Jane's Intelligence Review Andrew Webb-Vidal

Two powerful bombs detonated in Caracas on 25 February in an unprecedented terrorist attack in Venezuela. The first left the Spanish embassy, in the La Castellana district, severely damaged. The second partially destroyed the Colombian consulate 2km away. Five people were injured in the explosions, but no one was killed.

For Venezuela, the so far unresolved incidents may signal the onset of a new, more violent, phase in the country's political conflict, with significant diplomatic ramifications.

Police say the blasts appeared to have been caused by C4 explosives, probably detonated by remote control or timers. Officers from the explosives unit of the Directorate of Intelligence and Prevention Services (DISIP) were on the scene within minutes and collected samples of the debris. However, over a month later they have yet to disclose the results of tests that might help identify the perpetrators.

At the scenes of both explosions pamphlets scattered by the two blasts referred to the 'urban militia' of the Bolivarian Force for Liberation (Fuerza Bolivariana de Liberación - FBL). The FBL is a little-known group based in the border states of Apure, Barinas and Táchira, and is alleged to receive logistical support from former officials in the government of President Hugo Chávez. The FBL is likely to have connections with the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia - FARC).

The leaflets called for the expulsion from Venezuela of the US and Spanish ambassadors, and César Gaviria, a former Colombian president. He is now the secretary-general of the Organisation of American States (OAS), which is chairing talks between the Chávez government and opposition representatives. The US embassy also claimed to have received a security threat.

The bombings came less than two days after Chávez railed against the US and Spanish governments for siding with his opponents, who say that although elected, the former army officer is sliding towards authoritarianism. Washington and Madrid in turn criticised the previous week's detention of Carlos Fernández by the DISIP. Fernández is head of the Fedecamaras business chamber and, together with employees of state oil company Petróleos de Venezuela (PDVSA) and labour unions, co-led the strike in December and January.

These circumstances suggest the two bombs could have been planted by Chávez sympathisers. Analysts have speculated that sympathisers may have instigated the explosions in an effort to heighten existing tensions, and drive Chávez and his opponents further apart. Confidence in the authorities' ability, or willingness, to capture the perpetrators was undermined after the interior minister, General Lucas Rincón, said Chávez's assertion that investigators already had photographs of the suspects was untrue.

On the other hand, diplomats say that because the bombings do not obviously benefit Chávez, they may be the work of those aiming to discredit him internationally by associating him with terrorist actions. Those responsible could therefore be linked to dissident military officers, some of whom would also have experience of handling explosives.

The bombings occurred in the context of three key developments: deteriorating diplomatic relations with Colombia; the increased strength of Chávez relative to his opponents; and what appears to be the onset of a more aggressive foreign policy strategy from the US administration.

Shortly before the blasts, Colombian President Alvaro Uribe's government stepped up its public criticism of Venezuela's 'ineffectiveness' in patrolling its border. It insisted that there are FARC training camps and combatants on Venezuelan territory. The Colombian military, and Venezuela's opposition, have long accused Chávez of harbouring ideological sympathies with the FARC, and suspected that a mutual non-aggression pact was agreed at the beginning of his presidency in 1999.

However, the accusations clearly mark a new, more forceful stance by Bogotá. Colombia's interior minister, Fernando Londoño Hoyos, directly accused Chávez of meeting frequently with FARC rebels, prompting Chávez to ask whether diplomatic ties with Bogotá should be severed. The accusations went further, as other Colombian officials claimed that FARC chief Manuel Marulanda was hiding in Venezuela. Uribe, who said his government will pursue the FARC "across borders" if necessary, has also begun to press Chávez into signing an agreement on joint anti-guerrilla operations by the military in border areas, something the Venezuelan president has refused to do for the past two years.

In response to the increased pressure from Colombia, Venezuela's army commander, General Jorge García Carneiro, said that allegations of a FARC presence in Venezuela were untrue, and that the army would repel any guerrillas or paramilitaries that crossed the border. "Neither the army, nor the armed forces in general, are going to let anyone use Venezuela as a hideout, and much less for irregular forces," he said. "The day Marulanda or any other irregular crosses the border, he is going to get a firm response from our military." Almost simultaneously, nine members of the FARC's 10th front were captured in the Venezuelan state of Apure, suggesting the Venezuelan authorities have reliable information on the location of at least some FARC fighters.

Being caught protecting international terrorists may indeed be the last thing on Chávez's mind, however, as he faces a range of serious problems that look set to exacerbate social and political tensions.

Due to the unprecedented collapse in oil production as a result of the strike, analysts expect Venezuela's economy to contract by some 20% this year, the sharpest contraction on record, bringing an increase in unemployment and poverty. Oil output has been recovering, and government officials say daily production has climbed back up to 3m barrels, the volume it was at before the strike. However, former PDVSA managers say daily output is at around 2m barrels, and levels are unlikely to surpass an average of about 2.4m barrels during the year.

