CHRISTOPHER TOOTHAKER, Associated Press Writer Thursday, May 29, 2003
(05-29) 12:48 PDT CARACAS, Venezuela (<a href=www.sfgate.com>AP) --

Venezuela's government and opposition signed an agreement Thursday that requires them not to seek changes to election laws as they prepare for a referendum on the rule of President Hugo Chavez.

The agreement ended six months of negotiations sponsored by the Organization of American States between rivals engaged in a power struggle that produced a short-lived coup and a crippling general strike.

Opposition leaders feared pro-Chavez lawmakers would amend election laws to put obstacles in way of the referendum.

Chavez said he hoped the agreement would compel "those who have taken the path of violence and coups" to abide by the constitution.

"I feel happy," Chavez said in a nationally televised address. "There are no winners and losers. The government won't say we've won, and I hope the opposition won't either. Let's say the country won."

OAS Secretary General Cesar Gaviria called on political rivals to "make every effort" to see that the agreement is respected. Gaviria said he would return to Venezuela "if the sides require him to do so."

"The two sides should resolve any impasse that could present itself," Gaviria said.

Diplomats from countries that supported the talks -- the United States, Brazil, Chile, Mexico, Portugal and Spain -- witnessed the signing ceremony.

Both sides agreed the best way to resolve their differences over Chavez's continued rule would be a binding referendum on whether the president should step down.

Venezuela's constitution allows the vote if citizens gather signatures from 20 percent of the electorate, or 2.5 million people.

It can take place midway through a president's six-year term -- August, in Chavez's case. The next scheduled elections are in 2006.

The deal prohibits the Chavez-dominated Congress from amending electoral laws ahead of the vote. To deter political violence, it calls on authorities to disarm the population ahead of balloting and obliges the government to finance the vote. It also urges Congress to swiftly name an elections council.

The agreement provides for referendums on the terms of other elected officials. Chavez supporters plan to seek the ouster of several opposition legislators to increase the government's slim majority in Congress.

In a statement from the Atlanta-based Carter Center, former president Jimmy Carter said the period leading up to a possible vote will be the toughest yet.

"The implementation of the agreement will be the most important and most difficult phase in the process of lessening the crisis in Venezuela," Carter said in the statement.

Election authorities must be named, signature and voter rolls verified, ballots printed and a date chosen before any referendum can be held. Gaviria said Wednesday he expects the presidential referendum to take place in November if those requirements were met.

Several opposition political parties and business groups endorsed the agreement reluctantly, saying there was no guarantee the vote would take place.

Opponents argue Chavez can no longer govern a country bitterly divided between those who fear he is becoming increasingly authoritarian and those who consider him a champion of the poor.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, May 29, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: The 'conuco' is a small patch of land traditionally cultivated in some Latin American countries by very poor farmers ... not for commercial purposes but for the subsistence of the family.  It usually consists of 2-5 acres of land on which the farmer, assisted by wife and/or children, cultivate basic crops such as corn, plantains, cassava and the like. In addition, there are a few chickens running around, a couple of pigs and a few mango trees.

The conuco is one of the most primitive forms of farming, and is related to the Arawak tribes found by the Spaniards when arriving to the new world. Later on, the conuco also became the patch of land given by large plantation owners to their slaves for personal usufruct (Merriam-Webster: the right to use or enjoy something).

The conuco is a backward form of farming because it often entails burning and clearing hillside slopes, which promotes soil erosion. As such it is an enemy of sustainable agriculture and of environmental protection, which are basic concepts of the new Law of Lands and Agrarian Development (Articles 1 and 2).

However, Article 19 of this law recognizes the conuco as the historical source of biodiversity (really?) and as the object of government protection and promotion. The "ancestral" technique, reads the Article, will be made known and disseminated by the government, as well as its techniques of "soil preservation."

In Article 20, the 'conuquero' is said to be guaranteed his/her patch of land ... in parallel, however, the current 1999 Constitution (Article 307) makes guaranteed food security a fundamental right for Venezuelans.

