www.etaiwannews.com 2003-01-08 / New York Times /

A Venezuelan pushes his car in a line of cars waiting to fill up with gasolin in Caracas, Venezuela, Monday.(AP)

Energy Minister Rafael Ramirez said yesterday that the government planned to take the state-owned oil company, the world's fifth largest, and break it in two, hoping to snap the back of a devastating six-week strike aimed at driving President Hugo Chavez from power.

Ramirez, who offered preliminary details of the plan in an interview, said the government intended a sweeping restructuring of Petroleos de Venezuela.

The company, widely known by its Spanish acronym, PDVSA (pronounced peh-deh-VEH-sah), controls the largest oil fields outside the Middle East and is an important supplier to the United States.

He said the government would "decentralize" the company by dividing it into PDVSA East and PDVSA West and hollowing out the Caracas-based management.

Such a move would effectively gut the company of middle- and upper-level executives who have joined a coalition of business and labor leaders in opposing Chavez, whose left-leaning policies they say are destroying the country.

Opponents said floating such a plan amounted to government bluster aimed at breaking the morale of what they estimate are 30,000 oil workers who have joined the strike.

Ramirez said the goal was to restore the company's production capacity of some 3.1 million barrels of crude oil a day while reducing "exorbitant bureaucratic costs," which he estimated at US$1 billion. He said the company produced about 14 million barrels last month and was currently turning out 800,000 barrels a day, a quarter of what output was before the strike.

Outside experts expressed doubts that the company was producing even that much oil, and they were immediately skeptical that the plan could revive production to pre-strike levels.

Ramon Espinasa, a former PDVSA economist and now a consultant to the Inter-American Development Bank, said such a plan could have a devastating impact on what was once considered a model among state-run oil companies, and an equally devastating impact on Venezuela's oil-dependent economy. It could also reverberate through world markets and in the United States, which imports about 14 percent of its oil from Venezuela.

"We could talk about the need to diversify the economy, but those are long-term goals," Espinasa said. "But right now, Venezuela's economy needs oil. If not, the country could collapse."

The plan, experts said, appeared to be far less an economic strategy than a political one, aimed at purging the company of Chavez opponents once and for all and wresting more political control over the industry, even if it means enduring sharp declines in production.

Moises Naim, former minister of trade and industry and now editor of Foreign Policy, drew comparisons between what is happening in Venezuela today and what happened in Iran after the Islamic Revolution in 1979.

Iran's oil production, which rivaled Saudi Arabia's, plummeted from six million barrels a day to less than two million. In the decades since, Iran's oil output has been about half the pre-revolution levels. But, Naim said, the Iranian government has tighter political control of the industry.

"He may be willing to live with a smaller oil industry, and a less competitive oil industry, as long as he has more control over it," Naim said, referring to President Chavez. "What we know is that Chavez intends to stay in power at any cost."

In a televised address on Sunday night, Chavez said he had assumed the rank of "oil commander" and promised to rebuild the state company into "a new PDVSA, a patriotic PDVSA."

"PDVSA is being restructured for the benefit of all Venezuelans," he added. "In the near future we will see the fruits that we're sowing."

Ramirez rejected the view from critics, saying President Chavez remained committed to upholding the industry's strong performance. He acknowledged that getting the fallen industry up again was a Herculean task. The strike has virtually paralyzed PDVSA, shutting down refineries and strangling exports.

But, he said, the strike had shown the government that the industry could run with a significantly reduced labor force. Restoring oil operations had been delayed by sabotage at most installations, he said.

But, he added, signs of a slow but steady recovery were clear. He cited a number of tankers that have left Venezuelan ports and the restarting of two main oil refineries, at Puerto La Cruz and El Palito.

No one outside the national oil company is certain of the current state of Venezuela's oil fields. Opposition leaders, including Luis Pacheco, a former director of corporate planning at PDVSA, dismiss government industry reports as "pure fiction." He estimated that the government was producing about 200,000 barrels a day, enough to meet minimal domestic demands and fulfill some export commitments.

Government estimates seem to vary by the hour. On Sunday night President Chavez said the industry was exporting 1.5 million barrels a day. On Monday morning the PDVSA president, Ali Rodriguez, reported that the industry was producing 600,000 barrels a day. Ramirez put daily production at 800,000 barrels.

