Monday, June 9, 2003 Posted: 1307 GMT ( 9:07 PM HKT)

SANTIAGO, Chile (Reuters) -- U.S. Secretary of State Colin Powell arrived in Chile on Sunday to meet his Latin American colleagues as a group for the first time since disagreements over the U.S. invasion of Iraq early this year.

Most Latin American countries, mindful of U.S. intervention in their region, opposed the invasion, but welcome the attention implied by Powell's attendance at the annual assembly of the Organization of American States in Santiago.

Powell will also travel to neighboring Argentina on Tuesday to meet newly elected President Nestor Kirchner, symbolically endorsing his campaign to rid the country of cronyism and corruption after economic and political turmoil.

The Bush administration came to office with promises to pay more attention to its southern neighbors, but Latin Americans, especially Mexicans, feel they have slipped down its list of priorities because of Washington's focus on Iraq, Afghanistan and President George W. Bush's "global war on terrorism."

The two Latin American U.N. Security Council members, Chile and Mexico, which did not support the U.S. quest for an explicit endorsement of its Iraq invasion, have important economic reasons for avoiding confrontation with the world's most powerful nation.

Speaking to reporters aboard his plane, Powell cited strong U.S. relations with both countries and said he did not expect the disagreement to mar ties.

"We're anxious to talk about the future and not the past and I don't see any lasting consequences," Powell said.

"After all the time and attention that we spent on Iraq, the Middle East and elsewhere, we're looking forward to once again turning our diplomatic attention to our own hemisphere."

Cuba off agenda

The annual assembly brings together the foreign ministers or other representatives of 34 countries in the Americas, and the theme this year is good governance in the region.

The OAS has kept off the agenda the question of human rights in Cuba, which has cracked down on dissidents this year, because many members say Cuba cannot defend itself at the OAS. Cuba has been excluded from OAS deliberations since 1962.

But Powell said he would discuss the situation in that country anyway.

"I will talk about Cuba rather directly, point out once again, that Cuba remains the anachronism of the hemisphere and it's not getting better," he said.

A State Department official said last week the United States expected the meeting to release a declaration reaffirming member states' commitment to good governance, including increased efficiency, probity and transparency in public administration.

The meeting will also keep up diplomatic pressure on Haiti's government to move toward democratic elections.

Venezuela, one of the Latin American countries least favorable to the Bush administration, plans to circulate a document condemning the "powerful multinational oligarchies" it says dominate the Venezuelan media.

Many dominant media organizations in Venezuela were sympathetic to the unsuccessful campaign early this year to remove populist President Hugo Chavez from office.

But the U.S. official said he doubted Venezuela could muster much support.

Monday afternoon, the ministers will prepare for a special interim Summit of the Americas expected in Mexico late this year, between the Quebec summit of 2001 and the next regular summit in Argentina in 2005.

NewsStand - Monday, June 09, 2003 <a href=www.menafn.com>MENAFN-Agence France-Presse Kamal Taha BAGHDAD, June 9 (AFP)

BAGHDAD, June 9 (AFP) - Iraq plans to resume oil exports in the third week of June but does not expect production to return to pre-war levels for at least a year, acting oil ministry chief Thamir Ghadhban said Monday.

"We are processing contracts now with various interested parties and we hope that during the third week of this month the first shipment will be made available to the international market," Ghadhban said.

"Hopefully by the end of this month we will be producing about 1.5 million barrels per day (bpd) of crude oil and about two-thirds of that will be made available for export."

Ghadhban said output had already reached 500,000 bpd in the northern oil fields and 200,000 bpd in the south, but said he did not expect output to reach its pre-war levels for at least a year because of continued looting of the infrastructure and the wartime collapse of the power grid.

He has previously put pre-war production at three million bpd, although most Western analysts estimate it at closer to 2.5 million.

Ghadhban said the oil ministry had already recruited 3,000 security guards to protect facilities and expected to take on more.

The Iraqi bureaucrat said his staff and their advisors from the US-led coalition were reviewing all the existing contracts signed under the old regime, which favoured Chinese, French and Russian firms.

"We will be studying our contracts and evaluating them for contractual, legal and economic viability and take the proper decision in the future in the right time," he said.

But he promised that all foreign oil firms would be treated fairly as Iraq valued its position as a major supplier.

"We will be fair and just to everybody," he said.

"We are an international oil industry and therefore we are very careful and very serious about having amicable relationships with all international oil companies."

Ghadhban said Iraq was keen to reopen a 2.5-billion-dollar pipeline to Saudi Arabia which has been closed since Saddam Hussein's 1990 invasion of Kuwait and said he hoped the Saudi authorities would recognize Iraqi ownership over its entire length now that the strongman has been ousted.