How to reconcile this Constitutional mandate with the objectives of conuco promotion contained in the lesser law is beyond my understanding.

The chicken coop is the second vertebra of the revolutionary spinal column. It aims at replacing commercial egg and chicken production with domestic chicken coops located on flat terrain or ... if need be ... flat rooftops, a variation which has been baptized as the "vertical chicken coop."

Many Venezuelan families have had chicken coops in their backyards for decades or even centuries. When I was 15, I took a course in aviculture in my spare time, learning about the different types of chickens and hens, those good for eating and those good for eggs. I even learned how to kill a chicken efficiently, by snapping its head backwards, although I never got to do it.

When we moved to Sabana del Medio (where we have almost 4 acres) we decided to install a chicken coop, much before the Presidential directive ... I felt that my theoretical knowledge of aviculture would allow us to produce the best eggs in the neighborhood.

We came to have about 20 hens and 2 roosters, but the hens were moody and stopped laying eggs without notice ... either due to sentimental problems or to the type of feed they got. After my calculations indicated that the eggs had a cost three times more than the ones we could buy in the market, we dissolved the coop ... to my great relief. The hens were greedy and wanton creatures...  If this experience of ours is a common one, I'm afraid that the Presidential plan is going to diminish the national GDP even further ... his initiative might well become what, in colloquial English, is known as "to lay an egg."

And now we come to the third component of the revolutionary economic program ... the so called "Ruta de las Empanadas" ... the Empanada highway, an almost military plan to establish a national grid of 'empanada' stations. The empanada is almost as popular as 'arepas' in Venezuela ... especially along the coastal towns, less so in the hinterland. The empanada is made of corn flour, not wheat flour as in Chile and Argentina. The dough is filled with shredded meat or black beans or cheese or 'cazon' ... a marine fish of the family of squalids ... the non-political variety ... in short, a small shark.

The empanada is a big favorite in the early mornings, and is eaten mostly standing up at a street corner or in popular markets such as Conejeros in Porlamar, Guaicaipuro in Caracas or La Marina in Maracaibo. It is also common at the small town fairs, where they compete with arepas and diverse meats, served from cauldrons, grills and spits by a swarm of women, all chanting the excellences of their offerings, while mumbling depreciatively about their neighbor's.

Traditionally, empanada stands crop up here and there, without discipline. As of now, however, the revolution will impose an impressive grid of some 4,000 empanada stations all over the country ... or so the government says ... in order to generate some 400,000 new jobs.

Although details are yet somewhat sketchy, the impression I get is that the country will be divided by imaginary lines intersecting at right angles, with an empanada station at every intersection ... something like an enormous bingo card. This would facilitate comparing the quality of, say, the empanadas at O-5 with those at M-9...

This bold and visionary initiative could generate some new jobs ... but it might destroy, among many others, the quaint, personalized, empanada stand of Misia Luisa in Puerto La Cruz ... the individual empanada site will be sacrificed to a large scale, impersonal, revolutionary empanada blitz.

I get the impression that the rather melancholy Chavez revolution is falling short of the answers required by the mounting social, economic and political problems of the country. In the manner of T. S. Elliot, one could say that:

This is the way the revolution ends This is the way the revolution ends... not with a bang, but a whimper...

History will talk about a failed experiment which tried to base Venezuelan society on pride in poverty and backwardness, in going back to Zamora and to being half naked...

People would not go for it...

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email gustavo@vheadline.com

Atlantic Unbound | May 29, 2003   Robert Baer, a former CIA agent and the author of "The Fall of the House of Saud" (May Atlantic), discusses the perils of our dependence on Saudi Arabia and its precious supply of fuel .....