Venezuela's economic woes have been compounded by the government's decision to implement foreign exchange controls, after regular sales of dollars from the central bank were suspended in January due to the rapid decline in international reserves as a result of the strike in the vital oil industry. The government has since said it will tightly control which businesses receive hard currency for essential imports, hitting companies already reeling after the strike.

Concerns are also growing that the Chávez government has begun a retaliatory crackdown against the strike's organisers for 'sabotaging' the economy, just as the government's human rights record is beginning to be challenged publicly in international forums. The Inter-American Commission on Human Rights (IACHR), part of the OAS, said the government was not doing enough to prevent armed groups from intimidating opponents. The IACHR estimates that, between March 2002 and January 2003, 'extreme political polarisation' and violence between government and opposition supporters had left 40 people dead and more than 750 wounded.

In February, Human Rights Watch (HRW) urged the Venezuelan government to investigate the murder of four opposition supporters. The bodies of three junior military staff and a civilian who had joined dissident officers pressing for Chávez's resignation were found dumped on a roadside outside Caracas. "The circumstances strongly suggest that these were political killings," said José Miguel Vivanco, executive director of HRW's Americas Division. Shortly after the arrest of Carlos Fernández, Carlos Ortega, leader of the main labour confederation and a co-leader of the strike, went into hiding, claiming that government officials were planning to kill him. Ortega has since been granted diplomatic asylum by Costa Rica, and other key figures involved in the strike have also since gone 'underground'.

Reinforcing the gathering international concerns, Gen Hill told the US Senate Armed Services Committee in March that, in the wake of the strike, Chávez's "actions may portend a move toward greater authoritarianism. In my mind, that bears watching very carefully. I have directed my people to do that."

Fresh speculation over unease in sectors of the Venezuelan military has also surfaced in recent weeks, with reports that a group of active senior-ranking Venezuelan officers strongly opposed to Chávez had been 'in close contact' with US officials.

Diplomats are waiting to see whether Chávez will accept a referendum on his mandate after August, the mid-point of his term.

Chávez could find himself at the blunt end of a more aggressive US foreign policy in which war in Iraq was but the opening salvo, with Washington poised to intervene to pre-empt perceived threats from terrorism, or act against governments deemed to be 'tolerant' on terrorism.

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Jane's defence Weekly Issue 2631 -  08 March 2001

HUGO CHAVEZ, Venezuela's charismatic and controversial president, has made two powerful enemies: the top brass of the armed forces and the American Central Intelligence Agency (CIA). Chavez still enjoys the support of the poor majority, although his popularity rating in opinion polls has fallen from 70% to about 50%. His links with Cuba and revolutionary movements in South America have earned him the distrust of his own army and the United States.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 01, 2003 By: Oliver L. Campbell

VHeadline.com commentarist Oliver L. Campbell writes: I recall that old joke: What is the world’s best business? ...a well-managed oil company.

What is the world’s second-best business? ...a badly managed oil company!

Though it is undeniable that PDVSA needs good management and capable staff, the immediate success of the company largely depends on a factor within its control ... how soon it can get production back to 3 million barrels per day ... and one outside its control, how long the price of oil will maintain its present high level.

Given a high production level and a high price of oil, PDVSA should be back on the road to prosperity reasonably soon.

I would like to comment on a point made that many PDVSA employees left because of former PDVSA president Luis Giusti’s policies.

Before continuing, however, let me declare an interest: I used to play tennis with Luis (Eduardo) Giusti’s father, Luis German Giusti, a good friend, when we both worked for Shell de Venezuela in Maracaibo ... Luis senior was a keen tennis player, and some readers may remember when, back in 1956, he organized the tournament, we enjoyed so much that he brought Pancho Gonzalez , Jack Kramer, Dinny Pails and Pancho Segura to Maracaibo.

I was not in Venezuela when Luis Giusti was president of PDVSA ... so I am not qualified to comment on any negative aspects of his tenure ... though the 'malas lenguas' (bad tongues) among my friends did suggest he appointed too many of his colleagues from Maraven to key posts at the expense of people from Lagoven and Corpoven, and that this had caused friction.

What I can comment on (as an observer) is that Luis Giusti achieved what I believe are two remarkable successes. Firstly, he changed the industry from a vertical to a horizontal type organization. Out went the vertically-integrated companies Lagoven, Maraven and Corpoven to be replaced by functional companies for Exploration & Production and Manufacturing & Marketing. This had been talked about for many years, but no Chief Executive had wanted to grasp the nettle ... particularly as the three integrated companies opposed it.

Making a drastic change in an organization requires courage, needs detailed planning, produces opposition and ... unfortunately ... creates winners and losers. You no longer needed three heads of exploration, production, engineering, manufacturing, marketing, etc. and this is reflected further down the organization.

Obviously, this meant some staff became redundant, but those close to retirement who decided to leave were, I believe, fairly compensated.

