31 Jan 2003 20:40

(Recasts throughout) By Tom Ashby

CARACAS, Venezuela, Jan 31 (Reuters) - Venezuelan state oil company chief Ali Rodriguez said Friday he had restored half of the OPEC nation's strike-hit output and would impose a radical restructuring on the world's fifth largest oil exporter.

Rodriguez said there would be no return for thousands of fired Petroleos de Venezuela (PDVSA) workers, whom he accused of sabotaging the country's oil industry and betraying the nation by trying to topple President Hugo Chavez.

PDVSA employees who were pardoned for their role in a failed coup attempt against Chavez last April had re-offended by organizing the strike, Rodriguez said.

"There has been a repeat of the behavior which definitely allows no going back," he told a press conference.

The PDVSA chief said he had fired almost every one of PDVSA's 700 senior executives for joining the strike. The total number of dismissed workers already topped 5,300 and could reach 6,000, he added.

Rodriguez, a former communist guerrilla, said PDVSA had grown fat during the past 20 years, consuming an ever larger share of oil income. He pledged to turn it into a vehicle for state revenue collection.

"PDVSA should be nothing more than an instrument to secure maximum benefit from the export of (oil) through its contribution to the treasury," Rodriguez told reporters.

He said production recovered to 1.5 million barrels per day (bpd), half of pre-strike levels, from a low of 150,000 bpd at the height of the strike.

He forecast output approaching normal levels of 3 million bpd by early March.

Almost two months into the opposition strike aimed at forcing left-winger Chavez to resign, the two sides have been providing conflicting accounts of the impact of the stoppage on South America's largest producer.

Strikers pegged output at 1.1 million bpd on Friday and said it would never reach pre-strike levels without a deal for elections that would also return them to their jobs.

They accuse Chavez of adopting dictatorial powers and leading the South American country towards Cuban-style communism.

DESTRUCTION

Striking PDVSA employees said Rodriguez was destroying Venezuela's economic powerhouse with his reforms.

"We are witnessing the destruction of PDVSA, which was ranked among the top global energy corporations before the strike," a dissident spokesman said.

They dismissed accusations of sabotage, saying they handed over installations in good working order and that unqualified strike-breakers had caused a spate of oil spills, computer crashes and refinery faults.

PDVSA's investment budget would be cut by 30 percent to adjust to the slump in export revenue, Rodriguez said, adding he would protect the key oil production budget.

He conceded that oil output capacity would probably suffer as a result of the cut.

Striking workers said Rodriguez planned to sell PDVSA's overseas businesses, which include the Citgo refining and marketing brand in the United States.

Rodriguez said some asset sales were planned as part of his restructuring, but declined to give details.

The PDVSA head questioned the motives of a strike that has pushed the country close to the brink of economic collapse and forced the government to impose currency controls.

"Can you imagine BP promoting a strike against the British Prime Minister because it doesn't like him? Or Exxon staging a strike against President Bush in the United States? Rationally it has no explanation," Rodriguez said.

"It is a case for psychiatric analysis. Maybe Freud has the answer," he added.

The strike has helped drive world oil prices up to two-year highs and sapped oil inventories at a time when Washington prepares for possible war with Iraq.

"MASSIVE" RETURN TO WORK

Rodriguez said a "massive" return to work by blue-collar workers and contractors at the oilfields meant output had risen much more quickly than he had expected.

Crude flows should reach 1.8-1.9 million bpd next week when four huge heavy oil upgrading plants, operated by foreign investors, are due to be restarted.

He reiterated PDVSA's aim to lift a force majeure on oil exports, a legal term meaning it can no longer fulfill sales agreements, by the end of February.

Striking PDVSA workers think he will have to keep some restrictions on exports all year, because of a complete collapse of PDVSA's trading and logistics team, and the computer systems used to execute sales.

Some of Venezuela's output was being shipped to storage tanks in the Caribbean for sale to customers still nervous about sending vessels to Venezuelan ports, Rodriguez said.

Before the strike, Venezuela pumped 3.1 million bpd of oil, and refined about one third of it. It supplied 13 percent of U.S. import requirements.