A dependence that's so strong it's almost like a narcotic. You don't question the pusher." It may sound like the language of drug addiction, but in fact Robert Baer, a former CIA agent in the Middle East, is describing American dependence on Saudi Arabia and its oil. In "The Fall of the House of Saud" (May Atlantic), Baer details the United States's absolute reliance on oil from a country that is deeply, dangerously unstable. The history of U.S. involvement in Saudi Arabia goes back nearly to that nation's birth. In 1933, a year after the kingdom was declared, the first American oil concession was granted. Over time, U.S. interest in Saudi oil evolved into a company called Aramco, which controlled all of the oil in Saudi Arabia—25 percent of the world's total. Aramco was a private company held by four large U.S. oil companies, with immense influence on the U.S. government. (It is now wholly owned by the Saudi government.) Moreover, the relationship between the U.S. and Saudi Arabia extends beyond this private interest—as early as 1943, President Franklin Roosevelt asserted that protecting the kingdom, and its oil, was of vital economic importance to the United States as a whole. The precedent of maintaining a friendly relationship with Saudi Arabia, for both public and private reasons, has remained unchanged in the intervening years. The United States' policies on Saudi Arabia, Baer argues, are built upon the delusion that Saudi Arabia is stable—that both the country and the flow of its most precious commodity can continue on indefinitely. Sustaining that delusion is the immense amount of money (estimated at $19.3 billion in 2000) exchanged between the two partners: the U.S. buys oil and sells weapons, Saudi Arabia buys weapons and sells oil. Oil and the defense contracts underpinning its protection bind these two countries together in such a way that when Saudi Arabia falls—a fate Baer feels is absolutely certain—the U.S. falls too. Perhaps not all the way down, but, if we don't curtail our dependence, he argues, a failure in Saudi Arabia could have catastrophic consequences for the United States. Our relationship, however, continues unabated—even as the corrupt royal family bleeds the Saudi treasury, Wahhabist extremism heats up, and Saudi Arabian citizens kill American citizens in acts of terror. Baer maintains that we must look at Saudi Arabia with a more objective lens and examine the foundations of that country, since they are, in some sense, the foundations of our own. Robert Baer was part of the Central Intelligence Agency for twenty-one years; for most of that time, he worked for the Directorate of Operations in the Middle East as a field officer. He is the author of See No Evil: The True Story of a Ground Soldier in the CIA's War on Terrorism. His article for The Atlantic is adapted from his new book, Sleeping With the Devil: How Washington Sold Its Soul for Saudi Crude, to be released in July. We spoke by telephone on May 20. —Elizabeth Shelburne