Outside experts estimate that the government is producing at most 400,000 barrels a day.

"Clearly, by inflating production figures, his game plan is to psychologically wear down the workers," said Michael Shifter at the Inter-American Dialogue, referring to President Chavez. "As time passes, he believes, the workers will get fatigued and come back to their jobs, before they lose them forever."

But, he said, exaggerated rhetoric runs both ways. Every day, the opposition issues oil industry reports promising that President Chavez is close to running out of gas -- literally and politically.

"They are desperate," Shifter said of the opposition. "They feel this is their last battle, and that if they lose, there will be no way to get Chavez out."

Industry experts concur that "the longer the strike goes on, the more problems Venezuela will have in reactivating their wells," said George Beranek, manager of market analysis at the Petroleum Finance Company, a Washington consulting group.

Much of the difficulty in restoring output arises from the unique properties of the country's crude oil. Of the three million or so barrels of oil a day that Venezuela once produced, about 75 percent was heavy oil, Beranek estimated.

Heavy crude is particularly viscous, and the petroleum from Venezuela's vast Orinoco belt is so thick that it is classified as bitumen and must be processed at specially outfitted domestic refineries before it can even be called oil and shipped to standard refineries overseas. Heavy oil has a tendency to gum up unless it is under the constant pressure and flow that is used to extract it.

So Venezuela risks permanently losing hundreds of thousands of barrels a day in production capacity from a protracted shutdown.

In 1998, for example, when very low oil prices led Venezuela to shut some wells, the country permanently lost 500,000 barrels a day in capacity, said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation.

He estimated that about one-third of Venezuelan fields could be restored quickly, in about two weeks, based on his discussions with experts from Petroleos de Venezuela. Most of the rest would take another four to six weeks, he said, with about 400,000 barrels a day of bitumen from Orinoco requiring even more time.

www.orlandosentinel.com By Edwin Chen | Washington Bureau Posted January 11, 2003

WASHINGTON -- The Bush administration has begun playing an active, behind-the-scenes role to help resolve the political unrest in Venezuela, amid growing U.S. concern about an oil shortage if there is war in Iraq.

The U.S. participation in brokering an agreement between Venezuelan President Hugo Chavez and his opponents was confirmed Friday by the White House.

The 40-day standoff in Caracas, with widespread strikes organized by Chavez's political foes, has crippled Venezuela's economy.

It has halted petroleum exports, including more than 1.5 million barrels of oil to the United States every day -- about 15 percent of the total the United States imports.

In hopes of ending the stalemate and bringing about early elections in Venezuela, U.S. diplomats led by Secretary of State Colin Powell are working with the Organization of American States and its member nations.

OAS Secretary-General Cesar Gaviria has been mediating the talks in Caracas.

Gaviria's goal, which the White House is backing, is to form a "friends of Venezuela" group that can help develop a compromise to the country's conflict.

The growing U.S. role -- first reported Friday by The Washington Post -- signals that President Bush has overcome his reluctance to becoming involved in the South American country.

In April, amid a short-lived coup against Chavez, the United States was accused of encouraging the plotters, reviving memories of a long and controversial history of U.S. involvement in South America.

Chavez's populist, left-leaning ideology and his anti-U.S. rhetoric did not endear him to the Bush administration.

But the White House denied meddling in Venezuela's affairs.

On Friday, though, White House press secretary Ari Fleischer said, "The United States remains deeply concerned about the deteriorating situation in Venezuela.

The severe damage being caused to Venezuela's economy, as well as the increasing likelihood of violence and civil conflict, requires a solution."

Meanwhile, Chavez threatened to send soldiers to seize control of food-production facilities and also fired 700 workers from the state oil monopoly, hoping to break a 40-day-old strike intended to oust him.

Chavez, a former paratroop commander, told soldiers Friday to be ready "to militarily seize the food production plants" that joined the strike.

He asked state governors belonging to his political coalition to be ready to cooperate.

"This is an economic coup. They are trying to deny the people food, medicine and even water," Chavez told thousands of supporters in western Cojedes state. "They won't succeed."