He said it would not be for him to decide the fate of a pre-war agreement under which Jordan received all its import needs from Iraq, half of it for free and the rest at preferential rates.

"The agreement was between governments, not between oil ministers," he said. "That's why it is not a matter for the oil ministry to decide."

Ghadhban reiterated that there were no immediate plans to pull Iraq out of the OPEC oil cartel, although it would ultimately be a matter for a future Iraqi government to decide.

"Iraq is one of the founder members of OPEC with Saudi Arabia, Kuwait, Iran and Venezuela and ... has been and remains a member," he said.

"I am certain that as soon as the government is established, it is going to take the appropriate decision and Iraq certainly has all the means to remain a member."

British and US officials have made clear that they do not foresee handing over power to a sovereign Iraqi government for between one and two years.

In the meantime, US officials have pledged they will do nothing to prejudice the eventual decision.

"We will want to make sure that any decision on their future participation in OPEC is a decision that the representative government takes," US Under Secretary of State for Economics and Business Alan Larson told a Senate committee earlier this month.

"We need to be careful not to be seen as steering that because it does need to be seen as a decision they make in the interests of Iraq."

June 9, 2003, 2:14PM Reuters News Service

DOHA, Qatar - OPEC gathered in Qatar today amid signs high oil prices and low stock levels in the West will stay the cartel's hand on cutting output.

Global markets have been starved of two months of supply from Iraq, the world's seventh largest exporter before the war, despite extra volumes from Saudi Arabia and other cartel members.

With U.S. crude at nearly $32 a barrel, Indonesia and Venezuela have said there is no need for any cut at Wednesday's meeting from OPEC's 25.4 million barrel a day ceiling, in effect since the start of June.

However, the market outlook is far from clear and OPEC President Abdullah al-Attiyah said he was concerned by a possible surplus of oil in the next three months.

"All the analysts are talking about facing a 1.4 million bpd glut by the third quarter," Attiyah said. "So far I have to share that opinion."

Officials, for now, are not completely ruling out a cut to keep the heat under a market that is pricing OPEC's index of crudes near the top end of the group's $22-$28 target.

"We are going to see what measures should be taken: if we should keep things as they are, if we should make an adjustment, a cut. I can't yet say which," OPEC Secretary-General Alvaro Silva told Reuters.

UAE Oil Minister Obaid bin Saif al-Nasseri said he did not rule out a cut, but he thought the cartel should address a mismatch between quotas and real output levels first.

OPEC output, excluding Iraq, totalled 26.6 million bpd in May, 1.2 million more than limits set for June, according to a Reuters survey. But it is expected to fall this month as Saudi Arabia cuts back on loadings.

RIVAL EXPORTERS

The Middle East-dominated cartel, which controls half of world exports, will most likely use the Doha meeting to prepare the ground for a possible cut later this year when Iraqi output is expected to rise.

"With prices where they are I don't think OPEC will do anything," said Nauman Barakat, a broker at Fimat International Banque. "They will probably call another meeting once Iraq comes back and rope in non-OPEC to do its bit."

OPEC has invited rival exporters including Mexico and Russia to Qatar, hoping to maintain a fragile partnership that has kept OPEC's basket near $25 per barrel on average for four years -- a boom price compared to the previous decade.

Consuming countries have urged the cartel to keep supplies up, fearing a damaging spike in gasoline prices this summer when demand from motorists peaks.

Recovering from the war, Baghdad is preparing to resume international sales in about a week. Exports are expected to hit a million barrels per day next month, about half pre-war levels.

In April, OPEC ministers said they were ready to cut sharply to make room for Baghdad, possibly as soon as the Doha meeting.

Now data from the OPEC secretariat shows that the world market can absorb some 1.3 million bpd above forecast demand during the third quarter to replenish stocks, an OPEC source said, asking not to be named.

"That means there is more than enough room for Iraq at current quota levels," he told Reuters, based on an assumption that Iraq will supply at 1.5 million bpd in the third quarter.

June 9, 2003, 4:14PM Reuters News Service

NEW YORK - Oil prices hit fresh 12-week highs today as members of the Organization of the Petroleum Exporting Countries cartel gathered for a Wednesday meeting against a backdrop of tight global supply.

U.S. crude oil in New rose 31 cents to $31.59 a barrel, hitting the highest price in 11 weeks after rising 20 percent in barely a month. Brent crude in London rose 7 cents to $27.85 a barrel.

OPEC ministers meeting in the small Middle East emirate of Qatar will debate whether they need to cut production to accommodate the expected resumption of Iraq's oil exports this month.