How did you come to be involved in the CIA? It's a bit of a mundane process applying and getting hired. I actually just called the federal center in San Francisco. I was curious, and it was a bit of a prank in a way. I was living there, I'd finished college, and I was working part-time. They set up an interview for me, gave me a couple tests, and about six months later I was in, to my surprise. So you just called as a prank and this ended up being something that you did for twenty-one years. Well, you know, it was in the news a lot back in '75 and '76. I definitely never considered it seriously. I didn't even know what a spy was; I didn't like spy movies. But it was curiosity more than anything, I suppose. And I never thought I'd get in, and I never thought I'd stay in. Twenty-one years later, I was still in. How did you decide to write a book about Saudi Arabia? How much time did you spend there? You mention that you know the Saud family—do you know any of them personally? Where does your knowledge about them come from? I've visited Saudi Arabia, but I've never served there on a tour. I've always looked at Saudi Arabia and the phenomenon of Sunni fundamentalism from the periphery, where it is easier to see these people, to meet them. Because in Saudi Arabia, and this is one of the problems, you just can't walk into a mosque and sit down and start talking to the clerics. And you can't just drive around the country, going to Medina and Mecca—they're off-limits to Americans, unless you're Muslim. I'm like someone who followed the Soviet Union from the outside. But I've spent twenty-five years in the Middle East—I've met members of the royal family, I've talked to Saudis. That's one of the reasons I started thinking about the book. In the summer of 2001, I'd picked up some information that there was going to be a big attack. The person I was dealing with was in touch with the terrorists and wanted to go to Riyadh to pass on the information. He wanted me and another former CIA officer to go with him to Riyadh as intermediaries. But when we met with the Saudi Ministry of Defense in Geneva to see if we could go, they said, "Absolutely not. We don't want you there. What do you know about Saudi Arabia? What do you know about terrorism? We don't want to listen." It's that combination of arrogance, xenophobia, and denial that I was struck by. Then I started investigating it more and started talking to people. I went around the United States and asked people exactly what we knew about Saudi Arabia. It was amazing that for a country like Saudi Arabia, that is so important to us, we know so little about it. Why is this? Why haven't we looked into the kingdom that owns 25 percent of the world's oil resources? Why don't we look inside and examine the threat? And what is the answer to "Why don't we look inside?" Dependence. Dependence on cheap oil. It's a dependence that's so strong that it's almost like a narcotic. You don't question the pusher. So many of my colleagues who worked in Saudi Arabia left the CIA and went to work for the Saudis. How can they spend thirty years in the CIA, walk out the door, and have the same remarks I do if they are working for the place? This is an uneasy relationship, because even the Saudi ambassador to the U.S., Prince Bandar bin Sultan, has admitted that he holds out jobs in front of bureaucrats, knowing that one day they can work for the Saudis or work for defense companies that work inside Saudi Arabia. These companies don't want to question Saudi Arabia. You're not going to get Boeing or any of these other companies, like the Carlyle Group, to do independent studies saying, "Oh, by the way, our source of cheap oil is wobbly." In your article you describe how vulnerable the Saudi oil infrastructure is to attack. How worried should we be about the kind of attack that you mention? And can you describe what kind of shape an attack might take? Well, here's my theory. Of course, I'm not an expert, I'm not an engineer. I've read stuff on the vulnerabilities of Saudi oil, tightly held studies. And what the engineers worry about is, What could be done if there was a strong support system behind the planners, or if people inside the oil industry were co-opted; what sort of damage could they do? Externally, a truck bomb at the gate would do minimal damage. But, if an employee who knew the system could place explosives, could hit a couple key places, including the redundant systems, then you could take 25 percent of Saudi oil off the market for a long period of time. That's the worst-case scenario. With respect to the attacks last Monday on the compounds in Riyadh, there is more and more evidence that I am hearing (and it's not confirmed yet) that this was done with internal support from the National Guard. So, if they can do this to the compounds—a military operation with all these suicide bombers and multiple car bombs—why couldn't these same groups hit the oil industry and really do serious damage? I'm quite sure at this point that the Saudis have got security all over that system at the sensitive points. If it were just bin Laden on the outside, the risk isn't that much. But when you have internal support and operatives, then it worries me. You mention the possibility that a terrorist could procure a submarine from the global arms bazaar and use it in an attack on Saudi oil. Could you talk a bit about the global arms bazaar? A lot of countries that make these advanced arms are impoverished and they're willing to sell the arms. They are more and more available. My understanding is that the two most recent suicide bombings in Israel used explosives that weren't locally made. Plastique has almost become a commodity