www.bayarea.com Posted on Tue, Jan. 21, 2003 By Daniel Altman NEW YORK TIMES

As Washington decides whether to invade Iraq, uncertainty about a war is already weighing on the economy.

While consumers have not been overly discouraged by higher energy costs or the risk of another terrorist attack, business leaders are clearly hesitant to make new investments until the smoke clears.

Before going ahead with a big new project, asked Robert J. Barbera, chief economist of ITG/Hoenig, an investment firm, "Wouldn't you wait a quarter?"

In the calculations of many analysts, he said, an invasion of Iraq is "90 percent likely to occur, and 80 percent likely to occur in the next 90 days." Those probabilities may have risen with the discovery of empty chemical warheads in Iraq on Thursday, which led some investors to dump stocks in favor of government bonds, and dollars in favor of euros.

The budgetary costs of any war and future reconstruction are unknown. Even if war with Iraq never comes, though, the economy will still have received some stimulus from the upswing in military and domestic security spending since the Sept. 11, 2001, attacks. But that has not been enough to overcome the drag on investment, which began to sag as long ago as late 2000, after the technology bubble burst.

Adding to the uncertainty discouraging big companies from new investment, Barbera said, are the huge differences between the best- and worst-case outlooks for war. An invasion could be quick, surgical and successful, clearing the way for a surge of investment on delayed projects. Or it could be long, messy and fraught with retaliations by terrorists.

"Geopolitical risks, such as the threat of war with Iraq, tensions over North Korea and terrorism, have added to the list of business concerns," said Anthony M. Santomero, president of the Federal Reserve Bank of Philadelphia, in a speech last Tuesday. "These factors continue to leave businesses reluctant to invest."

Moreover, businesses can afford to take a wait-and-see attitude right now, Barbera said, because the economy is not exactly bursting with profitable opportunities. "You're not feeling like you're giving up something in growth by postponing investment," he said.

A more tangible drag on business activity is the relatively high price of oil, another consequence of uncertainty about the prospect of war. Oil prices are already up, with crude running above $30 a barrel. Unrest in Venezuela, a leading supplier to the United States, has not helped. Higher prices for oil and its commercial byproducts are already pressuring industries from pharmaceuticals to trucking.

"I don't think there's going to be much more than what we're already paying in the market price," said Samuel K. Skinner, chief executive of USFreightways. "We're already feeling it with the threat of war."

USFreightways can pass some of its extra costs along to customers through fuel surcharges, Skinner said, but the company may have to protect itself further by hedging against potential increases in the price of oil. "We're not hedging right now, though hedging is something we traditionally would look at," he said. "In retrospect, maybe we wish we had."

Many analysts and executives alike said they expect the price of crude oil to stay high until the United States and its allies have a war well in hand.

"It is unlikely we would face major shortages of physical product as a result of any war," said Steve Turner, an oil analyst at Commerzbank in London, but "a short-term price spike in the coming three months is possible."

OPEC, the international oil cartel, has increased its production by about 1.5 million barrels a day to counter Venezuela's stalled exports. Yet the group is unlikely to try to stave off a war-induced jump in the price of oil, Turner said.

The removal of Saddam Hussein, on the other hand, offers a balancing factor -- greater access by the world market to Iraq's vast oil reserves, which could bring down the price. The range of possible outcomes for oil prices has rarely been wider, except perhaps during the last conflict in the Persian Gulf.

When Iraq occupied Kuwait in 1990, cutting off shipments from that country, oil prices shot up to $35 a barrel from $17 four months earlier. As the United States massed troops in Saudi Arabia, the price began to fall.

Almost as soon as the invasion of Iraq began, the price slipped to $20 as it became clear the United States and its allies would win a quick victory. Talk of street-to-street fighting has led to worries that this conflict could take longer, though.

"The first thing we would worry about is the valuation of raw materials," said Ray Anderson, director of investor relations at DuPont, which uses tons of materials derived from crude oil in its manufacturing of plastics and chemicals. Buying financial hedges against high prices for oil byproducts is not easy. "They're just not very deep, liquid markets," he said. "We are largely, almost essentially unhedged in buying key oil-derived materials."

Some big users of oil-derived fuels have hedges built into their businesses. Bill Zollars, chief executive of the Yellow Corp., said that virtually all of his trucking business was insulated from rising fuel costs by surcharges, which scale up trucking fees automatically when the price rises above certain thresholds. But he said he worries that his business might suffer indirectly if economic activity slows more broadly. And hedging itself adds to the cost of doing business.