Rodriguez pegged refinery runs at 288,000 barrels per day, a quarter of normal levels, and said he would contract some foreign engineers from the United States to speed the recovery of halted units.

www.granma.cu Havana. January 31,  2003

THE Cuban Ministry of Foreign Affairs (MINREX) recently refuted a claim that the Chávez government is donating oil to Cuba, a claim it qualified as a "gross lie by fascists and coup organizers" within the Venezuelan opposition, circulated by the privately owned media to confuse the public in that country.

These evil-intentioned persons, states a note from the Ministry of Foreign Affairs dated January 9 and reproduced in its entirety in Granma International (No.2), "are overlooking the hundreds of millions of dollars paid by Cuba to PDVSA (Petróleos de Venezuela), fully meeting its commitments month by month, cent by cent, not without some effort and sacrifice, as well as "the effects on our economy (of more than $200 million USD), "by their Olympian omission that no ‘present’ whatsoever exists and that the signed Cooperation Agreement is not one-sided but of two-way benefit."

The documents points out: "In contrast, what has Cuba’s attitude been? Has the island perchance caused some damage to Venezuela?" It moves on to quote various examples of the island’s cooperation with "that sister nation:

"A total of 748 Cuban doctors, nurses and health technicians have freely given their services in dangerous places and the remotest areas of Venezuelan territory where no such services existed." In the locations where they have worked, it points out, the infant mortality rate has been reduced from 19.5 to 3.9 per one thousand live births.

It notes that 380 young Venezuelans, "in their overwhelming majority from modest backgrounds," are studying, likewise free of charge, at the island’s Latin American School of Medical Science.

"A total of 3,042 Venezuelan patients, in their majority suffering from serious disorders and injuries, have been freely treated in Cuban health institutions. That treatment, including a large number of highly complex operations, would have cost the Venezuelan government tens of millions of dollars," adds the MINREX statement. It notes that "adding on the free services offered by Cuba, its value would rise to more than $100 million USD in barely two years¼ "

It likewise refers to the fact that "600 Cuban trainers and other sports technicians have been working in many cities and areas of Venezuela" to promote the development of physical education and sports among the population. "For this cooperation — which is not free of charge — Cuba has received an income far below the average amount charged in professional fees by specialists from other nations or from its own nation, if it had such private-sector professionals."

sg.biz.yahoo.com Saturday February 1, 3:59 AM

CARACAS -(Dow Jones)- Venezuelan steel maker Siderurgica del Orinoco CA, or Sidor, said Friday that it's ready to resume full production as soon as its gas supply is restored from the current 40% of requirements.

The company said in a press release it's currently just operating its hot and cold lamination plants, after an ongoing 61-day-old general strike brought Venezuela's vital oil industry to a near standstill, severely affecting gas production, which is byproduct of crude oil extraction.

Oil output is now back to about a third of roughly 3 million barrels a day before the strike began.

Although many businesses have reopened, opposition leaders have said they won't officially call off the two-month-old strike unless President Hugo Chavez agrees to early elections.

Chavez has said his detractors must avail themselves of constitutionally-approved measures, such as an amendment shortening his term or a possible recall referendum in August, the midpoint of his term.

Chavez's critics blame his left-leaning policies for the country's deepening economic crisis, as the economy likely contracted about 8% last year amid unemployment of 17% and inflation of 31% sparked by the bolivar's devaluation. The currency lost another 25% this year before the government halted sales of foreign exchange Jan. 22 ahead of anticipated measures to stop capital flight and stabilize the bolivar.

Chavez, first elected in 1998 on promises to eradicate corruption and inequality, has blamed the recession on an "economic coup" by his opponents.

Venezuela's government last year capitalized $350 million of a $700 million debt Sidor had with the state-owned Bandes investment bank, raising the country's stake to 42% from 30%.

State-owned until 1998, Sidor is now semiprivate, with the remainder owned by the Amazonia consortium, which is made up of Mexico's Hylsamex SA (HLEFTY), Argentina's Siderar SA (E.SDR), Venezuela's Sivensa (E.SVS),and Brazil's Usiminas SA (E.UUS).

-By Jehan Senaratna, Dow Jones Newswires; 58212 564 1339; jehan.senaratna@dowjones.com

biz.yahoo.com Valero Energy Corporation Responds to Moody's Announcement Friday January 31, 2:30 pm ET

Currently, U.S. Gulf Coast gasoline margins are $7.20 per barrel, which is extraordinarily high for this time of year. And, based on the forward curve, the gasoline margin for the year is currently $5.20 per barrel, which is the highest gasoline margin in the last 15 years. It is also higher than the gasoline margins in 2002 and 2001 (which were $4.72 per barrel and $4.97 per barrel respectively) when Valero achieved record earnings.