like heroin or cocaine. You can pick it up anywhere on the black market for a certain price. Guns are easily available and heavier weapons are easily available. And that's not to speak of a person like bin Laden, who bought a lot of weapons in the mid-nineties that came from this market. In Yemen you can buy weapons—surface-to-surface rockets, surface-to-air missiles, the shoulder-fired ones, which closed down British Airways going into Kenya. In fact, availability of arms, the spreading of hate and demographic problems, all mean it's going to be a long time before we can get over this. It's going to take a lot of hard work. A country that it could really affect is Saudi Arabia. If you fired at one civilian airliner leaving Riyadh and shot it down, there would just be an exodus of foreigners. The people who run Saudi Arabia's oil industry are just going to get up and leave. So it's all interconnected. What disturbs me is how little we know about all this. Ten days ago, before the Riyadh bombing, the head of counterterrorism at the State Department, someone I know, said, "We've beaten bin Laden, he's on the run." He's not trying to mislead us, it's just that we don't know how deep this goes. If bin Laden's alive, he's holed up in some cave in Pakistan or Afghanistan. He's not running this. It's much too complicated. It's done locally. And with local access to arms, we can expect a lot more attacks. What is the Saudi royal family's attitude toward the threat to their oil? Well, even the King, back in the early seventies, when there was the Kissinger plan of seizing the oil fields, the King said "Fine, seize our oil fields and we'll go to war with you and we'll go back to the desert and live off camel's milk and eat dates." There's this mentality in Saudi Arabia that oil has been a curse. And maybe Saudi Arabia would be an ideal utopia if you got rid of the oil and all this money that it's generated that has caused more problems than it's solved for the majority of the Saudi people. So it's this convergence of terrorism and this attitude that we really need to watch in the future; not even in the future, right now. One of the things you mention in your article is that in the past you accepted on faith the U.S.'s assumption that the Saud family could keep their position and their oil safe. What caused you to change your mind? September 11. I figured that we'd be attacked eventually in the United States, but I never suspected that they would be able to put nineteen suicide bombers on those airplanes and hit us as hard as they did. It was an extraordinary attack, and the amount of damage it did to the United States is incalculable. But you have to think like the opposition. Why wouldn't they attack the oil, or the Saudi monarchy? No one knows what the repercussions of that would be. Since the article came out, I've talked to a lot of oil analysts and they've said, "You know, you cite the figure of $150 per barrel if the Saudis' contribution to the world oil supply were cut off, but there are no econometrics for this." It's the unthinkable if you took this oil out. You have to remember that Saudi Arabia plays a dominant role in the rest of the Gulf/Arab sheikdoms—Kuwait, Oman, United Arab Emirates. A cataclysmic failure of some sort in Saudi Arabia is bound to spread to these other countries. So we could, without having any econometrics on this, go way beyond $150. What's going to happen then? We truly are in uncharted waters if Saudi Arabia falls. Has CIA activity or U.S. policy as a whole helped to shape or create the present situation in Saudi Arabia? We, as a country, not just the CIA, didn't think that Sunni fundamentalism was all that bad. It helped us defeat Egypt in a large sense, and it helped us in the Yemen civil war in the sixties, and then in Afghanistan. So we were supportive of Sunni fundamentalism, never thinking that once the Russians were run out of Afghanistan the Sunnis would turn on us. It was a failure to see forward to this possibility. It wasn't just the CIA. It was the CIA, the State Department, the White House, and the American press as well. They all said, "Saudi Arabia is a medieval country, we don't really need to worry about it, it's very conservative, it doesn't change very fast, it's a mutually beneficial relationship. They pump the oil, they bank our oil, they buy our weapons, it's all to our advantage." Can the American and global dependency on Saudi oil be changed? If so, how do we do it? It's got to be changed. Just look at the environmental motivations to change it. And the increase in our dependence on oil can only make matters worse, because oil unfortunately sits in the most unstable parts of the world: Venezuela, Nigeria, Chad, the Middle East, the Caucasus, and Central Asia. Even Russia's not particularly stable. When our future is in the hands of parts of the world that are spinning out of control, it worries me. What would be your first thoughts in terms of how we go about making the change? I would start with, for one, taxing carbon-based energy sources. We have a huge gas problem in the United States; I'd start taxing those sources in order to force down consumption. Then I'd use incentives and start investigating practical alternatives—fuel cells, wind energy. Pumping more oil is just not going to do it. Alaska's going to last us for, what, sixty days of oil consumption? I think that's wishful thinking. Once we back away from this dependence on foreign oil or oil at all, we can have a more independent foreign policy. One of the things that you mention in your article is the surplus oil that the Saudis sent to the U.S. after September 11. Was that part of an agreement with the