By waging war in Iraq, the Bush administration could be taking a gamble with consumers' confidence in the economy. Ken Goldstein, an economist at the Conference Board, said that depending on its outcome, the war could either embolden consumers or, in the worst case, send them reeling.

"If the military action itself goes without a hitch," he said, "there would be a boost in terms of overall confidence. But countering that is the idea that we are no more going to bring Saddam out of Iraq than we brought bin Laden out of Afghanistan."

And Goldstein, like some others analysts, said he worries that any successful retaliation by terrorists in the United States could cause consumers to pull back.

"The potential to drop confidence like a stone is probably not from the bombing or fighting on the ground in Iraq, but more from the unintended consequences," Goldstein said. That concern was not present in the 1991 Gulf War, in which existing concerns about the domestic economy -- not the side effects of the war -- came to dominate consumers' moods.

www.bayarea.com

Microsoft is temporarily closing its office in Venezuela out of concern for security as a 50-day national strike has sparked rioting.

Microsoft made the decision to ensure the safety of the 85 sales and support workers in its Caracas office, said Ricardo Adame, a Microsoft spokesman.

Foreign companies including Ford Motor, Royal Dutch/Shell Group and Coca-Cola earlier shut down operations and offices in Venezuela amid the strike aimed at deposing President Hugo Chavez began Dec. 2.

By ALEXANDRA OLSON | Associated Press 01/21/2003

CARACAS, Venezuela — One person was killed and dozens were injured in bloody clashes between foes and followers of President Hugo Chavez. The violence overshadowed efforts by former President Jimmy Carter to help resolve Venezuela's crisis and end a strike that has crippled the world's fifth largest oil exporter.

One man died and 27 were injured Monday when gunfire erupted as Chavez supporters confronted opposition marchers in Charallave, a town 19 miles (30 kilometers) south of Caracas. Both sides threw rocks, bottles and sticks at each other as police struggled to keep them apart, but it was not clear who fired the live ammunition.

Opposition leaders blamed the violence on the government, saying Chavez sympathizers attacked their march.

"The only one responsible is the government," said Juan Fernandez, an executive fired from the state oil monopoly, Petroleos de Venezuela S.A., for leading the strike.

Carter, who won the Nobel Peace Prize in October, attended negotiations Monday between the government and opposition and met separately with Chavez and strike leaders. His Atlanta-based Carter Center, the Organization of American States and the United Nations are sponsoring the talks.

Business leaders, labor unions and opposition parties launched the strike on Dec. 2 to demand that Chavez resign or call early elections. After two months of negotiations, the two sides seem little closer to an agreement.

Chavez threatened Sunday to walk out of talks, accusing the opposition of trying to topple him even as they negotiated.

Strike leader Carlos Ortega said opponents would continue negotiating, but called Chavez undemocratic and said he would never accept a vote on his rule.

Ortega, president of the 1-million member Confederation of Venezuelan Workers, said Gaviria and Carter should "convince themselves once and for all that we are dealing with a regime that is not democratic, and that as long as Chavez stays in power there is no possibility of holding elections."

The National Elections Council, accepting an opposition petition, agreed to organize a Feb. 2 nonbinding referendum asking citizens whether Chavez should step down.

Chavez says the vote would be unconstitutional and his supporters have challenged it in the Supreme Court.

The strike has slashed Venezuela's oil production by more than two-thirds and caused shortages of gasoline, food and drinking water. It has cost Venezuela $4 billion, according to the government, and contributed to the plummeting of the bolivar currency.

Six countries - Brazil, Chile, Mexico, Portugal, Spain and the United States - began an initiative called "Friends of Venezuela" to help end the crisis. Chavez warned the six nations his government will not allow interference in domestic affairs.

The 48-year-old Chavez was elected in 1998 and re-elected in 2000 on promises to redistribute the country's vast oil wealth among the poor majority.

His opponents accusing him of steering the economy into recession with leftist policies and running roughshod over democratic institutions.

www.canoe.ca Tuesday, January 21, 2003 By AP

CARACAS -- Violence continued in Venezuela yesterday as former U.S. president Jimmy Carter tried to jump-start negotiations between the government and opposition.

Supporters of President Hugo Chavez clashed with opposition marchers and one person was killed when shots were fired into the crowd.

The confrontation began when Chavez supporters tossed bottles and rocks at the marchers in the town of Charallave. Rioters set fire to vehicles and a stage for opposition speakers.