Yes, some good people left prematurely, but that was the price of making a more efficient organization. All the major oil companies have had their reorganizations in the last few years, which have led to a reduction of staff ... particularly in administrative areas such as head offices.

The second considerable achievement was in the 'aperture' or opening-up of the oil industry to foreign companies. Luis Giusti played a leading role in negotiations with oil companies that wanted to invest in Venezuela ... and his was a major contribution in extracting so much cash from them. That the negotiations were so successful has been borne out by the fact that several oil companies now recognize they paid too much under the various agreements and have written down the assets in their books.

Of course, everyone has the same right to express criticism of Luis Giusti’s tenure as Chief Executive of PDVSA as they do of those who held the post before or after him ... but, to my mind, in those two important instances mentioned above he was eminently successful.

Let honor be given where honor is due.

Oliver L Campbell, MBA, DipM, FCCA, ACMA, MCIM  was born in El Callao in 1931 where his father worked in the gold mining industry.  He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA).  In 1982 he returned to the UK with his family and retired early in 2002.  Campbell returns frequently to Venezuela and maintains an active interest in political affairs: "I am most passionate about changing the education system so that those who are not academically inclined can have the chance to learn a useful skill ... the main goal, of course, is to allow many of the poor to get well paid jobs as artisans and technicians."  You may contact Oliver L Campbell at email: oliver@lbcampbell.com

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 01, 2003 By: Kay Onefeather

Date: Mon, 31 Mar 2003 19:10:52 EST From: Kay Onefeather Kaonefeather@aol.com To: editor@vheadline.com Subject: Fighting Corruption

Dear Editor: For 500 years, those in control in Venezuela have had what is tantamount to FREE REIGN, leaving overwhelming poverty, substandard living conditions for the majority of the people, poor health care provisions for the impoverished, and bleak prospect for improvement.

Then came, President Hugo Chavez Frias.

In four years, despite battling deliberate and malicious sabotage of the economy, an attempted coup, ongoing attempts to force illegal elections and constant attempts to undermine his position, President Chavez Frias has persistently fought to stabilize the economy. He has instituted programs for food production, to ease hunger now and feed the people in the future. These programs will also strengthen the economy in the future.

President Chavez Frias has instituted programs for better health care for ALL Venezuelans, not just the privileged few.

 And, President Chavez Frias is addressing issues regarding education -- uninterrupted education -- for ALL Venezuelan children.

It is mind-boggling to think how much more El Presidente could have accomplished if he had had as much assistance as he has had hindrances during the last four years.

President Chavez Frias is fighting corruption ... corruption which has had 500 years to "root" itself in Venezuela ... and 500 years of corruption can not be "uprooted" overnight!

Even without the constant bombardment of one malicious maneuver after another from the opposition, it will take time to rid Venezuela of its deep-rooted corruption.

It will require a stern, steady hand, stubborn persistence, the patience of Job and the support of you ... the people.

Kay Onefeather Kaonefeather@aol.com

"If you don't know where you're going, when you get there you'll be lost." -Yogi Berra

Reuters, 04.01.03, 5:53 AM ET

LONDON, April 1 (Reuters) - Loss of oil supplies from war-torn Iraq and Nigeria, where bloody clashes have choked off some production, will keep prices bubbling at close to $30 a barrel over the coming weeks, analysts and traders predict. They say there is enough supply heading into international markets to prevent a spike back to the $39.99 for U.S. light crude touched briefly in the run-up to the war. Many Brent traders are targeting a $28-$30 price band for the near future, with U.S. light crude valued at a $3 premium. "It's very unlikely we'll go right back up," said Tony Machacek of brokerage Prudential Bache. The price spike ahead of the war was partly driven by concerns that Iraqi soldiers might set fire to oil wells but an early capture of the wells by U.S.-led forces minimised this. "What we can see from the action so far is that they seem to have covered most of the southern oilfields quite well," added Machacek. Most analysts and traders agreed an 11-day sell-off that pushed Brent down to a low of $24.00 and U.S. light sweet crude to $26.30 on March 21, the day after war began, was too extreme. They also said a subsequent rebound was based on the closing in of 37 percent of Nigeria's 2.2 million barrels per day (bpd) of production because of clashes between tribal groups in the Niger Delta.

DRIVING SEASON LOOMS Nigerian low-sulphur crude is a particularly valuable commodity ahead of the U.S. driving season because it yields large quantities of gasoline. The U.S. gasoline market consumes more than 12 percent of all world oil. Fears U.S. gasoline supplies will run short during peak demand, pushing up prices of gasoline and in turn crude, were stoked by inventory data last week showing a one-percent fall in U.S. gasoline stocks when they should have been rising. "Inventories need to start climbing very sharply to give any chance of avoiding a huge spike in gasoline prices," said J.P. Morgan's Paul Horsnell in a research note.