U.S.? Did the Saudis do this of their own volition? How did that decision come about? There's an extremely close relationship between the White House and the king of Saudi Arabia, along with the oil minister and the ambassador. You can call the ambassador up and say, "Look, we're forecasting a shortage in the world oil market because of speculation. Can you pump more?" In every crisis, the Saudis have come through. Let's be frank about it—they were our best allies in the Middle East. They banked this oil—2-3 million barrels—at a very high cost, they never got reimbursed for it, and they were always there. The Iran-Iraq war, they were there. When the Iraqis overran Kuwait, they were there. Strikes in Venezuela, they came through and pumped more oil. They had their own interests, but they also protected our markets as well. Were they being financially compensated for pumping more oil? We pay market prices. But the point is that it's all based on supply and demand, and by increasing the supply, they keep down the price. It's something the Saudis have paid out of their pockets. We've never reimbursed them for this surplus capacity. We built it in the sixties and seventies; but when they nationalized Aramco they paid for it, they bought it back. We can't simply just sit down and say, "These guys have always been against us and the Wahhabi fundamentalists have been sent by the royal family to destroy the West"—that's when it veers off into right-wing theory. I'm intrigued by what the Saudi reasoning behind surplus oil is. Is it just to keep in the good graces of the U.S.? What do they get from it? Well, we provide their defense. We've got troops based in the area; we protected them from the Iranian terrorist threat in the eighties. They also maintain market dominance and they are looked at as a reliable partner, which helps them strategically. And that's worked fine until we've had this series of terrorist attacks, the intifada in Palestine, and this movement in the streets of Saudi Arabia. No one foresaw this, but now it's time to catch up. You said before that many Saudis feel that oil has been a curse for them. With that in mind, could you talk about the amount of money used to sustain the lifestyles of the Saudi family? Where does it come from and how is it being used? It's all hidden in defense and construction contracts. What has happened is that the price of Saudi oil is really transparent when it's sold. Aramco has contracts, they sell oil at world prices, and they get reimbursed. It's part of their budget. Some of their oil is called "political oil" which they give to their allies for free, whether it's Yemen or Jordan, or at times, Bahrain and even Afghanistan and the Taliban. Where the money is stolen—and I call it stolen; the Saudis might not—is in construction and defense contracts. You pay commissions of 20-40 percent for arms deals. That's divided among senior princes in the royal family and commission agents. The same thing happens in construction. When they rebuilt Mecca and Medina, they were overpaying for projects and the money went into the royal family, into the bin Laden family, into the bin Mahfouz family. I mean, what's a commission? If you get 40 percent on a deal, it seems like bribery to me. And the royal family divides these commissions up, which supplements money they get in their allowances. You mention in the article that these allowances range anywhere from $19,000-270,000 per month. Those are the stipends, which are perfectly open and legal—and expected. But it's over and above that that they are getting the commissions from construction and arms. For people who are living on that amount of money, is oil really a curse? Could they really go back to the desert? I don't think they could. I'd hate to live in Saudi Arabia without air conditioning if I'd grown up with it. No, they couldn't. I don't think most Saudis would survive without oil money, but the problem is now they believe that they can. The question is, What percentage of Saudis believe it? Once you start hitting the high numbers like sixty or seventy percent, you're ripe for a revolution. Could you talk a little bit about the current relationship between the House of Saud and Wahhabism—the fundamentalist Islamic movement gaining strength in Saudi Arabia? In the article you mention that the connection dates back to the eighteenth century, when Muhammad ibn Abdul Wahhab, the founder of the movement, and Muhammad ibn Saud, of the House of Saud, cemented their relationship with a deal that "the Saud family would provide the generals, and the Wahhabis would provide the foot soldiers." Saudi Arabia is a very conservative society and it has always been conservative. And the royal family depends upon the Wahhabis and these conservative religious groups. What the royal family did over the years was give them a lot of money, encourage them, give them mosques, give them an educational system, with the primary schools and the mosque schools, in return for not criticizing the royal family. Eventually, in the sixties and seventies, they gave them money to expand Wahhabi Islam, which spread into Central Asia, North Africa, and beyond. It was a payoff for turning the other way when it came to the Saudi royal family. Is that starting to change now? No. I don't think they can change it. These people are powerful. Somebody recruited those fifteen Saudis. Not all of them were recruited in Afghanistan and they weren't recruited in Europe. They were recruited in Saudi Arabia. They joined this bin Laden movement there. Aren't there some aspects of that movement that do call for the overthrow of the royal family? Sure, sure they do. Because they think it's corrupt. It's