Fleischer described the U.S. overtures as being "in the early stages."

But he emphasized that "an electoral solution is the direction the United States sees."

Wire services were used in this report. Edwin Chen is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

www.bayarea.com Posted on Fri, Jan. 10, 2003

CARACAS, Venezuela (AP) - President Hugo Chavez threatened today to send soldiers to seize control of food-production facilities and also fired 700 workers from the state oil monopoly, hoping to break a 40-day-old strike intended to oust him.

Chavez, a former paratroop commander, told soldiers to be ready ``to militarily seize the food production plants'' that joined the strike. He asked state governors belonging to his political coalition to be ready to cooperate.

This is an economic coup. They are trying to deny the people food, medicine and even water,'' Chavez told thousands of supporters in western Cojedes state. They won't succeed.''

Venezuela's opposition began a general strike Dec. 2 to demand that Chavez resign and call elections. The strike has caused food shortages.

Rafael Alfonzo, president of Venezuela's food producers chamber, blamed the shortages on Chavez for refusing to cede to opposition demands. He insisted food makers are producing staples but said fuel shortages have hampered deliveries.

It's totally false that we are denying the people food,'' Alfonzo said. We ask governors and soldiers to understand that the only one to blame for food shortages is the government.''

The strike also has paralyzed the world's fifth-largest oil exporter, where at least 30,000 of the state company's 40,000 workers are off the job.

Chavez fired 700 workers from the state oil monopoly today after earlier firing 300.

Chavez has tried to jump-start oil production. Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of 3 million barrels. Exports, normally 2.5 million barrels a day, are at 500,000 barrels. Venezuela is able to export more than it produces because it has been shipping stockpiled oil.

Today's developments inflamed an already unstable situation in this South American nation. Chavez opponents took to the streets and a bank strike prompted authorities to suspend dollar auctions for a second straight day after Venezuela's currency fell.

Chavez also threatened to maintain a military seizure of the independent Caracas police force -- even though the Supreme Court ordered the government last month to restore the department's autonomy. Troops seized the force in November.

Chavez accuses police -- who report to an opposition mayor -- of brutally repressing his supporters during protests and allegedly killing two supporters Jan. 3.

Police say Chavez street thugs instigate the violence.

The police will stay under (military) seizure,'' Chavez said, because there are groups of assassins -- truly subversive groups -- that break the law with a police uniform and weapons. That must not be allowed.''

In Washington, the Bush administration was talking with other nations in the Americas on ways to end the strike, White House spokesman Ari Fleischer said today.

We remain deeply concerned about the deteriorating situation in Venezuela,'' Fleischer said. Asked about a possible U.S. role in a breakthrough, he said, An electoral solution is the direction the United States sees.''

The general strike has caused a sharp decline in Venezuelan exports to the United States, which normally average 1.5 million barrels daily. Government opponents, including the nation's largest labor union and business chamber, are demanding Chavez resign if he loses a nonbinding Feb. 2 referendum on his rule.

But lack of funding and disorganization in Venezuela's elections council could dash opposition hopes.

Technically, logistically, it's impossible to hold the referendum on February 2,'' said Romulo Rangel, one of five council directors. There is no clear leadership within the board, which means nobody is leading the activities.''

Chavez says Venezuela's constitution permits only a binding referendum on his presidency halfway into his six-year term, or August.

Opponents stage daily street marches and urge tax evasion to force Chavez's resignation. Negotiations led by Cesar Gaviria, secretary general of the Organization of American States, have made little progress.

www.salon.com

By CHRISTOPHER TOOTHAKER

Jan. 10, 2003  |  CARACAS, Venezuela (AP) -- President Hugo Chavez threatened Friday to send soldiers to seize control of food-production facilities and also fired 700 workers from the state oil monopoly, hoping to break a 40-day-old strike intended to oust him.

Chavez, a former paratroop commander, told soldiers to be ready "to militarily seize the food production plants" that joined the strike. He asked state governors belonging to his political coalition to be ready to cooperate.

"This is an economic coup. They are trying to deny the people food, medicine and even water," Chavez told thousands of supporters in western Cojedes state. "They won't succeed."

Venezuela's opposition began a general strike Dec. 2 to demand that Chavez resign and call elections. The strike has caused food shortages.

