting with other opposition figures and Cuban Americans in Miami on the future of the movement -- currently in disarray.

Fernández is pushing for a referendum that he hopes would oust Venezuelan President Hugo Chavez in August.

He was one of the leaders of the strike that paralyzed the South American country's economy earlier this year. The strike is over and the opposition is scattered, but Fernández said at a news conference in Miami they haven't given up.

"We are calling for a referendum vote," Fernández said. "The problem with the strike is we don't have a rational person in charge of the country.

"If you see thousands of people are on the street clamoring for a solution what you expect is the head of that could try would do something to alleviate the problem," Fernández said. "Instead, Mr. Chavez did nothing and said, 'I don't care.'"

Fernández, 47, Carlos Ortega and Carlos Fernández led the strike that shut down nearly all of Venezuela's production. Venezuela has the largest deposits of crude oil outside the Middle East, and is one of the United States' major suppliers.

Juan Fernández left his country after a judge struck down an arrest warrant accusing him of damaging the country's fuel supply.

Carlos Fernández has been under house arrest, and Ortega has been granted political asylum in Costa Rica.

Juan Fernández said he would remain in Miami for a few days.

"I know the government is appealing the case and I'm afraid," he said.

Before his arrival in Miami he addressed the Council of Americas in New York, and visited the White House and met the undersecretary of state for the western hemisphere and officials from the Department of Energy.

Throughout the week's trip, he has urged support for the recall referendum.

"We need the international community, especially the United States to ... ensure we have elections and they are held with transparency," Fernández said.

He insists the opposition movement has not lost credibility with the Venezuelan people, although many were damaged financially by the strike.

The said the group headed by the Democratic Coordinator is deeply split, the product of frequent infighting. But he said changes are being considered.

"I don't know if we will have the coordinator as the franchise for the opposition," he said. "What we will have is a strong opposition first, in order to achieve the referendum."

Chavez, a former paratrooper who took part in an unsuccessful coup in 1992, was re-elected primarily on his support from Venezuela's poor. Key support from parts of the middle class has eroded, but he still has the support of the country's poor.