With prices nearly 30 percent higher than the same time last year and Iraq's exports expected to stay below pre-war limits for up to a year, some OPEC ministers have said there seems to be no need for the group to rein in supply.

OPEC, which controls around half the world's crude exports, aims to keep prices in a $22-28 a barrel range for its basket of crude oils. The basket was last valued at $26.77.

"There is no urgent need for the organization to modify its output," said Frederic Lasserre of SG Securities in a report.

"Iraq is still not in a position to harm the balance of supply and demand. Inventories are rising in line with the season but in absolute terms remain very low," Lasserre added.

After falling heavily from 12-year highs near $40 when Middle East oil facilities escaped feared damage from the U.S.-led invasion of Iraq, oil prices have now risen back to the levels that can further undermine already weak economic growth.

OPEC will use this week's meeting to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later this year, OPEC President Abdullah al-Attiyah of Qatar said.

Iraq will this month sell its first crude since the U.S.-led invasion in mid-March, tendering 10 million barrels of stored crude oil this month, allowing it to deliver an average of about 750,000 bpd during the second half of June.

Sabotage at oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Thamir Ghadhban said on Monday. Before the war, Iraq was producing about 2.5 million bpd and exporting two million bpd.

U.S. fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down supplies earlier this year.

U.S. crude stocks remain in an 11 percent deficit versus last year, while gasoline is down five percent. The next U.S. government supply data will be released on Wednesday.

U.S. average retail gasoline prices fell over the last three weeks, but did so at a slower rate than previously reported as crude oil prices began to rise, according to the Lundberg survey of about 8,000 gas stations.

"In the past three weeks, gasoline price declines are much slower and appear to be ceasing altogether," said Trilby Lundberg, editor of the survey.

The national average for self-serve regular unleaded gasoline fell 1.8 cents to $1.51 a gallon -- more than 10 cents above last year in the period between May 16 and June 6.

Reuters, 06.09.03, 1:41 PM ET CARACAS, Venezuela, June 9 (Reuters) - Venezuela, responding to Iranian interest in buying its bauxite, has proposed setting up a joint-venture alumina plant on Venezuela's Orinoco river, state industrial holding company CVG said on Monday. A spokeswoman for the company, Corporacion Venezolana de Guayana, told Reuters its President, Francisco Rangel, outlined the proposal to Iran's government and aluminum industry during a visit to the Gulf state at the end of May. "The Iranians want to buy bauxite, but (Rangel) explained to them that CVG doesn't want to just sell bauxite," the spokeswoman said. CVG operates Venezuela's state-run aluminum industry located in mineral-rich southeastern Bolivar state. The spokeswoman said Rangel had made clear CVG was only interested in selling bauxite through a strategic alliance with Iran, involving setting up a joint venture in Venezuela to produce alumina which could be shipped to Iran for smelting. "The idea is that the Iranians make the investment in the plant, and then they would be paid back through production," the spokeswoman said. CVG had identified a possible site for the proposed plant at Caicara on the Orinoco river, which would make it easier to transport bauxite from Venezuela's huge Pijiguaos mines. It was not immediately clear what response Rangel had obtained in Iran to his proposal. Iranian embassy officials in Caracas were not immediately available for comment. According to CVG, Iran has plans to increase its installed primary aluminum production capacity to more than one million tonnes in the next 10 years from the current 140,000 tonnes. It is looking for fresh sources of raw material to do this. Venezuela's fiercely nationalist left-wing president, Hugo Chavez, has made clear his government does not simply want to export raw materials. He says he prefers forming alliances with major foreign producers to develop value-added processing, smelting and manufacturing ventures inside Venezuela. As examples of this kind of preferred association, the CVG spokeswoman mentioned existing contracts with Swiss-based Glencore International AG and France's Pechiney <PECH.PA>. Glencore is leading a consortium in a $650 million project to build a fifth production line at CVG's Alcasa smelter. Pechiney is proceeding with a $210 million project to expand production at an alumina plant operated by CVG-Bauxilum to 2.2 million tonnes a year from 1.6 million tonnes. CVG is seeking foreign partners to participate in an ambitious expansion plan that foresees increasing its primary aluminum output capacity by more than 400,000 tonnes to more than one million tonnes at the end of the decade. Since Chavez, a populist former paratrooper, was elected in late 1998, the world's No. 5 oil exporter Venezuela has moved to strengthen ties with states seen as hostile by the United States, such as Iran, Libya, Cuba and previously Iraq, when it was ruled by the now toppled Saddam Hussein. This has irritated Washington, although the United States remains the single biggest buyer of Venezuelan oil.