Rafael Alfonzo, president of Venezuela's food producers chamber, blamed the shortages on Chavez for refusing to cede to opposition demands. He insisted food makers are producing staples but said fuel shortages have hampered deliveries.

"It's totally false that we are denying the people food," Alfonzo said. "We ask governors and soldiers to understand that the only one to blame for food shortages is the government."

The strike also has paralyzed the world's fifth-largest oil exporter, where at least 30,000 of the state company's 40,000 workers are off the job.

Chavez fired 700 workers from the state oil monopoly Friday after earlier firing 300.

Chavez has tried to jump-start oil production. Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of 3 million barrels. Exports, normally 2.5 million barrels a day, are at 500,000 barrels. Venezuela is able to export more than it produces because it has been shipping stockpiled oil.

Friday's developments inflamed an already unstable situation in this South American nation. Chavez opponents took to the streets and a bank strike prompted authorities to suspend dollar auctions for a second straight day after Venezuela's currency fell.

Chavez also threatened to maintain a military seizure of the independent Caracas police force -- even though the Supreme Court ordered the government last month to restore the department's autonomy. Troops seized the force in November.

Chavez accuses police -- who report to an opposition mayor -- of brutally repressing his supporters during protests and allegedly killing two supporters Jan. 3.

Police say Chavez street thugs instigate the violence.

The police "will stay under (military) seizure," Chavez said, "because there are groups of assassins -- truly subversive groups -- that break the law with a police uniform and weapons. That must not be allowed."

In Washington, the Bush administration was talking with other nations in the Americas on ways to end the strike, White House spokesman Ari Fleischer said Friday.

"We remain deeply concerned about the deteriorating situation in Venezuela," Fleischer said. Asked about a possible U.S. role in a breakthrough, he said, "An electoral solution is the direction the United States sees."

The general strike has caused a sharp decline in Venezuelan exports to the United States, which normally average 1.5 million barrels daily. Government opponents, including the nation's largest labor union and business chamber, are demanding Chavez resign if he loses a nonbinding Feb. 2 referendum on his rule.

But lack of funding and disorganization in Venezuela's elections council could dash opposition hopes.

"Technically, logistically, it's impossible to hold the referendum on February 2," said Romulo Rangel, one of five council directors. "There is no clear leadership within the board, which means nobody is leading the activities."

Chavez says Venezuela's constitution permits only a binding referendum on his presidency halfway into his six-year term, or August.

Opponents stage daily street marches and urge tax evasion to force Chavez's resignation. Negotiations led by Cesar Gaviria, secretary general of the Organization of American States, have made little progress.

www.theage.com.au Saturday 11 January 2003, 12:05PM

Oil-rich Venezuela again ran out of petrol, further stoking tension as bank employees walked off the job for a second day in support of a 40-day-old strike that has throttled the petroleum sector.

The potentially explosive crisis has caused international concern, notably on oil markets, and US authorities said they were considering new initiatives aimed at breaking the deadlock between the government and the opposition.

The strike has mainly targeted the vital oil sector, crippling crude output, processing and shipments, and forced the world's fifth-largest petroleum exporter to import petrol.

The imports helped ease critical shortages for about a week, but huge lines again formed outside Caracas service stations, even though many ran out of petrol and new deliveries were uncertain.

Banks and supermarkets also shut down for a second day running, in a move that mainly affected the eastern areas of Caracas, considered a stronghold of the opposition that is seeking to force President Hugo Chavez from office.   Numerous schools also were closed, which the United Nations Children's Fund (UNICEF) denounced as a violation of children's right to education.

The crisis has also been marked by a series of violent incidents, including the use of firearms during clashes between supporters and foes of the leftist-populist president that left two people dead and dozens injured so far this year.

A fragmentation grenade was reportedly hurled at the residence of the Algerian ambassador after the North African country agreed to help Chavez restart the crippled oil industry.

The attack coincided with reports that Algerian technicians had arrived in the Paraguana refinery complex, the world's largest and among the installations severely affected by the strike.

Because it cut petroleum exports to a trickle, the strike has sent oil prices soaring in recent weeks, causing serious concern in the United States, which prepared for possible war with Iraq.