"And, gasoline margins should remain strong, supported by tightening inventories, strong demand and the impact of the Venezuelan strike," said Greehey. "Gasoline inventories fell 3 million barrels last week and inventories are 4 million barrels lower than this same time last year. Meanwhile, gasoline production is down 500,000 barrels per day (BPD) since the first of the year. In addition, the strike in Venezuela has reduced gasoline imports into the U.S. by 55,000 BPD and has reduced exports to other countries (primarily Latin America) by another 175,000 BPD. This in turn has resulted in increased U.S. exports to Latin America. And, European barrels that would have typically been imported to the U.S. are now going to Latin America. At the same time, demand is up more than 4% over the last four weeks compared to the same period last year."

www.whitehouse.gov SUBJECT: Presidential Determination on Major Drug Transit or Major Illicit Drug Producing Countries for 2003

Pursuant to section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 2003 (Public Law 107228) (FRAA), which was enacted on September 30, 2002, I hereby identify the following countries as major drug transit or major illicit drug producing countries: Afghanistan, The Bahamas, Bolivia, Brazil, Burma, China, Colombia, Dominican Republic, Ecuador, Guatemala, Haiti, India, Jamaica, Laos, Mexico, Nigeria, Pakistan, Panama, Paraguay, Peru, Thailand, Venezuela, and Vietnam.

The Majors List applies by its terms to countries. The United States Government interprets the term broadly to include entities that exercise autonomy over actions or omissions that could lead to a decision to place them on the list and, subsequently, to determine their eligibility for certification. A country's presence on the Majors List is not necessarily an adverse reflection of its government's counternarcotics efforts or level of cooperation with the United States. Consistent with the statutory definition of a major drug transit or drug producing country set forth in section 481(e)(5) of the Foreign Assistance Act of 1961, as amended (FAA), one of the reasons that major drug transit or drug producing countries are placed on the list is the combination of geographical, commercial, and economic factors that allow drugs to transit or be produced despite the concerned government's most assiduous enforcement measures.

Pursuant to section 706(2)(A) of the FRAA, I hereby designate Burma, Guatemala, and Haiti as countries that have failed demonstrably during the previous 12 months to adhere to their obligations under international counternarcotics agreements and take the measures set forth in section 489(a)(1) of the FAA. Attached to this memorandum are justifications for each of the countries so designated, as required by section 706(2)(B).

I have also determined, in accordance with provisions of section 706(3)(A) of the FRAA, that provision of United States assistance to Guatemala and Haiti in FY 2003 is vital to the national interests of the United States.

Additionally, the alarming increase in the quantity of illegal synthetic drugs entering the United States, especially ecstasy from Europe, is of particular concern. A significant amount of the ecstasy consumed in the United States is manufactured clandestinely in The Netherlands (in 2001, a total of 9.5 million ecstasy tablets were seized in the United States, and the Drug Enforcement Administration believes that the majority of tablets

originated in The Netherlands). We are working closely with Dutch authorities to stop the production and export of ecstasy, which we both regard as a serious threat to our citizens. We expect Dutch authorities to move effectively and measurably in the coming year against the production and export of this drug, including dismantling labs and proceeding against trafficking organizations. Early in the year, we plan to discuss specific steps we can take together to reduce drug trafficking.

Although the United States enjoys an excellent level of bilateral cooperation with Canada, the United States Government is concerned that Canada is a primary source of pseudoephedrine and an increasing source of high potency marijuana, which are exported to the United States. Over the past few years there has been an alarming increase in the amount of pseudoephedrine diverted from Canadian sources to clandestine drug laboratories in the United States, where it is used to make methamphetamine. The Government of Canada, for the most part, has not regulated the sale and distribution of precursor chemicals. The regulations to restrict the availability of pseudoephedrine, which the Government of Canada has just promulgated, should be stronger. Notwithstanding Canada's inadequate control of illicit diversion of precursor chemicals, I commend Canadian law enforcement agencies, which continue to work energetically to support our joint law enforcement efforts.

Under section 706 of the FRAA, you are hereby authorized and directed to submit this memorandum to the Congress, and to publish it in the Federal Register.

GEORGE W. BUSH