corrupt because it's made an alliance with the United States, because of money, things like that. We've seen a lot in the news during the past few months about the idea that toppling Saddam Hussein might lead to a domino effect in the Middle East. Could that happen in Saudi Arabia? Would it ever be allowed to happen? A domino effect? Sure. We crossed a threshold when we invaded Iraq. All bets are off. The obvious is no longer obvious. But again, it's all in the timing. Everybody thought that the terrorism would start when the first bombs fell on Iraq; it took two months. When are we going to see the unintended consequences of this war? I don't know. The Saudi royal family is trying to make reforms very quickly, but it's going to be too little, too late. What kind of reforms are they trying to push through right now? They've created a pseudo-parliament, to give people some measure of representation. But what are they going to do with the radicals, who say "Let's break relations with the United States, let's stop pumping so much oil, let's raise the price of oil, and let's support a jihad in Iraq against American troops"? The Saudi royal family is never going to let that happen. Basically, they are governing a country that is at a complete disconnect with the life they are leading and the foreign policy they are pursuing. Yes. These huge contradictions—we're starting to see the fissures resulting from them now. Again, I emphasize, we don't know how bad it is, but based on the closing of the embassies today and based on the attack in Riyadh, I think the scenario is speeding up. In the article you say that Crown Prince Abdullah has called for "democratic reforms, the reining in of the conservative clergy, and military disengagement from the United States." Where does he stand in the eyes of others in Saudi Arabia as a result of those views? He's popular, I believe. He's taken a strong position on reforms, on cutting back the princes' stipend, on the corruption. He's aware of the problems. He just hasn't been able to get a consensus inside the royal family. Some of the behaviors of the Saudi princes just seem purely criminal in nature. Would there ever be any sort of popular uprising against the princes' corruption? That's what I'm afraid of. I'm hearing that the National Guard, which is a tribal group, is fighting against Saudi Arabia's connection to the West. Is that going to spread to the rest of the military? Are they going to turn against the royal family? I don't know. But it's something we shouldn't rule out. About a third of the Saudi Arabian population is composed of foreign nationals, and they seem to be the ones who keep that economy functioning. What kind of effect does that have on the society? If Saudi Arabia were ever to find itself in a situation where these workers didn't have jobs or decided to leave en masse, what effect would that have in Saudi Arabia and the rest of the Middle East? If they got up and left, the whole economy would collapse. They're the engineers, they run things. A lot of Saudis are not equipped to run their water-purification plants and things like that. But I think that what we are talking about is the Americans leaving or the British leaving, rather than the Pakistanis, who are Muslims, of course, or the Bangladeshis. If the Americans all left, it would be a catastrophe, but not like if all 6 million foreign nationals left. You talk about the Washington establishment's proposed solutions: for the royal family to cede part of its authority, support reform-minded princes, set up a model parliament, and co-opt firebrands by giving them political office, etc. Do you think any of these suggestions are enough? Instant democratic reforms? No. Because the problem is that the country would be like Algeria and would vote in an Islamic government. Everything I've seen suggests that. And it's something we couldn't live with right now, because that would be entirely unpredictable. According to the Washington establishment, are there any real plans to implement these kind of suggestions, or is it enough to have the suggestions at all? No, it's not enough to just have suggestions. And it's not enough to pull our troops out. I don't know what you do to fix it now. I would say you're going to have to start by doing something serious about Israel and the Palestinians. The problem is that going into Iraq, the way the Saudi in the street looks at it, was an invasion of an Islamic country. We decided, for whatever reason, to ignore that. Can we turn back this wave by military force? It depends on how bad things are in the Islamic world. But it's a risky strategy. How long do you think we have before we start to see Saudi Arabia fall apart from all of these tensions? The smart people tell me that in three or four years we're going to see some big change in Saudi Arabia. Now, it may be a change in succession, an Islamic government, or a complete distancing of the country from the United States. Any of those changes could radically alter the world. Yes. We should have contingency plans, if that occurs. If we see an Iranian-style revolution occur there, what do we do about the oil? Can we afford to lose Saudi Arabia's oil production? We can't rule it out that they might just close it down. Or that a completely nutty group might get a hold of the oil facilities and destroy them. Do you think the most recent events—the withdrawal of troops and the bombings—are going to serve as a wake-up call to either the Saudi family or the Bush Administration? I think they have. The fact that we've closed the embassy down, it's clear to me that they're saying, "Hey, things are bad there and we have to do something about it."