Six people have died in protests since the 50-day-old strike, intended to oust Chavez, started.

Carter, who won the Nobel Peace Prize in October, was to meet Chavez and attend negotiations sponsored the Organization of American States.

Carter's Atlanta-based Carter Center is also sponsoring talks. He arrived in Venezuela on Wednesday.

Oil production is down to 800,000 barrels a day. Venezuela is the world's fifth-largest petroleum exporter, producing three-million barrels a day before the strike.

The president of Venezuela's oil monopoly urged workers to return to work.

"I urge you as citizens, appealing to whatever reserves of rationality there may be, to stop these activities," Ali Rodriguez, president of Petroleos de Venezuela S.A, said on state TV.

Chavez has fired more than 1,000 white-collar PDVSA workers and has the support of Venezuela's military

Chavez's opponents say his leftist policies are driving the country toward economic ruin. They also say his autocratic style erodes democracy.

www.charlotte.com Posted on Tue, Jan. 21, 2003 JOSEPH L. GALLOWAY Knight Ridder

ARAUCA, Colombia - American Army Special Forces teams moved last week into what a senior U.S. intelligence official calls "the most dangerous place in Colombia." They will begin training Colombian soldiers to protect an often-bombed 500-mile oil pipeline that runs along a porous border with neighboring Venezuela.

At a time when American soldiers are policing Afghanistan and the Balkans, fighting a global battle against Osama bin Laden's al-Qaida network, keeping watch on North Korea and preparing for possible military action in Iraq, the escalating U.S. military involvement in Colombia's drug war has gone largely unnoticed.

The arrival of the Green Berets signaled a more aggressive U.S. effort to help Colombian forces fight the guerrillas of the leftist National Liberation Army, or ELN, and newcomers to this region from the Revolutionary Armed Forces of Colombia, or FARC.

Until now, American efforts have been aimed almost exclusively at curtailing cocaine and heroin production.

The vulnerable oil pipeline is crucial to the Colombian government, which has seen millions of gallons of oil spill into the region's soil, rivers and streams and lost tens of millions in oil revenues.

The special forces team doing the training, A Company 3rd Battalion 7th Special Forces Group, is from Fort Bragg and is commanded by Maj. Bill White.

White will base 40 Special Forces troops on a small military base in the nearby town of Saravena and 30 others at a larger military post in Arauca.

Two more will be stationed at the sprawling facilities at Cano Limon, where Occidental Petroleum and Colombia's Ecopetrol produce $5 billion a year worth of oil.

The Americans will rotate out every three months.

As a sign of how dangerous a place this is, the Army also is sending in a medical evacuation team that includes several Black Hawk helicopters and their crews, a surgeon and nurse and several trained medics.

They will be based with the Special Forces team in Arauca to provide emergency medical care and evacuation for any Americans wounded in the area.

Smaller Special Forces teams have been in Arauca and Saravena for two months, setting up communications and intelligence-gathering facilities, building heavily fortified living and working quarters in compounds in the middle of the Colombian Army facilities, and planning the training mission.

Rings of concertina wire and heavily fortified bunkers surround the Special Forces compounds.

In Arauca, the compound has a tall guard tower with security cameras and motion-activated perimeter lights. A sergeant said they had filled more than 70,000 sandbags to construct a head-high wall around the compound.

The Americans based in Arauca will advise and assist the Colombian Army's 18th Brigade, which guards the long border with Venezuela, runs operations against terrorists and attempts to secure the Cano Limon pipeline in this region.

Those based in Saravena will run five-week training courses for units assigned to protect the pipeline, in hope they will begin more aggressive operations against the rebels.

In other action, rebels ambushed a pickup truck carrying policemen in northern Columbia on Monday, killing six officers and their civilian driver in a hail of gunfire and grenades, a state governor said.

The attack was near the village of Zambrano, 340 miles north of Bogota.

About 60 miles farther north, army and police forces searched Monday for at least 10 civilians who were among dozens kidnapped on a rural road by FARC rebels the day before.

Government security forces rescued 49 of the hostages on Sunday, hours after the rebels put up a roadblock near the village of Jagua del Pilar and forced travelers from their vehicles.

"The operations are being carried out with extreme caution so we don't put at risk the lives of those who have been kidnapped," police Col. Heriberto Naranjo told RCN radio.

Naranjo said government forces had clashed with the fleeing rebels, but he had no information on casualties.

Juan Pablo Toro of the Associated Press contributed to this article.