<a href=ogj.pennnet.com>Oil & Gas Journal Sam Fletcher Senior Writer

HOUSTON, May 29 -- There were 95 bcf of natural gas injected into US underground storage during the week ended May 23, the largest amount injected so far this season, the US Energy Information Administration reported Thursday.

That's on top of the previous seasonal record of 90 bcf of gas injected during the week ended May 16. US gas storage now stands at 1.09 tcf, down 762 bcf from year-ago levels and 508 bcf below the 5-year average.

Gas remains short But traders shouldn't become too complacent as a result of the two back-to-back large injections, said James K. Wicklund, an analyst in the Houston office of Banc of America Securities. "We still believe (the US) could come into winter with less than ideal gas in storage," he warned Thursday. "While weekly injections have averaged 9 bcf/week above normal since the start of the injection season (at the beginning of April), they need to average 17 bcf/week above normal now until winter for storage levels to return to 3 tcf (the 5-year average) by the start of the season."

Wicklund said US gas storage levels "should continue to be depressed enough to maintain high relative natural gas prices (in excess of $5/Mcf) at least through this year, causing E&P companies to continue drilling and oil service (firms) to continue selling their services."

Earlier this week, the Natural Gas Supply Association forecast continued upward pressure on natural gas prices this summer as a result of warm weather, increased storage, and flat production.

"While the weather is out of anyone's control, natural gas storage and production are issues that can and should be addressed," Wicklund said. With federal government officials now focusing on the structural shortage of gas in this country, he said, "We continue to look for a near-term solution in the form of an executive decision vs. a legislative bill."

June expiration record The expiring June natural gas contract rebounded by 4.5¢ Wednesday to close at $5.945/Mcf, the highest finish ever for that month on the New York Mercantile Exchange. "The June contract finished 74% above last year's settlement, and 16% above the April and May expirations," reported analysts last week at Enerfax Daily. But despite a late price surge Wednesday, they said, the June contract fell below the 3-day settlement average.

When NYMEX resumed trading Tuesday after the long US Memorial Day weekend, the June natural gas contract had plunged below $6/Mcf for the first time since mid-May, dropping 21.9¢ to $5.90/Mcf as moderate weather and weaker cash prices encouraged local distribution companies to liquidate, analysts reported (OGJ Online, May 28, 2003).

Wednesday, the market opened down and spent all morning trading around $5.80/Mcf, before rallying in the afternoon to as high as $6/Mcf as traders bought commodities to close out short sales, "despite a soft physical market and fairly mild weather forecasts through next week," analysts said.

The new near-month July gas contract inched up 0.5¢ to $6.016/Mcf Wednesday on NYMEX and may climb higher this week, if traders continued to cover short positions.

Meanwhile, cash market prices for natural gas continue to lag futures market, "which is a function of not having hot weather east of the Rockies," analysts said.

Oil prices The July contract for benchmark US sweet, light crudes dropped 77¢ to $28.58/bbl Wednesday on NYMEX, while the August position retreated by 74¢ to $27.65/bbl. Unleaded gasoline for June delivery fell by 1.72¢ to 87.8¢/gal. Heating oil for the same month was down 1.64¢ to 72.96¢/gal.

In London, the July contract for North Sea Brent oil lost 75¢ to $25.59/bbl on the International Petroleum Exchange. The June natural gas contract declined by 5.8¢ to the equivalent of $2.68/Mcf on IPE.

The Vienna offices of the Organization of Petroleum Exporting Countries were closed Thursday, so no price report was available for the OPEC basket of seven benchmark crudes.

Oil supplies Meanwhile, oil supplies remain "overstated out of Venezuela, delayed out of Iraq, and controlled out of Saudi Arabia," said Tyler Dann, another analyst in the Houston office of Banc of America Securities.